ratio analysis

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evlgbc

Business Finance

Description

do an analytic report for the result (result attached) .

which company is better?
which company should I invest in?


1. You are to briefly describe, in your own words and citing company literature where appropriate, the companies under consideration.
2. The majority of the project is a complete ratio analysis of the two companies. You are to follow the format listed in our course textbook which is the first chapter of Subramanyan, Financial Statement Analysis.
3. For additional reference about the project, please consult the perfect student submission which can be found in attached.
4. You are to use the two most recent years of financial statements for your analysis.
5. You are to graph the common stock price for the years under consideration. Please appropriately label the source of your stock-price graph.
6. Finally, you are to answer the question, “Which company would be the better investment?” based upon your ratio analysis.

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Adidas Ratios Ratio Calculation 2016 Numerical Calculation Current Ratio Current Assets 8,886 Current Liabilities 6,765 Cash + Marketable Securities+ Accounts Receivable 3,710 6,765 0.548 Current Liabilities 3,913 6,291 Collection Period Average Accounts Receivable Sales/360 1100 51 21.4251 1157.5 59 Total Debt to Equity Total Liabilities 8,722 1.351 8,087 Shareholder's Equity 6,455 Long-term Liabilities 1957 Shareholder's Equity 6,455 Income before Income Taxes & Interest Expense 1,582 Interest Expense 74 Return on Assets Net Income Average Total Assets 1,020 7588 0.134 1,100 7261 0.151 Return on Common Equity Net Income 1,020 0.316 1,100 0.342 Average Shareholder's Equity 3228 Sales- Cost of Sales 9,100 18,483 49% 10,703 21,218 50% 1,536 18,483 8.31% 2,023 21,218 9.53% 1,020 18,483 5.52% 1,100 21,218 5.18% Sales Sales 18,483 21,218 27 Average Cash 755 sales 18,483 Acid-Test Ratio Long Term Debt to Equity Times Interest Earned Gross Profit Sales Operating Profit Margin Income from Operations Sales Net Profit Margin Cash Turnover Accounts Receivable Turnover Net Income 2016 Result 1.314 2017 Numerical Calculation 8,645 2017 Result 1.374 6,291 0.622 20 1.257 6,435 0.303 1,796 0.279 6,435 21 2,070 22 93 3218 24 799 17 21,218 18 Average Accounts Receivable 1100 Inventory Turnover Cost of Sales Average Inventory 9,383 1882 4.987 10,514 1846 5.696 Working Capital Turnover Sales 18,483 3.358 21,218 7.768 Average Working Capital 5504 Sales 19.303 21,218 1000 21.218 Average PP&E 18,483 958 Sales 18,483 2.436 21,218 2.922 Average Total Assets 7588 PPE Turnover Total Asset Turnover 1157.5 2732 7261 Nike Ratios Ratio Calculation 2016 Numerical Calculation 2016 Result 2017 Numerical Calculation 2017 Result Current Ratio Current Assets 5,358,000 0.357 16,061,000 2.934 Current Liabilities 15,025,000 Cash + Marketable Securities+ Accounts Receivable 8,698,000 Current Liabilities 5,358,000 Average Accounts Receivable 1620500 Sales/360 89933 Total Liabilities 9,121,000 Shareholder's Equity 12,258,000 Long-term Liabilities 3,763,000 Shareholder's Equity 12,258,000 Income before Income Taxes & Interest Expense 4,502,000 Interest Expense 31000 Net Income 3,760,000 Average Total Assets 10689500 Net Income 3,760,000 Average Shareholder's Equity 6129000 Sales- Cost of Sales 14,971,000 Sales 32,376,000 Income from Operations 3,760,000 Sales 32,376,000 Net Income 3,760,000 Sales 32,376,000 Sales 32,376,000 Average Cash 1569000 sales 32,376,000 Average Accounts Receivable 1620500 Acid-Test Ratio Collection Period Total Debt to Equity Long Term Debt to Equity Times Interest Earned Return on Assets Return on Common Equity GrossProfit Operatng Profit Margin Net Profit Margin Cash Turnover Accounts Receivable Turnover 5,474,000 1.623 9,856,000 1.801 5,474,000 18 1838500 19 95417 0.744 10,852,000 0.875 12,407,000 0.307 6,684,000 0.539 12,407,000 145 4,749,000 55 86000 0.352 4,240,000 0.365 11629500 0.613 4,240,000 0.683 6203500 46% 15,312,000 45% 34,350,000 11.61% 4,240,000 12.34% 34,350,000 11.61% 4,240,000 12.34% 34,350,000 21 34,350,000 18 1904000 20 34,350,000 1749000 20 Inventory Turnover Working Capital Turnover PPE Turnover Total Asset Turnover Cost of Sales 17,405,000 Average Inventory 2419000 Sales 32,376,000 Average Working Capita! 12346000 Sales 32,376,000 Average PP&E 1760000 Sales 32,376,000 Average Total Assets 10689500 7.195 19,038,000 7.532 2527500 2.622 34,350,000 2.578 13324000 18.395 34,350,000 17.222 1994500 3.029 34,350,000 11629500 2.954
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Explanation & Answer

Attached.

RATIO ANALYSIS
ADIDAS VS. NIKE INC.

By:
Financial Statement Analysis

RATIO ANALYSIS
Making investment decisions is a very crucial process to each and every investor who
intends to realize the returns from the investment. Due to the dynamic nature of the global
economy, all the investment decision should be made based on the analysis of the performance
of the target companies in various markets. The financial statements are the key documents that
investors analyze to determine the financial health of the target company. Critical analysis of the
financial ratios enables the investor to make a comparison of the financial health of various
companies that belong in the same industry to determine the most appropriate to invest. This
analysis and comparison enhance the minimization of the probable risks through the making of
data-driven decisions.
Ratio analysis is a very vital tool as far as making of the financial decisions by comparing
the financial health of two or more companies is concerned. Adidas and Nike are the leading
manufacturers of sportswear globally. However, Nike is ranked in the first place followed by
Adidas. Both companies deal with the manufacture and sale of sports footwear, bags, clothing,
apparel, and other accessories and services. Adidas is a multinational corporation founded in
1924 by Adolf Dassler and is headquartered in Herzogenaurach, Germany. It is the leading
sportswear company in Europe. On the other hand, Nike is an American multinational
corporation founded as a Blue Ribbon Sports in 1964 by Phil Knight and Bill Bowerman. Adidas
and Nike present their financial statements in different formats that an investor needs take into
consideration. Nike complies with the GAAP accounting standards and practices established by
the New York Stock Exchange. In contrasts, Adidas complies with IFRS since it is registered as
a public company on the Frankfurt Stock Exchange. Additionally, Nike's fiscal year ends on 31 st
May while the end of the year for Adidas is 31st December. Therefore, for effective comparison

of the financial performance of two companies by the use of ratio analysis, one is required to
have accounting knowledge.
Critical analysis of the financial ratios depicts that Nike has a good financial health as
compared to Adidas. The profitability ratios of Nike i.e. Return on Assets and Net Profit Margin
are much higher than those of Adidas. This indicates that Nike co...


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