Sources of Funds for Nike Inc
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assume that the Nike Inc. (NKE) (http://www.nikebiz.com/; http://money.cnn.com/quote/quote.html?symb=NKE) is expanding globally. One way to expand globally is to open up new branches. But Nike Inc. might need to raise funds in order to finance new projects.
Read the information in the background material, look for more information, and then write a 2 to 3 page paper answering the following questions:
What are the best sources of raising funds that the financial managers of the Nike Inc. can use? Why?
Suppose you have $100,000 in your bank account that can be invested. Would you buy the shares of the Nike Inc. with your $100,000? Why? Why not?
Explain your reasoning.
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Solution Summary
The sources of funds for Nike Inc is examined.
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Introduction:
As Nike Inc, a U.S. based unrivaled footwear maker and distributor expands globally (Nike Inc., 2012), it requires effective financing for this global expansion to be successful and strategically place it in the global market place. This paper therefore analyses sources of funds that Nike managers can use in their global expansion.
The best sources of raising funds for global expansion:
The best sources of raising funds for Nike's global expansion are two fold: debt financing or equity financing. In debt financing, Nike would have to borrow funds for the global expansion from the banks or domestic securities market. While in equity financing Nike Inc. would have to sell its stocks to investors so as to raise the funds. In this it can either cross list in highly liquid foreign exchanges and sell new equity or it can or/ and conducting an international bond offering (Melicher and Norton, 2011).
Both these methods have their benefits and costs in any business venture. In Loan financing there will be a contractual obligation on Nike Inc. to pay interest and also repay the principle amount borrowed by a given period of time. The bank loans are often secured against business assets, and often range in amount according to the security and prospects of the business. The riskier the business the lesser a business is usually able to borrow and the higher the interests rate that will be repaid with loan. This is so in order to help banks ensure that they are covered even if the risk does not pay off (Melicher and Norton, 2011).
Bank loans have some advantages in that they are reliable and secure as Nike, Inc. would be assured of the amount required to fund the ...
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