ACC102 Financial Statement Analysis

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Craig Krupski #116
Accounting 102
Professor Marback


Nike Inc. Balance Sheet

Nike Inc. Income Statement

Nike Inc. Statement of Changes in Owners Equity

Nike Inc. Statement of Cash Flows

Nike Inc. Management and Discussion Analysis

Nike Inc. Audit Report

Addidas Balance Sheet

Adidas Balance Sheet Continued

Adidas Income Statement

Adidas Statement of Changes in Owners Equity

Adidas Statement of Cash Flows

Adidas Notes and Managers Discussion and Analysis

Adidas Auditors Report

Financial Ratios

Nike (In Millions)
Debt to assets = 23.3%
Debt to equity = 34.5%
Return on equity = 20.7%
Profit Margin = 10.0%
Return on assets = 13.2%
Working Capital = 7595
Current Ratio = 3.26
Taxes Expense = 32%

Adidas (In Millions)
Debt to assets = 37.6%
Debt to equity = 80.3%
Return on equity = 13.4%
Profit Margin = 9.5%
Return on assets = 5.8%
Working Capital = 2154
Current Ratio = 1.50
Taxes Expense = 38%

Ratio Explanation

When one first decides they want to invest, it is smart to calculate ratios when
deciding if a company is worth investing. As I did for Nike and Adidas, I calculated ratios
based off numbers pulled straight from each company’s financial statements. Ratios give
future investors explanations behind each companies spending and earnings. The debt to
asset ratio is total liabilities divided by total assets. This ratio is calculated by percentages,
showing future investors the percentages of company assets that are bought under
liabilities. The higher the percentage, the greater risk and more liabilities the company has
to pay off in the future. The debt to equity ratio shows investors how companies finance
their assets from liabilities. This is calculated by taking the total liabilities divided by
stockholders equity. The return on equity ratio can be calculated by taking net income and
dividing it by the average owners equity. This ratio shows us how much profit the company
has made based on the money the share holders have invested previously. Another ratio to
determine profit is the profit margin ratio. This ratio is calculated by taking net income and
dividing it by the company’s revenues. This ratio shows us how much of every dollar a
company keeps as earnings. The return on assets ratio can be calculated by net income
divided by total assets. This ratio shows us how much profitability a company is getting
from their assets. Working capital could be calculated by taking the current assets and
subtracting it from the current liabilities. Current ratio is calculated by taking the current
assets and dividing it by current liabilities. This ratio measures how a company is able to
pay its short-term obligations (Liabilities, IOU’s, etc.). Finally, I calculated the tax expense
percentage by taking a companies tax payings of that year, and dividing it by the net
income. It shows us how much percentage of a company net income is going to taxes.

Highlights of the Management Discussion


In Nike’s Management Discussion statement, Nike talks about how these financial
statements are the statements as of May 31, 2010. Nike used general accepted accounting
principals (GAAP) under the United States of America. These financial statements provided
were made by management and are internal to the company. The management brings up
their audits and how they believe they are correct and they portray a good example of their
company’s opinions.


In Adidas’s financial statements, under the notes it shows us management decisions that
would or would not affect the company’s future. Adidas Company shows how future laws
and amendments did not have an affect on these financial statements that were printed. It
also tells us that Adidas prepared these statements using historical costs, with the
exceptions of certain items in the financial statements.

Summary of my findings

After exploring the financial statements of Nike and Adidas, and calculating the
ratios for both companies based off numbers pulled from their financial statements, I
would conclude the better company to invest in would be Nike. From proof of the ratios, it
looks like Nike gets a better bang for their dollar. Nike’s net income was 1906.7 million
dollars compared to the 670 million Adidas made in 2010. Nike made 35% more net
income than Adidas. The next thing that caught my attention was the profit margin ratio for
the two companies. Nike’s profit margin was 10.0% compared to Adidas’s 9.5%. This
means that for every dollar Nike makes, 10 cents of the dollar goes to the company’s
earnings account to be saved and used for later. Just quickly glancing at the financial
statements, one thing that is apparent is that Nike’s cash flows deal with greater amounts
of money compared to Adidas’s, which suggests that Nike is a bigger company than its
competitor. Nike seems to be pulling better numbers for each and every ratio compared to
their competitors who lack by a few percentage points in all of them. Each and every
account on the balance sheet for Nike is way larger compared to its competitor. For
example, Nike’s assets for 2010 were 14,419.3 million while Adidas’s were 11,380 million.
If a company tanks and begins to struggle, which is becoming more and more apparent in
today’s market, one corporation could sell part of its assets in order to survive longer, and a
company with more assets means that they have more liquid cash in their company. After
analyzing each financial statement and calculating the ratios for both companies, it is
apparent that Nike would be a better investment in the long run because each and every
year it continues to grow.

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