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Comparison of Financial Performance of Nike


Corporation and Under Armour
Name
Course
Date

Olivia Blankenship
Accounting
6/4/2016

Complete one paragraph, profiling each company's business, including


information such as a brief history, where they are located, number of
employees, the products they sell, and so forth. Please reference any
websites that you used for the Profiles on the Bibliography tab.

Nike Corporation operates in the apparel industry whereby it designs,


develops, markets and sales athletic footwear, apparel, and equipment among
other accessories. Incorporated in 1969, the company has managed to
enhance its competitiveness in the industry in order to secure a dominant
position. independent contractors are responsible for manufacturing teh
company's products that are later sold to retail accounts via Nike outlet
stores.
Under Armour is a sports clothing corporation based in the U.S. the company
has been operation since 1996 when it began offering footwear. Although the
coumpany has its other locations in Texas, Denver, Colorado, and New York
Cities, its global headquarters are in Baltimore, Maryland. SInce inception, the
company enjoyed significant growth to reach a dominant level with other
competitors such as Nike and Adidas. Its major products are mainly apparel
with common brands including ColdGear, TurfGear, AllseasonGear, and
StreetGear product lines.

Use this Excel spreadsheet to compute ratios; show your computations for all ratios on this tab, and also include your commentary.

The 2014 financial statements used to calculate these ratios are available in the Investor Relations section of Nike Corporation and Under Armour.

Nike, Inc

Interpretation and comparison between the two companies' ratios (reading


Chapter 13 will help you prepare the commentary).

Under Armour

The comparison of the ratios is an important part of the project. A good approach is to
briefly explain what the ratio tells us. Indicate whether a higher or lower ratio is better.
Then compare the two companies on this basis. Remembereach ratio below requires a
comparison.

Earnings per Share of Common Stock (basic - common)

Current Ratio

As given in the income statement

3.05

0.53 Nike has strong EPS as compared to under Armour

Under Armour has better strength to pay short term obligation as compared to Nike

Current assets
Current liabilities

$13,696
$5,027

2.72

$1,549,399
$421,627

3.67

Gross margin
Net sales

$12,446
$27,799

44.8%

$1,512,206
$3,084,370

49.0%

Under Armour has higher profitability as compared to Nike

Net income
Net sales

$2,693
$27,799

9.7%

$208,042
$3,084,370

6.7%

Nike has better profitability, it s because the operating expenses of Nike are less
as copared to Under Armour

Inventory Turnover

Cost of goods sold


Average inventory

$15,353
$3,947

3.9
times

$1,574,162
$536,714

Days' inventory outstanding (DIO)

365
Inventory turnover

365
3.9

94
days

365
2.9

Accounts Receivable Turnover

Net sales (assume all sales are credit sales)


Average net accounts receivable

$27,799
$3,434

8.1

Days' Sales Outstanding (DSO)

365
Accounts receivable turnover

365
8.1

Net sales
Average total assets

$27,799
$18,594

Gross (Profit) Margin Percentage

Rate of Return (Net Profit Margin) on Sales

Asset turnover

Rate of Return on Total Assets (ROA)

Debt Ratio

Times-Interest-Earned Ratio

Dividend Yield
(Please follow the Course Project instructions to calculate the current dividend yield.)
Rate of Return on Common Stockholders' Equity (ROE)

Free cash flow

Price-Earnings Ratio (Multiple)


(Please see the Course Project instructions for the dates to use for this ratio.)

Rate of return on sales times asset turnover

2.9
times

Nike has better ability to sale its inventory as compared to Under Armour

124
days

Nike is able to sell its inventory faster

$3,084,370
$279,835

11.0

45.1
days

365
11.0

33.1
days

1.50

$3,084,370
$2,095,083

1.47

Nike is able to use its assets more optimally as compared to Under Armour

14.5%

9.9%

Nike has better return on Assets as compared to Under Armour

Under Armour is able to collect its receivables more quickly as compared to Nike

Under Armour is able to collect its receivables more quickly as compared to Nike

Under Armour has lower debt as compared to Nike, thus having better solvency

1
Total Assets

$7,770
$18,594

41.8%

$744,783
$2,095,083

35.5%

Income from operations


Interest expense

$3,003
$33

91.0

353,955
5,335

66.3

Nike has better ability to pay off interest

Dividend per share of common stock (Yahoo Finance 12/24/2015)


Market price per share of common stock (Yahoo Finance 12/24/2015)

$0.93
$53.45

1.7%

$0.98
$38.38

2.6%

Under Armour does not pay any interests

Net income - Preferred dividends


Average common stockholders' equity

$2,693
$10,824

24.9%

$208,042
$1,350,300

15.4%

Nike has better return on equity as compared to under Armour

Net cash provided by operating activities minus cash payments earmarked


for investments in plant assets

Market price per share of common stock as of 12/31/2014


Earnings per share (Yahoo finance 6/11/2016)

$53.45
$3.05

$2,123

18

67,522 under Armour has higher free cash flow

$38.38
$0.53

72

P/E ratio of Under Armour is better

You all get the chance to play the role of financial analyst below. The summary should be a
comparison of each company's performance for each major category of ratios listed below.
Focus on major differences as you compare each company's performance. A nice way to
conclude is to state which company you feel is the better investment and why.

Measuring Ability to Pay Current Liabilities: Under Armour has an advanatage over Nike given its current ratio.
The company has a current ratio of 3.67 compared to Under Armour's 2.72, though both imply enough liquidity
to meet obligations.
Measuring Turnover: Nike Corporation has an advanatage in Inventory turnover with Under Armour having an
advanatage in accounts receivable turnover ratio. Nike's inventory turnover is 3.9 times compared to 2.9 times of
Under Armour. Similalrly, Nike has a receivable turnover ratio of 8.1 compared to Under Armour's 11.1. This
implies that under Armour is more efficient its collection of accounts compared to Nike.

Measuring Leverage - Overall Ability to Pay Debts: Under Armour has significantly less debt than Nike Inc as
evidenced by Under Armour's 35.5% debt-to-asset ratio compared to Nike's 41.8% debt-to-asset ratio. Nike can
cover its interest expense 91 times with income before interest and taxes, while Under Armour can only cover its
interest expense 66.3 times with their income before interest and taxes. Nike has the advantage for each of
these ratios.
Measuring Profitability: Nike has the advantage for 4 of the 5 profitability ratios. Nike has a significant edge in
return on common stockholders' equity, with a 24.9% return on common stockholders' equity, as compared to
Under Armour's 15.4%. Under Armour has a higher gross profit rate (49.0% - 48.7%), while Nike has a higher net
profit margin ratio (9.7%6.7%). Nike also has a significant advantage for asset turnover (1.51.47) and rate of
return on total assets (14.5%9.9%).
Analyzing Stock as an Investment: Under Armour returns a 2.6% dividend yield to its investors, while Nike's
yield is 1.7%. Nike has positive free cash flow of $2,123 million while Under Armour has positive free cash flow
of $67,522 million. Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down
debt, or buy back stock.
Conclusion: Nike is the safer investment when you examine their ability to pay current liabilities and overall
liabilities; however, Under Armour has the advantage for the gross profit ratio and the dividend yield. For the
conservative investor, Nike Corporation looks like the way to go because of their strong current and timesinterest-earned ratios. For the growth-oriented investor, Under Armour is the way to go because of their large
amount of free cash flow.

Your textbook and any information that you use to profile the companies should be cited as a reference below.

Under Armour. (2016). Under Armour, Inc. Retrieved on Jun. 4, 2016 from https://uk.finance.yahoo.com
Nike. (2014). Nike, Inc.: Form 10-K Annual Report. Retrieved on Jun. 4, 2016 from http://d1lge852tjjqow
Under Armour. (2014). Under Armour, Inc.: Form 10K Annual Report. Retrieved on Jun. 4, 2016 from ht
Yahoo Finance. (2016). Nike, Inc. Retrieved on Jun. 4, 2016 from https://uk.finance.yahoo.com/q?s=NK

udfront.net/CIK-0000320187/bc222fb9-2306-449c-8c11-4424d8979db6.pdf.
les.shareholder.com/downloads/UARM/2178425690x0xS1336917-14-8/1336917/filing.pdf.