Nike is a big industry and to take shares of this company and asset it into Zinc Finances would be very pricey but according to ratios worth it. Here I would look at Nike Inc's total finances and compare it with Adidas and possibly other rival competitors including Reebok, which has come very close to Nike over the years with revenue and gross profit. As you can see from the research the years taken from Nike Inc and Adidas are a year or so different as Adidas finance information starts at Dec 1998 and ends in Dec 2000, whereas Nike Inc starts in Dec 1999 and ends in Dec 2001.
I have analyzed both companies with their ratios in the years where there is financial data on both companies in two particular years. Which in this case was Dec 1999 and 2000 for Adidas, while May 1999 and 2000. This could have created different results in the ratio. However, it was clear which company performed better. The performance, profitability and solvency ratios all show that Nike Inc is consistently financially better than its competitors.
But does this mean overall success for Nike? I would look at the Industry, History, Mission, Culture, Marketing overview, Brand expansion, International market, advertising, endorsements and come up with a conclusion for the references I have made.
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Adidas is the #2 biggest footwear industry and after analyzing the ratios it has performed as well as Nike over the years, even though it is far behind Nike in revenue and profits. The share price of Adidas is currently at 4877. 0 compared to the opening price of 4864. 0 that was a 44. 0 change-0. 90%. The highest it has been being 4916. 0, which I would guess is cheaper than Nike. However, does the price of Adidas worth its value and most importantly if I was to buy shares from Nike for Zinc PLC I would look at all departments of ratios I used, here I would look at all the ratios I used and possible ratios I could have used. Adidas has performed consistently well insolvency and beaten Nike in the productive side of some parts of the current ratio wherein 2000 Adidas recorded figures of 2. 04:1 compared to the modest 1. 7:1 of Nike in that year. Indeed, it could be argued that the current asset for Nike is far bigger than the current assets of Adidas.
Therefore, meaning the current liabilities would also be high to balance out the assets where a firm like Nike, which has high current assets would therefore have high current liabilities because of the usage of assets means the usage of liabilities. So what does solvency point out? It could be that solvency ratios are not efficient as other ratios as a big firm like Nike may have a much lower current ratio figure to say Adidas for this instance, where Nike quite clearly has a better current asset figure than that of Adidas where Nike's figure stands at 3,596. 4 to Adidas's 2,623. 3, while the current liabilities stand at 2. 140. 0 for Nike and 1,288. 7 for Adidas in the year 2000. The purpose of solvency is to show the ability of a firm to pay off its short term debt.
However, I do not believe Nike will have problems covering short term debt in already having $9,488. 8 annual sales, having a huge marketing value of $15,491. 9 and 22,700 compared to Adidas's 13,157 employees. Nike has shown a recovery with recent 2001 current ratio figures of 2:1 in comparison to 1999 2. 3:1 and 1. 2:1 in acid test ratio. Despite, some un-consistent form Nike remains in average better insolvency then Adidas as the acid test ratio prooves where 1999 figures of 1. 4:1 vindicate Adidas figures of 1. 04:1. Moreover, Adidas would be closer to liquidation then Nike would, even though some figures suggest otherwise as it has enough profit and sales to use for solvency if ever a problem occurs.
Both the Acid test ratio and Current ratio are useful in predicting the liquidity of each of the two companies. However, solvency doesn't show how big a company is but instead looks at how close apart assets and liabilities are. This is not what I would look for if I was going to buy shares as it could be two very small companies that I could want to buy shares of with better figures than that of Nike and Adidas whereas both are bigger and yet, it shows the same value. Gearing ratio, which measures the working capital, which for Nike was 8. 29 per share could have been used to get a different spin on the ratios.
If I am to buy shares for Zinc PLC, I would have to look at the share information of Nike and its competitors. The revenue per share is $35. 83 compared to Reebok's $50. 10. The dividends per share for Nike is $0. 48 and long term debt per share are $2. 33. It is important to know the price per each share because you can measure it with the ratios and see if it is worth its value. The profitability is broken down to gross profit % and Net/Operating profit %. The gross profit % of Nike is 42. 4% compared to 43. 3% in the year 2000.
Yet, again the gross profit is bigger in Nike-3,814. 9 to 2,380. 3 of Adidas. The sales figure is also higher in Nike then it is in Adidas. Gross profit has to be large enough to cover overheads in the long run. The starting point is always turnover. The first deduction from turnover is the cost of sales. This gives gross profit, which should be similar from year to year or better and Nike improved 2. 4% from 1999, whereas Adidas dropped 0. 3%. While Adidas defeats Nike in gross profit, Reebok's gross profit was 38. 57%.
The operating profit margin can be calculated the same way as gross profit and is what remains from sales revenue after deduction of all operating costs, including overheads. The net profit for Nike in 2000 was 10. 9% compared to 7. 5% for Adidas and again the higher the better. The gross profit was pretty close, but the net profit prooves that Nike is technically more efficient.
It's all beginning to map out on Nike's favor now and Return on capital invested is currently at 13. 5% compared to a modest 10% for Reebok. The return on capital invested measures money, which can be earned by investing in physical capital. It reflects the effectiveness with which the business uses its capital equipment.
Rising ROCE values in one firm raise the opportunity costs of capital in other firms and other industries. Ratio's that I could have used returned on equality, assets, and pre-tax profit margin, which all show that Nike is considerably a better firm to take shares out. Furthermore, a firm like Adidas will find it hard to maintain profits in the long run as Nike can. The performance ratio leads to the conclusion that it would be wiser to take shares from Nike and not Adidas. The performance ratio gives an indication of how efficiently the business is performing in areas such as stockholding and chasing up customer debts.
It is a good way to see how efficient a firm like Adidas or Nike is in stock and assets and how much usage of it is converted into cash. The stock turnover measures how long it takes for the business to sell its stock. It is a target of all businesses to sell their stock in a few stock as possible. It takes 89 days to sell its stock for Nike. Meanwhile, the asset turnover for Nike in 2000 was 1. 54 days to 1. 45 days for Adidas. However, the ratio that stood out from the rest was the debt collection period, which measures how long it takes a firm to collect its debt.
It would take a mere 58. 61 days for Nike in the year 2000 compared to Adidas who would take a huge 118. 65 days. I would have looked for a firm that performs to the highest ability and consistently at a yearly basis and Nike fulfills that criteria. Performance is probably the most evidential that Nike is worth taking shares of and even other competitors such as Reebok fail to deliver as with the high quantity of numbers for everything including annual sales, employees, market value, profitability and performance, it would be foolish to pick any other company to take shares out of.
I found out that the ratios don't look at quantity, but rather the quality of solvency, profitability and performance shown by Nike's defeat to Adidas in some areas, even though it would have bigger values. I'm now going to look at the technical department of Nike to prove if it is really worth taking shares from... -Industry: - Nike belongs to the non-rubber footwear industry. The Athletic footwear industry is highly competitive. The market share data shows Nike and Adidas as the major players in the industry. In 1991, Nike led the way with a 29 percent share. Reebok held 23 percent of the market, while the rest of the industry split the remaining 48 percent.
As a group, the industry reported a 4. 8 percent increase in sales in 1992 but posted a 19. 5 percent decline in profits. During 1992, Nike and Reebok recorded 94 percent of the profits in this industry. Nike, Adidas, Reebok and Fila can be seen splashed all across the front of athletic clothing. This represents a double benefit for the industry because people pay to be seen in the company's apparel, and the industry gains free advertising. The latest industry statistics show total sales increased by 7 percent on 6 percent unit sales figures from 1994 to 1995.
Domestic consumers bought 344 million pairs while spending $13. 3 billion in 1995. For four straight years, the 12 and under female categories have shown great increases. Also, in 1995, adult women accounted for 45 percent of total dollars, while adult men contributed 42 percent of total sales. This men's figure was up 5 percent over 1994, another high growth area. The industry as a whole concentrates heavily on advertising. Some well-known sports figures endorsing Nike include Michael Jordan, Bo Jackson, Deion Sanders, and most recently, golf phenomenon Tiger Woods. Reebok spokespeople include Shaquille O'Neal and Emmitt Smith.
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