Nike Vs Under Armour Essay

Financial Standings and Investment Decisions of Nike and Under Armour

Nike and Under Armour are two of the biggest athletic companies on the market, bringing in billions of dollars in sales each year worldwide. Both design, develop, and market premium athletic wear. Nike and Under Armour have experienced considerable growth in recent years, and are expected to continue to grow as time goes onward. To measure the overall success of a company, you must measure the Profitability ratios. In 2015, Nike had a Net Profit Margin of 10.7%. This means that for every dollar earned of revenue, 10.7% of it translates into profit. Under Armour had a Net Profit Margin of 6.75%. Both companies recorded an increase in their Gross Profit Percentages from the previous year. This is a good sign because it shows both companies are retaining more on each dollar of sales to costs.

Nike has $6.33 million in current liabilities, and Under Armour has current liabilities of 422 thousand. Liquidity ratios also include account receivable turnover and inventory turnover. Under Armour has the advantage when it comes to accounts receivable, their turnover measuring 25.19, while Nike’s is 9.01. The companies have somewhat similar inventory turnover ratios. Nike reported a ratio of 3.99 in 2015, and Under Armour reported a ratio of 3.13.
Though UA has a much lower amount for current liabilities and other short-term debt ratios; Nike is still better equipped to handle long-term debts. “Nike is more suitable to meet working capital obligations compared to Under Armour, who holds a significant amount of their current assets in inventory” (Durante, 2015). Nike’s debts to assets ratio is .41, compared to UA’s .36. Nike also has a much higher times interest earned ratio, 151.18 vs. Under Armour’s