BUS 317 GCU Financial Management & Financial Decisions Nike & Adidas Presentation Using the report you wrote in Topic 3, create an executive summary presen
BUS 317 GCU Financial Management & Financial Decisions Nike & Adidas Presentation Using the report you wrote in Topic 3, create an executive summary presentation of the report (7-9 slides, exclusive of the title and reference slides) with appropriate speaker notes that could be delivered to a C-suite executive in a corporation. Consider the feedback from your instructor on the case study report you completed in Topic 3. Include the following in your presentation:
A summary of the industry and companies chosen.
An overview of the chosen companys liquidity ratios relative to the industry averages and to the competitor.
An overview of the chosen companys solvency ratios relative to the industry averages and to the competitor.
An overview of the chosen companys profitability ratios relative to the industry averages and to the competitor.
Describe the importance of the budgeting process in an organization relative to these ratios.
Prepare a variance report and balanced scorecard for the chosen company, comparative against the industry averages for liquidity, solvency and profitability (C.1.3)
Which and how would these ratios impact capital budgeting decisions.
A concluding summary of which company based on the analysis is overall better compared to each other and the industry.
Be sure to cite three-five relevant sources in support of your content. Utilize the GCU Library and external sources for your research.
Refer to the resource, “Creating Effective PowerPoint Presentations,” located in the Student Success Center, for additional guidance on completing this assignment in the appropriate style.
Title slide and reference slide are not included in the slide count. Include speaker notes below each content-related slide that represent what would be said if giving the presentation in person. Expand upon the information included in the slide and do not simply restate it. Please ensure the speaker notes include 50-100 words per slide.
While APA style is not required for the body of this assignment, solid academic writing is expected, and in-text citations and references should be presented using APA documentation guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. Refer to the LopesWrite Technical Support articles for assistance.
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Benchmark Information
This Benchmark assignment assesses the following programmatic competencies:
BS in Applied Management
1.3: Utilize accounting principles to evaluate the effectiveness of internal decisions. Running head: ADIDAS AND NIKE
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Financial Statements
Adidas and Nike
Gilbert B. Johnson
Grand Canyon University
Professor Brent Beyer
14, June 2020
ADIDAS AND NIKE
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Adidas and Nike
Abstract
Nike and Adidas are companies belonging to the same industry. This report gives an
analysis of the two companies in areas of growth, profitability, solvency, and management
effectiveness. It will further review some ratios that indicate the financial health and
performance of the two companies.
The following are some of the key findings:
For Nike
The quick ratio of Nike is more than 1, indicating that the company can meet
its financial obligations.
The financial risk of Nike Company increased in the year 2019 as reflected
in the increase of debt to equity ratio
The revenue and assets of Nike increased
The net profit margin for the company increased in 2019 as compared to
2018
In Nike, there has been growth in the sales and assets when the years 2018
and 2019 are compared.
For Adidas
Nike’s profitability increased tremendously in 2019 from 2018
The asset and revenue of Adidas increased
Adidas is heading toward insolvency since it has a quick ratio of less than 1
The financial risk of the company is increasing
Compared to Nike, Adidas has less financial risk since its debt to equity
ratios are less for both years under investigation.
ADIDAS AND NIKE
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Nike
Growth
There are various indicators of growth in a company which include the percentage
change in sales or revenue, the percentage change in assets, the number of employees hired,
and growth in assets and cash flows (Businesswire, 2019).
Growth in Revenue Nike
Growth in revenues is given by:
(Current revenue- Previous revenues)/previous revenues *100%
= ( $ 39.117b-36.397b)/36.397 * 100
= 7.5%. The revenue for Nike grew by 7.5% in the year 2019 as compared to 2018.
Growth in Assets
= (Total assets in 2019- Total assets in 2018)/Total assets 2018 *100%
=5.24 %
Profitability
Profitability indicators include measures such as the Gross profit margin and the net
profit margin
Net Profit Margin
NPM represents the percentage of sales left after all expenses have been paid,
including interest and taxes (Wahlen et al., 2011).
=Net Income/sales * 100
For 2019 NPM =$4.029 b/39.117b *100
= 10.3%
For 2018 NPM = $ 1.933b/36.397
=5.3%
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The net profit margin for the company increased in 2019 as compared to 2018,
which is attributed to growth in revenue (BusinessWire, 2019).
Financial health
The financial health of a company is assessed by analyzing the balance sheet. A
common indicator of the financial health of the company includes:
The quick ratio
Quick Ratio = (current Assets-Inventory)/current liabilities
Quick ratio for the year 2019= (16525-5622)/7866
=1.3
For 2018, the quick ratio = (15134-5261)/6040
= 1.63
A quick ratio of 1 and above indicates that a business can meet its current financial
obligations (Businesswire2019). Therefore, Nike is a liquid company that can meet its current
obligations as and when they fall due.
The Debt/Equity ratio
D/ E ratio is an indicator of the financial leverage of a company. A high D/E ratio
indicates that the company is operating at a higher financial risk (Wahlen et al., 2011).
D/E ratio = Total liabilities/ Total shareholders Capital
D/E ratio for the year 2019 = 11330/9040
= 1.25
For the year 2018 = 9508/9812
= 0.96
The financial risk of Nike Company increased in the year 2019, as reflected in the
increase of debt to equity ratio.
Price ratios
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The P/E ratio measures a company’s share price taking into consideration the earning
per share. The P/E ratio enables a comparison of companies within the same industry in the
same period.
P/E ratio= Market value of the share / Earnings per share
P/E ratio= $95.61/$ 0.53
=180.3962
Management Effectiveness
The effectiveness of the management is measured by various indicators such as
profitability, the rate of productivity, the management of labor relations, and the relationship
maintained with external and interested parties (Adidas 2019). In Nike, there has been growth
in the sales and assets when the years 2018 and 2019 are compared. The company has
positioned itself competitively by value creation, product innovation, and brand name
recognition.
Adidas
Growth
Growth of revenues/sales
= (Net sales for 2019 Net sales for 2018)/ Net sales for 2018 * 100
= (23640-21915)/21915
= 7.87%
Asset growth
= (Total Assets 2019- Total Assets 2018)/ Total assets 2018 * 100
= (20680-15612)/15612 * 100
=32.5%
The assets of Adidas grew by 32.5 %
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Profitability
Net profit margin
NPM 2019 = Net income/ sales * 100
=2558/23640 * 100
=10.82 %
NPM 2018= 2378/21915
=10.85%
The Net profit margin is stable and within the industry average. Compared to Nike,
Adidas is relatively more stable in its profitability (Adidas 2019). Nike’s profitability
increased tremendously in 2019 from 2018 indicating the effectiveness of the management in
driving profitability levels up
Financial health
Quick ratio
= (Current Assets Inventory)/ Current liabilities
Quick ratio for 2019 = (10934-4085)/8754
== 0.78
For 2018 = (9813 – 3445)/6834= 0.93
From the above computation, it is evident that Adidas is heading toward insolvency,
whereby it will have difficulties meeting its current obligations. Adidas’ current ratio is less
than that of Nike. It is also less than the recommended industry average of 1 (Macrotrends,
2020).
Debt Equity Ratio
D/E ratio = Total liabilities/ Total shareholders Capital
D/E ratio for the year 2019= 4868/6796
= 0.72
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For 2018 = 2414/6377
=0.378
The financial leverage for Adidas Company has increased tremendously from 2018
to 2019. Thus, the financial risk of the company is increasing as the company depends more
on external borrowing (Adidas 2019). Compared to Nike, Adidas has less financial risk since
its debt to equity ratios are less for both years under investigation.
Price ratios
Price-Earnings ratio = Market value of the share/ Earnings per share
P/E ratio= $ 230.10/$ 0.47
=489.5
Compared to Nike, Adidas has a high P/ E ratios. This is indicative of either an
overvaluation of the company’s share price or anticipation of future increase in the share price
of Adidas (Adidas 2019).
Management effectiveness
Adidas recorded stellar operational and financial advancement in the 2019 financial
year. Sales grew by 7.8%. The gross margin improved by 0.2% while operating expenses
went down by 0.2%. Also, the Net Income from the operations increased by 12% (Adidas,
2019).
Conclusion
A comparison of the two companies reveals performance variances of different
aspects of the business. For instance, Adidas has a high P/E ratio compared to Nike, yet it has
a lower than industry average current ratio. Both companies experienced growth in revenues
and assets and have relatively low financial risks as compared to the industry average.
ADIDAS AND NIKE
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References
Adidas. (2019), Home. adidas Annual Report, 2019. https://report.adidasgroup.com/2019/en/
Businesswire (2019, June 27). NIKE, Inc. Reports fiscal 2019 fourth quarter and full-year
results. https://www.businesswire.com/news/home/20190627005883/en/NIKEReports-Fiscal-2019-Fourth-Quarter-Full
Macrotrends. (2020). NIKE financial statements 2005-2020 | NKE. Macrotrends | The Long
Term Perspective on
Markets. https://www.macrotrends.net/stocks/charts/NKE/nike/financial-statements
Wahlen, J. M., Baginski, S. P., & Bradshaw, M. (2010). undefined. Cengage Learning.
=
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