Nike and Under Armour (Accounting Paper)

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RUNNING HEAD: NIKE & UNDER ARMOUR FINANCIALS

Nike & Under Armour Financial Analysis

Table of Contents

Background……………………….……………………………………………………………………..3

Progress in last year…………………………………………………………………………………..3-5

Profitability/Debt Ratios…………………………...………………………………………………...5-7

Net Profit Margin………………………..……………………………………………………….5

Gross Profit Margin………………………...…………………………………………………….6

Return on Equity………………………….…………………………………………………...6-7

Earnings per Share……………………..………………………………………………………...7

Liquidity/Debt Ratios………………………………………………………….…….……………….7-9

Current Ratio……………………………………………………………………………………8

Debt to Equity…………………………………………………………………………………..8

Interest Coverage……………………………………………………………………………….9

Efficiency
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Thus signifying that they have necessary cash flow to fund their aggressive expansion plans.

Profitability/Debt Ratios

There are several tests one can conduct to test how profitable a company is. Profitability measures how a company utilizes their assets and controls their expenses to generate a return on their investment (Libby, Libby, Short, 2009). Debt ratios measure how capable a company is at repaying or meeting their obligations (2009). The four-profitability/debt ratios that will be discussed are: net profit margin, gross profit percentage, return on equity and earnings per share. Net profit margin shows how effective a particular company is at “controlling revenues and expenses to generate more profit for the shareholders” (Libby, Libby, Short, 2009, pg. 181). Net profit margin shows investors how much profit every sales dollar generates (2009). An increase in net profit margin shows that a company is more efficient at managing sales and expenses. Nike’s net profit margin was 10.11 percent in 2008 and 7.75 percent in 2009 signaling a drop in efficiency of managing sales and expenses (Stevens, J, 2010). The decrease in net profit margin could be a signal of the economic downturn the United States and world is facing. In addition Nike’s competition, such as Under Armour, is widening their consumer base thus affecting Nike’s profit. Under Armour’s net profit margin was 5.27 percent in 2008 and 5.46 percent in 2009

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