Financial Statement Analysis, statistics homework help

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Question Description

At this point you have examined three years of financial statements for your firm. You have also determined their sustainable growth rate as well.
You have also learned about various financial ratios.



In a comprehensive summary of your firm, provide the following financial information for your firm for the last two years.

  • Revenue
  • Net Income
  • Profitability Ratios
    • Gross Profit Margin
    • Net Profit Margin
    • Return on Assets
  • Liquidity Ratios
    • Current Ratio
  • Market Ratios
    • Earnings per Share
    • Price to Earnings Ratio
  • Debt measures
    • Debt to Asset Ratio
  • Explain what each ratio and piece of financial data means and explain the trends in each; are they increasing or decreasing and is this trend positive or negative for the firm and why?
  • Using the information from IP4, summarize an explanation of the Sustainable Growth Rate for your firm and what it means for your company (do NOT copy and paste the information from IP4! This is not what the assignment requires)
  • Using the financial data, summarize and reflect on the future financial health of your firm.

Be sure to document your statements with credible sources, in-text citations, and references using proper APA format.

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Running head: Analysis of Financial statement of Under Armor Company Financial Statement Analysis Unit 4 IP Name: James Henry Date: 8/3/17 1 Analysis of Financial statement of Under Armor Company 2 Analysis of Financial statement of Under Armor Company Based on the financial statement for under Armor for the year 2014, 2015 as well as 2016, the sustainable growth rate of the company was calculated for each year. The sustainable growth rate of the company was calculated using the following formula, SGR = one subtracting the dividend-payout ratio of each year and then multiplying the answer with the company’s return on equity for the respective year. Sustainable growth rate for the year 2014 Return on equity of the year 2014 was equal to 17.31%, while the dividend pay-out ratio was 0. This implies that SGR of the company in 2014= (17.31/100) * (1-0) = 0.1731= 17.31% SGR of the company in 2015 Return on equity of the company was 15.41%, while the dividend-payout ratio for this year was 0. This implies that the SGR of the company for this year = (15.41/100) *(1-0) = 0.1541 = 15.41% SGR of the company in 2016 Return on equity of the company was 14.07%, while the company’s dividend-payout ratio was 0. This implies the SGR of the company = (14.07/100) *(1-0) =0.1407= 14.07% The SGR obtained above are clear indicators of how under armor grew at a rate which was safe for the company. That is, in the year 2014 under armor could only grow at a rate 17.31% in the absence of outside financing, while in 2015 it could achieve a growth rate of 15.41% without the external financing & lastly, it could achieve a growth rate of 14.07% without external financing. This implies that based on SGR above the company can rely on the revenue it Analysis of Financial statement of Under Armor Company 3 is generating & maintain sustainability. Additionally, it implies if under Armor wants to accelerate growth beyond the SGR of the company, then the only way to achieve this is by seeking external funding. From the above analysis of the financial statement of under armor, the SGR of the company is decreasing year after year i.e. in 2014 it was 17.31%, in 2015 it decreased to 15.41 and lastly in 2016 it decreased to 41.07%. The decrease in the SGR of the company is a clear picture of the difficulty the company is facing as it tries to achieve its growth potential year after year (Mitka, 2012). On the other hand, under armor’s actual growth rate remained higher that the SGR. E.g. in the year 2014 the ACR of under Armor Company was 24% which is higher than the SGR of the company which was 17.31%. Despite the actual growth rate being higher than the SGR, it also decreased year after year. The actual growth rate for under armor decreased from 24% in 2014 to 22% in 2015. However, the decrease of the actual growth rate for the company was smaller than the decrease in the SGR of the company. In cases where a company is growing at a rate which is inconsistent to the sustainable rate then they may end facing various consequences. Among them is that they will have trouble when trying to expand their debt to equity ratio. This implies that the company will have trouble in acquiring outside financing. The second consequence is that the company will struggle whenever it wants to liquidate its assets. Considering that the most realistic growth rate for any company is growth at a sustainable rate, it implies that whenever the growth rate is inconsequential, then there will be severe impacts on the company’s financial ratios. Whenever the growth rate of a company is high than the sustainable rate, the company will experience difficulties that will eventually plunge it into trouble and whenever the sustainable rate of growth is higher than the company’s growth rate, it implies that the company is not performing at its best (Mitka, 2012). Analysis of Financial statement of Under Armor Company 4 In situations where a firm is growing at such a rate which is either below the SGR of the firm or above the SGR of the firm, then it can finance this excessive growth via either a longterm debt or a short-term debt. The debt will enable the company to be able to fund the growth by increasing the firm’s financial leverage. The company will also be able to reward the stockholders. The second way that the firm can finance the excessive growth is by reducing the firm’s dividend payout. Lastly, if a firm is in the situation where it must finance excessive growth then it will have to come with a strategy that will result in more equity of the firm being sold as well as lowering the firm’s asset to sales ratio (Mitka, 2012). In relation to the analysis above, the strategy to grow employed by Under Armor Company will not maximize its value hence it not sounds. This is so since, the strategy has resulted in the decrease of the firm’s SGR year after year. Additionally, the firm’s growth rate is not consistent with the firm’s SGR. References Analysis of Financial statement of Under Armor Company Mitka, M. (2012). Sustainable Growth Rate. JAMA, 308(6), 558. http://dx.doi.org/10.1001/jama.2012.9564 Under Armour Inc UA. Morningstar.com. Retrieved from http://financials.morningstar.com/ratios/r.html?t=UA. 5 ...
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FinAccGuru
School: UIUC

Here is the answer. Thanks

Analysis of Financial Statements of Under Armor Company

Financial Statement Analysis
Name: James Henry
Date of Submission: 08/08/2017

Analysis of Financial Statements of Under Armor Company
Introduction
Financial statements represents a snapshot of the financial picture of company (Moles,
Parrino, & Kidwell, 2011). Understanding of the performance and position of the company
requires to assessment and evaluation of the figures represented in the financial statements. Ratio
analysis is a widely used financial tool for the assessment and evaluation of the figures
represented in the financial statements. The liquidity, profitability, solvency, assets management
efficiency, and market performance of a company can be analyzed with various types of ratio
calculation and explanation.
This paper aims at understanding the financial performance and position of Under
Armour Incorporation based on the review of key figures, and analysis of selected financial
ratios including gross profit margin ratio, net profit margin ratio, return on assets (ROA), current
ratio, debt-to-assets ratio, Earnings per share, and P/E ratio.
Understanding of Financial Performance and Position of Under Armour Incorporation
Financial Performance Analysis
Sales Revenue and Net Income
The revenue and net income of the Under Armour Incorporation have increased in 2015,
and 2016 (Figure 1). The increase of sales revenue and net income are favorable for the
company.
Total sales of the company were USD 3963 million, and USD 4825 million respectively
in 2015, and 2016. Even though sales has been increased in 2015 and 2016, the sales growth in
2016 (21.57%) was lower than that of 2015 (28.50%). Reduction of the sales growth is an
indication of the failure to sustain market share as before by the company. The net income of the
company were USD 233 million, and USD 257 million respectively in 2015, and 2016. Increase

Analysis of Financial Statements of Under Armor Company
of net income is an indication of the improvement of the ability of the Under Armour to manage
cost of its operation, and generate return for the company. But in 2016 the net income growth
(10.30%) of the company was lower than that of in 2015 (12.02%)
Revenue and Net Income
6000
5000
4000
3000
2000
1000
0

Revenue
Net income

2015
3963
233

2016
4825
257

Figure 1: Revenue and Net Income of Under Armour
Profitability Ratios
The gross profit margin, net profit margin, and ROA of the Under Armour have been
decreased in 2016 (Figure 2). The decrease of these profitability ratios are unfavorable for the
Under Armour. The decrease of these ratio are indication of the deterioration of the profitability
of the company.
The gross profit margin of the Under Armour was 48.07% and 46.42% in 2015 and 2016
respectively. The decrease of gross margin is indication that the company has failed to manage
its cost sales, and generate gross income on the sales. The cost of sales of the Under Armour has
been significantly incr...

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Anonymous
Good stuff. Would use again.

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