Nike And Under Armour Comparison
Analysis of the financial data for Under Armour Inc. & Nike Inc. 1. Liquidity | Comparison between Nike & Under Armour | | 2010 | 2009 | Current Ratio | •Both companies have a ratio that is higher than the dangerous 1.0 current ratio.•The current Ratio of Under Armour is a bit higher than Nike`s which means that Under Armour is more efficient in terms of the operating cycle or in other words the ability to turn its products into cash. | •Both companies have a ratio that is higher than the dangerous 1.0 current ratio.•The current Ratio of Under Armour is a bit higher than Nike`s which means that Under Armour is more efficient in terms of the operating cycle or in other words the ability to turn its products into cash. |
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Acid Test | • Both companies have a ratio higher than the dangerous 1.0 acid test ratio.
Both companies are able to pay their current liabilities. • This test shows that Nike is more financially stable and Under Armour lost its lead based on this test.• Another conclusion that can be based on this test is that Under Armour`s current assets are more dependent on inventory than Nike`s current assets. Nike continues its lead based on this test. | • Both companies have a ratio higher than the dangerous 1.0 acid test ratio. Both companies are able to pay their current liabilities.• This test shows that Under Armour is more financially stable.• Another conclusion that can be based on this test is that Under Armour`s current assets are more dependent on inventory than Nike`s current assets
| Conclusion: Basing ourselves on the acid test ratio we concluded that both companies have 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 about the business styles of the two companies is the fact that Under Armour keeps a higher dependency of current assets on inventory, which is more typical for retail store businesses.
2. Profitability | Comparison between Nike & Under Armour | | 2010 | 2009 | Gross Profit Margin | The gross profit margin of both companies is almost the same.Still Under 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 both 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 | Ratio of Net Sales to Assets | Under Armour leads in this categoryUnder Armour has a higher effectiveness of assets in respect to sales. | Under Armour leads in this categoryUnder Armour has a higher effectiveness of assets in respect to sales | Rate Earned on Total Assets | Nike is the leader in this categoryNike maintains a higher return on its investments which means that its management team 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 years. The lack of fluctuations in the GPM suggests that there were no major changes in the sports apparel industry 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 also 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 growth based on a year to year comparison. This may be a result of bad managerial decisions or less effective managerial team. Based on the leverage Nike is a better choice for investment in comparison to Under Armor.
3. Solvency | Comparison between Nike & Under Armour | | 2010 | 2009 | Solvency Ratio | Both companies have solvency ratios that are far above the critical 20%.Nike has a little bit higher solvency ratio than Under Armour. The problem 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 larger working capital 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 & Under Armour show a high solvency ratio which means that they are capable of meeting their 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 amount of working capital. Again Under Armour shows a higher growth of working capita, 24% compared to the 17% growth in Nike.
4. Cash flow adequacy | Comparison between Nike & 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 |
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 trust 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. 5. Asset utilization | Comparison between Nike & 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 |
Acid Test | • Both companies have a ratio higher than the dangerous 1.0 acid test ratio.
Both companies are able to pay their current liabilities. • This test shows that Nike is more financially stable and Under Armour lost its lead based on this test.• Another conclusion that can be based on this test is that Under Armour`s current assets are more dependent on inventory than Nike`s current assets. Nike continues its lead based on this test. | • Both companies have a ratio higher than the dangerous 1.0 acid test ratio. Both companies are able to pay their current liabilities.• This test shows that Under Armour is more financially stable.• Another conclusion that can be based on this test is that Under Armour`s current assets are more dependent on inventory than Nike`s current assets
| Conclusion: Basing ourselves on the acid test ratio we concluded that both companies have 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 about the business styles of the two companies is the fact that Under Armour keeps a higher dependency of current assets on inventory, which is more typical for retail store businesses.
2. Profitability | Comparison between Nike & Under Armour | | 2010 | 2009 | Gross Profit Margin | The gross profit margin of both companies is almost the same.Still Under 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 both 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 | Ratio of Net Sales to Assets | Under Armour leads in this categoryUnder Armour has a higher effectiveness of assets in respect to sales. | Under Armour leads in this categoryUnder Armour has a higher effectiveness of assets in respect to sales | Rate Earned on Total Assets | Nike is the leader in this categoryNike maintains a higher return on its investments which means that its management team 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 years. The lack of fluctuations in the GPM suggests that there were no major changes in the sports apparel industry 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 also 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 growth based on a year to year comparison. This may be a result of bad managerial decisions or less effective managerial team. Based on the leverage Nike is a better choice for investment in comparison to Under Armor.
3. Solvency | Comparison between Nike & Under Armour | | 2010 | 2009 | Solvency Ratio | Both companies have solvency ratios that are far above the critical 20%.Nike has a little bit higher solvency ratio than Under Armour. The problem 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 larger working capital 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 & Under Armour show a high solvency ratio which means that they are capable of meeting their 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 amount of working capital. Again Under Armour shows a higher growth of working capita, 24% compared to the 17% growth in Nike.
4. Cash flow adequacy | Comparison between Nike & 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 |
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 trust 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. 5. Asset utilization | Comparison between Nike & 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 |