Complete Your Title Page On This Tab ✓ Solved
Title Page complete Your Title Page On This Tabplease Inc
Complete your Title page. Please include the names of your team members, the course, the date, your instructor's name, and the title for the project.
Complete one paragraph, profiling each company's business, including information such as brief histories, where each company is located, number of employees, the products each company sells, and so forth. Please reference any websites that you used for the profiles on the Bibliography tab.
ONLY DO A SUMMARY FOR ALPHABET 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. Remember that each ratio below requires a comparison.
Summary: 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.
Paper For Above Instructions
In this paper, we profile two companies in the athletic apparel industry, Nike, Inc. and Under Armour, Inc. The financial ratios of Alphabet Inc. will be summarized but not profiled in detail as per the assignment instructions.
Company Profiles
Nike, Inc. was founded in 1964 as Blue Ribbon Sports, and rebranded as NIKE, Inc. in 1971. Headquartered in Beaverton, Oregon, it is a leading designer and seller of athletic apparel and footwear. As of 2014, Nike reported $27.8 billion in net product sales and had approximately 76,700 employees. The company is famous for its endorsements from sports icons, including Michael Jordan.
Under Armour, Inc. was established in 1996 by Kevin Plank, a former college football player at the University of Maryland, and is headquartered in Baltimore, Maryland. Known for its performance apparel, footwear, and accessories, Under Armour reported $3.1 billion in net sales in 2014 with around 7,000 employees. The company has grown rapidly since its inception and continues to innovate in the sports apparel market.
Alphabet Inc. Summary
Alphabet Inc. is the parent company of Google and several other businesses. The company was created during a corporate restructuring of Google on October 2, 2015. Based in Mountain View, California, Alphabet focuses on technology innovations and operates its various businesses under the Alphabet umbrella, including advertising, cloud computing, and hardware. While a detailed profile of Alphabet is not required, it’s crucial to understand its operational framework as it pertains to financial analysis.
Financial Ratios
In analyzing the financial health of both Nike and Under Armour, we need to focus on various categories of ratios: liquidity, solvency, and profitability. These ratios yield insights into how efficiently each company utilizes its resources and manages its financial obligations.
Liquidity Ratios
The current ratio is a key indicator of liquidity. Nike's current ratio stands at 2.72, while Under Armour shows a lower ratio of 0.98, indicating that Nike is better positioned to meet its short-term liabilities.
Solvency Ratios
When examining solvency, Under Armour demonstrates a more robust stance with a debt-to-assets ratio of 35.5% compared to Nike's 41.8%. However, Nike can cover its interest expenses 108.4 times with its income before interest and taxes, indicating a strong financial foundation compared to Under Armour's coverage of 65.1 times.
Profitability Ratios
In terms of profitability, Under Armour has the edge in gross profit rate at 49%, while Nike's gross profit rate is at 44.8%. Nevertheless, Nike outperforms Under Armour in profit margins, returning 9.7% compared to 6.7% for Under Armour. Furthermore, Nike's return on assets (ROA) and return on equity (ROE) are higher, standing at 14.9% and 24.6%, respectively, compared to Under Armour’s 11.3% and 17.3%.
Conclusion
Both companies show strengths in different financial aspects. Under Armour’s lower debt levels present it as a less risky investment option, while Nike’s stronger profitability and liquidity ratios indicate a well-established market position and efficient management of assets and liabilities. Ultimately, from an investment standpoint, Nike appears to be the more favorable choice for both conservative and growth-focused investors due to its superior financial metrics.
References
- Big Charts for Nike. (2014, May 30). Retrieved from [URL]
- Big Charts for Under Armour. (2014, December 31). Retrieved from [URL]
- Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2019). Financial Accounting: Tools for Business Decision Making (9th ed.). Hoboken, NJ: John Wiley & Sons, Inc.
- Nike's 2014 Annual Report. (2014). Retrieved from [URL]
- NKE profile. (2019). Retrieved from [URL]
- NKE stock price. (December 24, 2015). Retrieved from [URL]
- Under Armour 2014 Annual Report. (2015). Retrieved from [URL]
- UA profile. (2019). Retrieved from [URL]
- UA stock price. (December 24, 2015). Retrieved from [URL]
- Yahoo! Finance. (2015). Retrieved from [URL]