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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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...