Does nike use fifo or lifo

Running head: EXCUTIVE SUMMARY 1

EXCUTIVE SUMMARY 5

COMMENTS:

However, there are a few omissions in your paper like double spacing (single spacing would give you twice as much space to be more descriptive and "speak with data").

Second, there are areas where you provide numbers but not insight. Example: Inventory days comparison...one is 91 and one is 117...which is better...by how much? you provided numerical trends, but did not interpret them...which is improving/declining....etc. This insight comment (a/k/a speaking with data) is relevant to several of the questions.

Make sure you answer every question we ask. Example, your interpretation in Net Income Margin does not express the building blocks in cost/Net Sales. This is the only way to same-size these very different sized companies.

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Executive Summary

Investing in athletics seems to be a viable business. This can be proved by the level of success that Nike and Under Armour have achieved in this industry. In this executive summary, I will provide a thorough analysis of these two companies as they are the main competitors in the industry, worthy of benchmarking.

Competitor strategies

Nike’s primary activity is to design, develop, market and sell athletic footwear, apparel, equipment, accessories and services worldwide. It sells through retail stores, Nike-owned stores and online websites.

Under Armour plans to connect with its consumers and increase awareness and sales of existing products globally. It intends to develop innovative applications, services and other digital solutions to impact the way athletes and fitness-minded people train, perform and live.

Net Income Margins

The net income margin gives an idea on how profitable a company is, and is useful for comparison between companies.

During 2015 the net income margin for Under Armour was 5.9% while Nike’s was 10.7%. This shows that Nike produces more net income compared to Under Amour, hence Nike is more profitable. This is because Nike is stable in the market and Under Armour is a growing company with smaller market capitalization.

COGS for Nike was 16.534 billion dollars and Under Armour 2.058 billion, Nike’s too high compared to Armour’s.

SG&A for Nike was 9.892 billion and Under Armour 1.497, Nike had more selling, general and administrative expenses.

Taxes paid by Nike were 932 million dollars and Under Armour 154.112 million, which shows that Nike paid more taxes.

Inventory Management

Inventory days shows the nature of sales in a company; an increase indicates that company’s sales slowed. Inventory days for Nike last year was 91.44 and Under Armour 117.05.

The respective inventory trends for the last 3 years is; Nike’s 85.71, 88.33, 91.44 respectively from 2013 to 2015 and Under Armour were; 120.35, 116.75 and 117.05.

FIFO stands for “first-in, first-out”, this is whereby the inventory purchased first is the one to be sold first while LIFO stands for “last-in, first-out”, and here the last inventory purchased is the first to be sold. Nike uses LIFO for domestic inventories and FIFO for international inventories while Under Armour uses FIFO.

Cash is King

The following are the net cash generated by both companies last year. Nike generated 3.852 billion dollars while Under Armour 129.852 million dollar.

Nike uses huge amounts on SG&A expenses, its dividends per share rose from $0.81 in 2013 to $1.08 in 2015. Its long term debt reduced from 1.199 billion dollars in 2014 to 1.079 billion in 2015.

Under Armour’s debt increased from 255.25 million dollars in 2013 to 352 million in 2015. It spend 1.497 billion on SG&A, the dividends per share rose from $0.77 in 2013 to $1.08 in 2015.

Liquidity

Current ratio is calculated by; Current assets/Current liabilities. Measures liquidity or the ability to repay short-term debts.

The following are the current ratios for the two companies in the last 3 years from 2013 to 2015 respectively. Nike 3.44, 2.72 and 2.52, for Under Armour 2.65, 3.67 and 3.13.

A current ratio generally from 1 to 3 shows healthy business and the higher the better. For less than 1 it means the company may not be able to pay off its financial obligations. Both companies show they can meet their financial obligations hence there is no alarm over any possibility of them going bankrupt soon. They have healthy businesses.

Reference

UA Income Statement | Under Armour, Inc. Class A Comm Stock - Yahoo! Finance. (2016). Finance.yahoo.com. Retrieved 3 May 2016, from https://finance.yahoo.com/q/is?s=UA

NKE Income Statement | Nike, Inc. Common Stock Stock - Yahoo! Finance. (2016). Finance.yahoo.com. Retrieved 3 May 2016, from https://finance.yahoo.com/q/is?s=NKE