Sources of Funds and Diversification

Part I: Sources of Funds

Assume that the Nike Inc. (NKE) (http://www.nikebiz.com/; http://money.cnn.com/quote/quote.html?symb=NKE; http://news.nike.com/news/nike-inc-introduces-2015-global-growth-strategy) 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 pages 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.

To complete this part, you will probably want to think about, among other things, points such as:
Benefits and drawbacks of raising funds through equity,
Benefits and drawbacks of raising funds through debt,
Fundamental analysis of your selected company, etc.

Part II: Diversification

In Part I, we assumed that you have $100,000 in your bank account that can be invested. Suppose you invested your $100,000 in shares of Nike Inc. (NKE) (http://www.nikebiz.com/; http://money.cnn.com/quote/quote.html?symb=NKE). Based on your current situation, your portfolio cannot be considered a diversified portfolio because you invested all your money in Nike. In fact, an undiversified portfolio is very risky and you may end up losing your investment. Therefore, it is strongly recommended that you diversify your investment portfolio by adding different types of securities.

Read the information in the background material, look for more information, and then write a 2- to 3-page paper answering the following questions:

How important is it for you to diversify your investment portfolio?

How would you diversify your investment portfolio?

Explain your reasoning.

To complete this part, you will probably want to think about, among other things, points such as:
The benefits and drawbacks of portfolio diversification,
The major techniques for portfolio diversification,
Types of securities you like to add into your investment portfolio to diversify risk, etc.