Under Armour Nicole Williamson University Of Phoenix 0617202

Under Armournicole Williamsonuniversity Of Phoenix06172020introducti

The purpose of this paper is to analyze the financial data of Under Armour, focusing on key aspects such as cash balances, accounts receivable, inventory levels, and related financial policies. Understanding these components provides insight into the company's financial health, liquidity status, credit risk management, and operational efficiency.

Under Armour, a reputable manufacturer of athletic accessories, sportswear, footwear, and casual apparel, was founded by Kevin Plank in 1996. Headquartered in Baltimore, Maryland, the company operates both nationally and internationally, with a presence in countries including the United States, China, and the Netherlands. As of recent records, Under Armour employs over 15,000 individuals and maintains a strong financial position, evidenced by its cash balances and receivables.

The company's cash balance reflects its total liquid assets. Historically, the cash balance has fluctuated, with a notable negative balance of -$463,000 in 2015, indicating overdrawn accounts at that time. By 2015, the cash balance improved significantly to $245,686. These figures suggest periods of financial challenge and recovery, with positive liquidity achieved post-2015. Cash balances are crucial as they indicate the company's ability to meet short-term obligations without relying on external financing.

Accounts receivable represent the amount of money owed to Under Armour by its customers on credit. In 2014, accounts receivable stood at $279,835, increasing to $433,638 in 2015, reflecting growth in sales on credit and possible changes in credit policy or customer base. Accounts receivable turnover, calculated as net credit sales divided by average accounts receivable, provides an efficiency measure, revealing how quickly the company collects owed amounts. A turnover of 3.28 times indicates that, on average, receivables are collected roughly every 111 days, highlighting the credit collection cycle.

The company's liquidity also depends on its cash and cash equivalents—liquid investments with maturities of three months or less. Interest income from cash equivalents was reported as $164,000 in 2015, evidencing the company's effective management of liquid assets. Managing cash and equivalents wisely ensures operational flexibility and reduces reliance on short-term borrowing.

Under Armour’s credit risk is concentrated among large sporting retail companies, which together constitute a substantial portion of its receivables. For example, the largest North American customer accounted for 18.7% of accounts receivable in December, presenting a concentration risk. The company evaluates each customer's financial health before extending credit, and typically does not demand collateral but relies on its assessment of clients' creditworthiness.

To mitigate potential losses from unpaid receivables, Under Armour establishes an allowance for doubtful accounts. This reserve is based on historical loss rates and industry conditions. Since customer defaults are unpredictable, this reserve fluctuates to account for anticipated bad debts, thus safeguarding the company's profitability.

Inventory management is fundamental to operational efficiency. As of 2015, inventory stood at $783,031, up from $536,714 in 2014. The inventory primarily consists of finished goods, and the company employs the first-in, first-out (FIFO) method for valuation, aligning with the industry standards to ensure inventory freshness and accuracy of financial reporting. The costs associated with inventory include all expenses needed to bring products to their current condition, from raw materials to finished goods.

Market valuation of inventory is periodically assessed based on expected demand and current industry conditions. When the estimated market value falls below the carrying amount, Under Armour records a charge to cost of goods sold, reflecting a lower inventory value. This practice ensures realistic reporting of inventory worth and prevents overstatement of assets.

Financial ratios such as accounts receivable turnover and days sales outstanding (DSO), as well as inventory turnover and days sales in inventory, are essential metrics for evaluating operational efficiency. The receivable turnover ratio of 3.28 indicates the company's efficiency in collecting receivables, with an average collection period of approximately 111 days. Similarly, an inventory turnover of 3.12 suggests the company sells and replaces its inventory about every 113 days. These ratios highlight the operational cycle length and potential areas for improving cash flow management.

In conclusion, Under Armour's financial data demonstrate a firm that actively manages liquidity, credit risk, and inventory. The positive trend in cash balances after 2015 signals recovery and operational strengthening. While accounts receivable management indicates a moderate collection period, ongoing concentration risks necessitate prudent credit policies. Effective inventory management, coupled with disciplined policies for doubtful accounts and liquid asset deployment, positions Under Armour to sustain its growth trajectory. Continued focus on optimizing receivables, managing inventory efficiently, and maintaining robust cash reserves will be crucial for the company's ongoing financial stability and competitive advantage in the global sportswear market.

Paper For Above instruction

Under Armour, founded in 1996 by Kevin Plank, has established itself as a prominent player in the sportswear and athletic accessories industry. Its extensive operations, both domestically and abroad, necessitate robust financial management practices to sustain growth and meet strategic objectives. Central to this financial management are the company's liquidity, accounts receivable, and inventory policies, which collectively influence its operational efficiency and risk management.

The company's cash balance is an integral indicator of its liquidity position. As of 2015, Under Armour experienced a positive cash balance of $245,686, a significant improvement from the negative balance of -$463,000 in 2015. This fluctuation underscores the company's transition from financial distress to stability, likely attributed to increased sales and improved cash flow management. Maintaining an adequate cash reserve enables Under Armour to fund daily operations, service debt, and invest in growth initiatives without undue reliance on external borrowing.

Accounts receivable are another critical component of Under Armour’s financial structure. The accounts receivable increased from $279,835 in 2014 to $433,638 in 2015, reflecting a growth in credit sales. The receivables turnover ratio of 3.28 times indicates that the company collects its outstanding balances approximately every 111 days, suggesting a moderate credit collection period. Such a period has implications for the company's cash flow, as extended collection times can tie up capital and affect liquidity. Therefore, effective receivables management becomes vital to reducing days sales outstanding and optimizing cash conversion cycles.

The management of cash equivalents further enhances liquidity. Under Armour's liquid investments, with interest income of $164,000 in 2015, contribute to the company's ability to respond swiftly to operational needs. These investments, considered safe and short-term, help diversify cash holdings beyond idle balances, providing additional income streams while ensuring funds are available when needed.

However, credit risk remains a concern, especially given the company's reliance on large retail clients. Approximately 18.7% of North American accounts receivable in December was attributable to a single major customer, illustrating a significant concentration risk. To mitigate potential losses, Under Armour evaluates the creditworthiness of its clients before extending credit and maintains an allowance for doubtful accounts based on historical loss data and industry conditions. This reserve acts as a buffer against the financial impact of customer defaults, which are inherently unpredictable in nature.

Inventory management is equally important in the context of financial health. The inventory was valued at $783,031 in 2015, up substantially from $536,714 in 2014. The company employs the FIFO method for inventory valuation, a standard industry practice, to ensure that older inventory is sold before newer stock, reducing obsolescence and maintaining product freshness. The market value assessments frequently consider industry demand forecasts, and adjustments are made to align book values with realizable values through charges to cost of goods sold if necessary.

Key financial ratios such as inventory turnover and days sales in inventory provide insights into operational efficiency. An inventory turnover ratio of 3.12 indicates that the company sells and replaces its inventory roughly every 113 days, aligning with industry norms for apparel and footwear companies. Similarly, the accounts receivable turnover of 3.28 times reflects an average collection period of about three and a half months. These metrics are crucial for identifying areas where receivables and inventory management can be optimized to improve cash flow and profitability.

In summation, Under Armour's financial data illustrate a company actively managing its liquidity, credit risk, and inventory. The positive trend in cash balances, along with prudent receivables and inventory policies, allows the company to sustain growth while mitigating operational risks. Continued focus on reducing days sales outstanding and inventory turnover periods will further strengthen its financial position. Strategic management of these key areas is essential for maintaining competitive advantage and ensuring long-term financial stability in the dynamic global sportswear industry.

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