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Noor-E-Hira Naveed, Nayo Challenger, Ibrahim Minta,
Dan Otembo, and Delroy Williams. Financial Accounting,
the date,
Carrie Xiao, A Comparative Analysis of Nike, Inc. and
Under Armour, Inc. .

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 Incorporation was established in 1964 by Bill Bowerman and Phil Knight
(Nike, 2016). It is a multinational company that engage in designing,
developing, producing, and selling of Athletic footwear, apparel, and sport
equipments & accessories. The company is currently employing more than
62000 employees worldwide (Nike, 2016). In 2015, total revenue of the Nike
was 30.601 US billion dollars (Nike, 2016).
Under Armour Incorporation was established in 1996 by Kevin Plank (Under
Armour, 2016). It is a multinational company that engages in offering of sport
clothing, footwear, and sport equipments & accessories.

The company is

currently employing more than 11000 employees around the world (Under
Armour, 2016). In 2015, total revenue of the Nike was 408.54 US million dollars
(Under Armour, 2016).

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 and Under Armour websites.

Nike

Interpretation and comparison between the two companies' ratios, as pe the

information in chapter 13.

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)

As given in the income statement

3.05

The EPS of Nike is higher than that of the Under Armour. Higher EPS of Nike confers that Nike is generating more return for its sharehodlers than
0.98 that of Armour.

Current assets
Current liabilities

$13,696
$5,027

2.72

$1,549
$421

3.68

The current ratio of Under Armour is higher than that of the Nike. Higher current ratio of Under Armour indicates that as comapred to Nike, it has
better ability to repay its short term debt and obligation when become due. Thus, liquidity condition of Under Armour is said to be better than that of
the Nike.

Gross margin
Net sales

$12,446
$27,799

44.8%

$1,512
$3,084

49.0%

The gross profit margin ratio of Under Armour is higher than that of the Nike. Higher gross profit margin ratio of Under Armour indicates that as
comapred to Nike, Under Armour is better capable to manage the cost of sales and generate more return on sales. Higher gross profit margin of
Under Armour than gross profit margin of Nike indicates that profitability condition of Under Armour is said to be better than that of the Nike.

Net income

$2,693

9.7%

$208

6.7%

Net sales

$27,799

Inventory Turnover

Cost of goods sold

Average inventory

$15,353
$3,716

Days' inventory outstanding (DIO)

365
Inventory turnover

365
4.1

Accounts Receivable Turnover

Net sales (assume all sales are credit sales)

Average net accounts receivable

$27,799
$3,276

Days' Sales Outstanding (DSO)

365
Accounts receivable turnover

365
8.5

Net sales
Average total assets

$27,799
$18,070

Current Ratio

Gross (Profit) Margin Percentage

Rate of Return (Net Profit Margin) on Sales

The net profit margin ratio of Under Armour is lower than that of the Nike. Higher gross profit margin ratio of Nike indicates that as comapred to
Under Armour, Nike is better capable to control and manage its operating cost and generate more return on sales. Higher net profit margin of Nike
than gross profit margin of Under Armour indicates that Nike is ended up with more profit poentiality than that of the Under Armour. Even though Nike
it is less effecient than Under Armour than managing cost of sales, but is more effecient than Nike in managing operating expenses.

$3,084

Inventory Turnover of Nike is higher than that of Under Armour. Higher Inventory Turnover of Nike indicates that Nike converts its raw materials more
4.1
times

$1,572
$503

3.1
times

88
days

365
3.1

117
days

8.5

$3,084
$244

12.6

43.0
days

365
12.6

28.9
days

1.54

$3,084
$1,836

1.68

Asset turnover of Under Armour is higher than that of Nike. Higher Asset Turnover of Under Armour indicates that as comapred to Nike, Under
Armour is more efficient than Nike in utilizing its assets to generate sales revenue. Higher Assets turnover of Under Armour than that of Nike is an
indication that Under Armour has more effecinecy in managing its asset.

14.9%

11.3%

Return on Assets of Nike is higher than that of Under Armour. Higher Return on Assets of Nike indicates that as comapred to Under Armour, Nike is

time to finished goods than Under Armour. Thus, Nike is said to be more efficient than Under Armour in inventory management.

Days Inventory Outstanding of Nike is lower than that of Under Armour. Lower Days Sales Outstanding of Nike indicates that Nike is taking less time
in processing its inventory than that of Nike. Thus, Nike is more efficient than Under Armour in inventory management.

Asset turnover

Rate of Return on Total Assets (ROA)

Rate of return on sales times asset turnover

Account Receivables Turnover of Under Armour is higher than that of Nike. Higher Account Receivables Turnover of Under Armour indicates that
Under Armour is converting its inventory to sales revenue than that of Nike. Thus, Under Armour is more efficient than Nike in account receivable
management.
Days Sales Outstanding of Under Armour is lower than that of Nike. Lower Days Sales Outstanding of Under Armour indicates that Under Armour is
taking less time in collecting credit sales from the customers than that of Nike. Thus, Under Armour is more efficient than Nike in account receivable
management.

more efficient than Under Armour in utilizing its assets to generate more return.

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.)

Notes:
1) The amount extracted from the Financial Statements and injected in the ratio
calculation (template) of the respective Companies are in the million (round up).
2) Free cash flows of the respective companies are in million.
3) Dividend per share of Nike is of dated of June 13, 2016. No Cash dividend history of
Under Armour is found in yahoo Finance.
4) The prices of the respective companies for dividend yield calculation are prices of
Dated June 13, 2016.
5) The price of Nike for P/E calculation are prices of May 30, 2014, and price of Under
Armour for P/E calculation is price of December 31, 2014.

Total Liabilities
Total Assets

$7,770
$18,594

41.8%

$744
$2,095

35.5%

Debt Ratio of Nike is higher than that of the Under Armour. Higher Debt Ratio of Nike indicates that as comapred to Under Armour, Nike has more
burden on debt in its capital strucutre. Even though slightly higher debt ratio indicates more risk of Nike than under Armour, Nike will have more
capacity to lever up its earning with the funds of debtholers.
The Timed-Interest Earned Ratio of Nike is higher than that of the Under Armour. Higher Timed-Interest Earned Ratio of Nike indicates that as
comapred to Under Armour, Nike has better ability to repay its interest burden with operating income. Thus, solvency condition of Nike is said to be
better than that of the Under Armour.

Income from operations

Interest expense

$6,602
$33

200.1

353
5

70.6

Dividend per share of common stock

Market price per share of common stock

$0.62
$54.91

1.1%

NA
$37.45

NA

Net income - Preferred dividends

Average common stockholders' equity

$2,693
$10,953

24.6%

$208
$1,202

17.3%

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

25

$67.90
$0.98

Return on Equity of Nike is higher than that of Under Armour. Higher Return on Equity of Nike indicates that as comapred to Under Armour, Nike is
more efficient than Under Armour in utilizing the funds of its shareholders to generate more return. Higher Return on Equity of Nike than that of
Under Armour is an indication that Nike is more profitable to shareholders than Under Armour.

79

69

Free Cash Flow of Nike is higher than that of Under Armour. Higher Free Cash Flow of Nike indicates that as comapred to Under Armour, Nike will
have more capacity to prursue profitable investment projects, and distribute cash to the shareholders as it gerates more free cash than Under
Armour.
Price Earning Ratio of Under Armour is higher than that of Nike. Higher Price Earning Ratio of Under Armour indicates that the shareholders of
Under Armour has paid more price for its share than that of the Nike. As a result, there was price correction. The current price of Under Armour has
decreased substantially.

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 more ability to repay its current liabiliites than that
of the Nike.
Measuring Turnover: As compared to Nike, Under Armour is more effeceint in collecting is credit sales. But as
compared to Under armour, Nike is more efficient in Inventory processing and management.
Measuring Leverage - Eventthough Nike is more geared up than Under Armour, Nike is more solvent than Under
Measuring Profitability: Nike is more profitable than Under Armour implied from the higher Net Profit Margin,
Return on Equity, and Return On Equity of Nike than that of the Under Armour.
Analyzing Stock as an Investment: Nike provides 1.10% dividend yield to its shareholders whereas Under Armour
has not paid any cash dividend in last year. Whereas free cash flow of Nike is $2123 million, the free cash flow of
Under Armour is $79 million. Thus, As compared to Under armour, Nike has more capacity in undertaking
acquisitions, paying off additional cash dividends, repaying down debt, and repurchasing stock.
Conclusion: Nike is more attractive investment than the Under Armour. As compared to Under Armour, Nike is
more profitable, and solvent. Also, cash generating and dividend paying capacity of Nike is also better than
Under Armour. Thus, investors are suggested to make investment in share of Nike.

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

Nike. (2016). Retrieved June 13, 2016, from About Nike: http://about.nike.com/pages/company-profile

NIKE INC. (2016). Retrieved June 13, 2016, from Investors: Events and Presentations: http://investors.nike.com/investors/news
reports/?toggle=filings
Under Armour. (2016). Retrieved June 14, 2016, from Investors Relation: http://www.uabiz.com/sec.cfm?
DocType=Annual&Year=2015&FormatFilter=
Under Armour. (2016). Retrieved June 13, 2016, from Our History: http://www.underarmour.jobs/why-choose-us/our-history/
Yahoo Finance. (2016). Retrieved from NIKE, Inc. (NKE): Historical Prices: http://finance.yahoo.com/q/hp?
s=NKE&a=11&b=2&c=1980&d=05&e=15&f=2014&g=d

Yahoo Finance. (2016). Retrieved June 14, 2016, from Key Statistics: NIKE, Inc. (NKE): http://finance.yahoo.com/q/ks?s=NKE+

Yahoo Finance. (2016). Retrieved June 13, 2016, from Historical Price: Under Armour, Inc. (UA): http://finance.yahoo.com/q/hp
s=UA&a=10&b=18&c=2005&d=11&e=31&f=2016&g=d
Yahoo Finance. (2016). Retrieved June 13, 2016, from Key Statistics: Under Armour, Inc. (UA): http://finance.yahoo.com/q/ks?
s=UA+Key+Statistics