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Comparison of Financial Performance of Nike

Corporation and Under Armour
Name
Course
Date

Accounting

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 the Nike Inc. and Under Armour Inc.

Nike Inc.

Interpretation and comparison between the two companies' ratios (reading

Chapter 13 will help you prepare the commentary).

Under Armour Inc.

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

Earnings per share explains the relationship how much earning the shareholders
have earned in comparison to its shares. Nike Inc. EPS is higher which indicates
that the Shareholders of Under Armour Inc. earned higher as compare to Nike
0.98 Inc..

Current ratio explains the relationship between the current assets and current
liabiliites and current ratio of Under Armour is higher than Nike Inc. which
indicates that they can pay their current liabilities easily than Nike Inc.

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%

Gross profit margin shows the relationship between the gross profit and net sales
Under Armour is higher than nike Inc. which indicates that cost of goods sold is
less than Under Armour as compared to sales and this is considered as a very
good sign for the Under Armour.

Net income
Net sales

$2,693
$27,799

9.7%

$208,042
$3,084,370

6.7%

Net profit ratio explains the relationship between the net profit and net sales of
Nike Inc. is higher than under Armour which indicates that Nike Inc. operating
expenses are less than Under Armour as compared to increase in sales and this
is considered as a very good sign for the Nike Inc..

Inventory Turnover

Cost of goods sold

Average inventory

$15,353
$3,716

4.1
times

$1,572,164
$502,860

Days' inventory outstanding (DIO)

365
Inventory turnover

365
4.1

88
days

365
3.1

117
days

Accounts Receivable Turnover

Net sales (assume all sales are credit sales)

Average net accounts receivable

$27,799
$3,276

8.5

$3,084,370
$244,894

12.6

Days' Sales Outstanding (DSO)

365
Accounts receivable turnover

365
8.5

43.0
days

365
12.6

29.0
days

Net sales
Average total assets

$27,799
$18,070

1.54

$3,084,370
$1,836,412

1.68

14.9%

11.3%

Nike Inc. ratio is better

Under Armour ratio is better

Gross (Profit) Margin Percentage

Rate of Return (Net Profit Margin) on Sales

Inventory turnover ratio explains the relationship between the cost of goods sold
and average inventory of Nike inc. Inventory turnover is higher than Under Armour
which shows that it is taking less time in converting the inventory into 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

3.1
times

Days in Inventory turnover of Nike Corporation is better as it is taking less time in

converting its inventory into sales.

Accounts Receivable turnover ratio explains the relationship between the net
sales and average receivables . Nike inc. receivable turnover is less than Under
Armour which shows that it is taking more time in converting the receivables into
cash..

Days in collection period of Under Armour Corporation is better as it is taking less

time in converting its receivables into cash.

Asset turnover eplains the relationship between the net sales and average
assets . The ratio of Under Armour is higher which indicates that the company is
using its assets in a better way in generating the net sales.

Total Liabilities
Total Assets

$7,770
$18,594

41.8%

$744,783
$2,095,083

35.5%

Income from operations

Interest expense

$3,680
$33

111.5

353,955
5,335

66.3

Nike Inc. ratio is better

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

Market price per share of common stock (Yahoo Finance 5/31/2014)

$0.93
$76.91

1.2%

$0.00
$35.08

0.0%

Nike Inc. ratio is better

Net income - Preferred dividends

Average common stockholders' equity

$2,693
$10,953

24.6%

$208,042
$1,201,827

17.3%

Nike Inc. ratio is better

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

$76.91
$3.05

$2,123

78,505 Nike Inc. ratio is better

25
$

$35.08
=
0.98

36

Under Armour ratio 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 the advantage for the current ratio.Under Armour
has $3.67 in current assets for every dollar in current liabilities, while Nike Inc. has only $2.72 in current assets
for every dollar in current liabilities.
Measuring Turnover:Under Armour has the advantage for the receivable turnover whereas Nike Inc. has the
advantage for Inventory turnover ratios. Under Armour turns over its receivables 12.6 times toNike's 8.2 times,
and Nike turns over its inventory 4.1 times toUnder Armour 3.1 times.
Measuring Leverage - Overall Ability to Pay Debts: Under Armour has significantly less debt than Nike's as
evidenced byUnder Armour35.5% debt-to-asset ratio as compared to Nike 41.8% debt-to-asset ratio. Nike can
cover its interest expense 111.5 times with income before interest and taxes, whileUnder Armour can only cover
its interest expense 66.3 times with their income before interest and taxes. Nike Inc.has the advantage for each
of these ratios.
Measuring Profitability: Nike has the advantage for the profitability ratios. NiKe has a significant edge in return
on common stockholders' equity, with a24.6% return on common stockholders' equity, as compared to Under
Armour 17.3% return on common stockholders' equity. Under Armour has a higher gross profit rate while Nike
Inc. has a higher net profit margin ratio .Under Armour also has a significant advantage for asset turnover while
Nike has advantage in rate of return on total assets .
Analyzing Stock as an Investment: NiKe returns a 1.2% dividend yield to its investors, while Under Armour yield
is 0%. Under Armour has better free cash flow than Nike Inc.Free cash flow can be used to undertake
acquisitions, pay additional dividends, pay down debt, or buy back stock.
Conclusion: under Armour is the safer investment when you examine their ability to pay current liabilities and
overall liabilities; however, Nike has the advantage for the turnover and profitability ratios. For the conservative
investor, Under Armour looks like the way to go because of their strong current and free cash flow earned
ratios. For the growth-oriented investor, Nikeis the way to go because of their stronger profitability ratios and
times-interest earned ratio-.

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

(n.d.). Retrieved from https://finance.yahoo.com/q/pr?s=NKE

Big Charts for NIKE (7/25/2014). Retrieved June 18th, 2016 from http://bigcharts.marketwatch.com/historical/default.asp?
symb=tr&closeDate=12%2F31%2F14&x=0&y=0

(n.d.). Retrieved from http://investors.nike.com/investors/news-events-and-reports/?toggle=filings

(n.d.). Retrieved from http://www.uabiz.com/sec.cfm?DocType=&DocTypeExclude=&SortOrder=FilingDate%20Desc

Harrison, W.T., Horngren C.T. & Thomas, C.W. (2015). Financial Accounting, 10th ed. Upper Saddle River, NJ: Pearson Educat

(n.d.). Retrieved from http://investor.underarmour.com/stocklookup.cfm?historic_Month=12&historic_Day=30&histor

(n.d.). Retrieved from https://in.finance.yahoo.com/q/hp?s=NKE&a=04&b=30&c=2014&d=04&e=30&f=2014&g=d

g&Year=&Pagenum=9&FormatFilter=&CIK=