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Nike Inc  (NYSE:NKE) Asset Turnover: 0.39 (As of Aug. 2017)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Total Assets. Nike Inc's Revenue for the three months ended in Aug. 2017 was \$9,070 Mil. Nike Inc's Total Assets for the quarter that ended in Aug. 2017 was \$23,453 Mil. Therefore, Nike Inc's asset turnover for the quarter that ended in Aug. 2017 was 0.39.

Asset Turnover is linked to ROE % through Du Pont Formula. Nike Inc's annualized ROE % for the quarter that ended in Aug. 2017 was 31.15%. It is also linked to ROA % through Du Pont Formula. Nike Inc's annualized ROA % for the quarter that ended in Aug. 2017 was 16.20%.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Nike Inc Annual Data

 May08 May09 May10 May11 May12 May13 May14 May15 May16 May17 Asset Turnover 1.53 1.54 1.52 1.51 1.54

Nike Inc Quarterly Data

 Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 May17 Aug17 Asset Turnover 0.43 0.37 0.37 0.37 0.39

Calculation

Asset Turnover measures how quickly a company turns over its asset through sales.

Nike Inc's Asset Turnover for the fiscal year that ended in May. 2017 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (A: May. 2017 ) / ( (Total Assets (A: May. 2016 ) + Total Assets (A: May. 2017 )) / 2 ) = 34350 / ( (21379 + 23259) / 2 ) = 34350 / 22319 = 1.54

Nike Inc's Asset Turnover for the quarter that ended in Aug. 2017 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (Q: Aug. 2017 ) / ( (Total Assets (Q: May. 2017 ) + Total Assets (Q: Aug. 2017 )) / 2 ) = 9070 / ( (23259 + 23647) / 2 ) = 9070 / 23453 = 0.39

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Companies in the retail industry tend to have a very high turnover ratio.

Explanation

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula.

Nike Inc's annulized ROE % for the quarter that ended in Aug. 2017 is

 ROE % (Q: Aug. 2017 ) = Net Income / Total Equity = 3800 / 12200 = (Net Income / Revenue) * (Revenue / Total Assets) * (Total Assets / Total Equity) = (3800 / 36280) * (36280 / 23453) * (23453/ 12200) = Net Margin % * Asset Turnover * Leverage Ratio = 10.47 % * 1.5469 * 1.9224 = ROA % * Leverage Ratio = 16.20 % * 1.9224 = 31.15 %

Note: The Net Income data used here is four times the quarterly (Aug. 2017) net income data. The Revenue data used here is four times the quarterly (Aug. 2017) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

It is also linked to Return on Assets (ROA) through Du Pont Formula:

Nike Inc's annulized ROA % for the quarter that ended in Aug. 2017 is

 ROA % (Q: Aug. 2017 ) = Net Income / Total Assets = 3800 / 23453 = (Net Income / Revenue) * (Revenue / Total Assets) = (3800 / 36280) * (36280 / 23453) = Net Margin % * Asset Turnover = 10.47 % * 1.5469 = 16.20 %

Note: The Net Income data used here is four times the quarterly (Aug. 2017) net income data. The Revenue data used here is four times the quarterly (Aug. 2017) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

In the article Joining The Dark Side: Pirates, Spies and Short Sellers, James Montier reported that In their US sample covering the period 1968-2003, Cooper et al find that firms with low asset growth outperformed firms with high asset growth by an astounding 20% p.a. equally weighted. Even when controlling for market, size and style, low asset growth firms outperformed high asset growth firms by 13% p.a. Therefore a company with fast asset growth may underperform.

Therefore, it is a good sign if a company's asset turnover is consistent or even increases. If a company's asset grows faster than sales, its asset turnover will decline, which can be a warning sign.

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