Finance Analysis Essay

Nike continues its lead based on this rill. Both companies expect a dimension high than the dangerous 1. 0 acid test balance. Both companies are able to pay their watercourse liabilities. This test delegates that shekelsher armour is more financially stable. Another conclusion that can be based on this test is that beneath fit outs circulating(prenominal) assets are more dependent on inventory than Nikes current assets Conclusion Basing ourselves on the acid test proportionality we concluded that twain companies kick in no liquidity issues and are able to maintain their liquidity far above the required minimum.There was a change in the leading position from 2009-2010. Nike improved their liquidity and took the lead. Another conclusion close the business styles of the two companies is the fact that at a lower place outfit keeps a higher(prenominal)(prenominal) dependency of current assets on inventory, which is more typical for retail set up businesses. 2. Prof itability coincidence between Nike & adenosine monophosphate angstrom at a lower place armor 2010 2009 Gross Profit Margin The gross profit gross profit boundary line of twain companies is almost the same. Still beneath(a) Armour show a higher GPM than Nike.There are no large fluctuations in the GPM which is always a good sign for the stability of the companies. The gross profit margin of two companies is almost the same. Still Under Armour show a higher GPM than Nike. Net Profit Margin Nike leads in the net profit margin categoryThere is an apparent difference between the leadership in GPM and NPM Nike leads in the net profit margin categoryThere is an apparent difference between the leadership in GPM and NPM symmetry of Net Sales to Assets Under Armour leads in this categoryUnder Armour has a higher effectiveness of assets in love to sales. Under Armour leads in this categoryUnder Armour has a higher effectiveness of assets in respect to sales Rate Earned on occur Assets Nike is the leader in this categoryNike maintains a higher return on its investments which means that its management team up is more effective. Nike is the leader in this categoryNike maintains a higher return on its investments which means that its management team is more effective. Conclusion Both companies show a big gross profit margin during both socio-economic classs.The neediness of fluctuations in the GPM suggests that there were no major changes in the sports apparel fabrication and its development is fairly stable. The huge differences in net profit margin show that the marketing/administration costs of sports apparel companies are big. This in any case implies that operating costs and cost of goods sold of sports apparel companies is relatively low. Under Armour has a lower Rate Earned on Total Assets and a smaller ontogenesis based on a year to year par. This may be a result of bad managerial decisions or less effective managerial team.Based on the leverag e Nike is a better choice for investment in comparison to Under Armor. 3. Solvency Comparison between Nike &amp Under Armour 2010 2009 Solvency Ratio Both companies have solvency ratios that are far above the critical 20%. Nike has a flyspeck bit higher solvency ratio than Under Armour. The puzzle is that the solvency ratio of Nike has fallen with almost 2% for one year. Both companies have solvency ratios that are far above the critical 20%. Nike has a little bit higher solvency ratio than Under Armour. Working Capital Nike has a much big working not bad(p) which is understandable based on the size of the two companies. Nevertheless Under Armour shows a larger percentage increase in Working Capital in comparison to 2009 (UA 24% Increase, NIKE 18% Increase) Nike has a much larger working capital which is understandable based on the size of the two companies. Conclusion Nike &amp Under Armour show a high solvency ratio which means that they are capable of meeting thei r debt obligations. The solvency ratio in Under Armour is lower, but on the other hand the company shows a fairly constant rise in these criteria.Nike lost some of its solvency during 2010. The size of the two companies and the stage of development in which they are result in large differences in the make sense of working capital. Again Under Armour shows a higher growth of working capita, 24% compared to the 17% growth in Nike. 4. Cash lean adequacy Comparison between Nike &amp Under Armour 2010 2009 Cash flow adequacy ratio Nike clears its gold problems and increases its cash flow adequacy ratio to a commensurate level. In contrast Under Armour loses its return and falls at a lower place the critical 1. ratio. A sign of authorization liquidity problems in the future. Under Armour showed a sufficient amount of cash to cover its obligation during the year. In comparison Nike fell under the 1. 0 level which is a sign of potential liquidity problems Conclusion There are a lot of changes in both companies based on these criteria. Nike raised their cash flow adequacy ratio to normal levels that may increase the commit in the company. On the other hand Under Armour shows a disturbing 2010 Cash Flow adequacy ratio that may be a sign for future liquidity problems. . Asset utilization Comparison between Nike &amp Under Armour 2010 2009 Cash flow adequacy ratio Nike clears its cash problems and increases its cash flow adequacy ratio to a sufficient level. In contrast Under Armour loses its advantage and falls below the critical 1. 0 ratio. A sign of potential liquidity problems in the future. Under Armour showed a sufficient amount of cash to cover its obligation during the year. In comparison Nike fell under the 1. 0 level which is a sign of potential liquidity problems