Nike Inc.

Blue Ribbon Sports was founded by Bill Bowerman a track and field coach at University of
Oregon and Phil Knight a former student of Bowerman in 1964 with its headquarters in
Beaverton, Oregon. In 1966, they opened the first retail store and launch the Nike brand in shoe
in 1972. In 1978, it was renamed Nike Inc. and went public in 1980. Nike along with its
subsidiaries engages in design, development, marketing and sale of footwear, apparel,
equipment, and accessories for men, women and kids. Nike offers products in running,
basketball, football, mens training, womens training, sportswear, action sports, and golf under
the NIKE and Jordan brand names. Nike also sells apparels used in various sports, as well as
apparel for licensed college and professional team logos.
Under Armour
Kevin Plank a former University of Maryland specials team captain founded Under Armour in
1996 in his grand-mothers basement in Washington DC. While playing for University of
Maryland, Plank hated changing his sweat-soaked T-shirts over and over again and decided to
create something better to solve the problem. He designed the first Under Armour HeatGear with
moisture-wicking performance fibers, the shirt helps keep athletes cool, dry, and light in the most
brutally hot conditions. The first sales was made by the end of 1996 generating $17,000 in sales.
In 1998, he moved to an all new warehouse in Baltimore which is its headquarters. Under
Armour sells sports clothing and accessories. In 2006, they started offering footwear to its
customers. The company offers its apparel in compression, fitted, and loose types to be worn in
hot, cold, and in between the extremes. It provides various footwear products, including football,
baseball, lacrosse, softball and soccer cleats, slides, performance training, running, basketball,
and outdoor footwear.

1. Current ratio: Both companies have good ratios but Under Armour has a slightly higher
current ratio that Nike Inc. which means that they can liquidate assets to cover for current
liabilities if needed.
2. Gross (Profit) Margin Percentage: Under Armor has 4.2% gross percentage more than
Nike which means that more is retained of each dollar spent, hence more money is left
over for other expenses and net profit.
3. Rate of Return (Net Profit Margin) on Sales: For this ratio, Nike Inc. earns 9.7 cents
for every dollar in sales while Under Armour has 6.7 cents for every dollar so Nike Inc.
has an edge in this profitability ratio.
4. Inventory Turnover: Nike had a higher inventory turnover ratio compared to Under
Armour which implies that they are selling their inventory faster than Under Armour.
5. Days' inventory outstanding (DIO): The aim of this ratio is to measure the average
number of days that inventory is being held. Nike has an edge in their inventory turnover
because they take 27 less days than Under Armour to sell their inventory.
6. Accounts Receivable Turnover: All sales are assumed to be credit sales. Under Armour
turns over their receivables at 12.6 while Nike turns over their receivables at 8.5 times so
Under Armour has an advantage for this liquidity ratio which measures how quickly a
company converts its receivables to cash.
7. Days' Sales Outstanding (DSO): This is a liquidity ratio which measures the average
number of days it takes for a company to collect their receivables. Under Armour also has
an advantage here because it takes them 14 days less than Nike Inc. to collect their
accounts receivable. Nike Inc. DSO shows that they are selling their product to customers
on credit and taking longer to collect their money.
8. Asset turnover: For this profitability ratio, Under Armour has slight advantage with a
ratio of 1.68 which shows that they generated more sales for each dollar invested in assets
and that means that the management of Under Armour are operating the company more
efficiently than Nike Inc.
9. Rate of Return on Total Assets (ROA): Nike has a higher ROA which shows that they
are using their assets more effectively than Under Armor which can relate to making
profits during a period.
10. Debt Ratio: For this solvency ratio, Under Armour will have to liquidate 35.5% of their
assets to pay off all of their debts while Nike Inc. will have to liquidate 41.8% so Under
Armour has an advantage.
11. Times-Interest-Earned Ratio: Nike Inc.s income before interest and taxes is 81.6 times
the amount needed to cover their interest expense while Under Armours income before
interest is 66.3 times the amount need to cover their expenses in other words, Nike Inc.
will have more ease paying off its debts and Under Armour would have a little difficulty.
12. Dividend Yield: For both companies, no dividends were paid.

13. Rate of Return on Common Stockholders' Equity (ROE): For this ratio, Under
Armours income earned was 17.3 cents for every dollar thats invested by the common
stock shareholders while Nike Inc. earned 24.6 cents to every dollar invested which gives
them an advantage over Under Armour.
14. Free cash flow: Under Armour has a free cash flow of $78,505 million and Nike Inc. has
$2,123 billion giving Nike Inc. the greater advantage and that implies that Nike Inc. has
more free cash which can be used for reducing debt, dividends and expanding the
business.
15. Price-Earnings Ratio (Multiple): Under Armour has a significantly higher priceearnings ratio than Nike Inc. which implies that the market has high expectations of the
company.

Liquidity: Under Armour is more liquid in most of the liquidity ratios but the comparisons
suggests they are not doing well in managing their inventory as Nike Inc. managed their
inventory better in the Inventory turnover and Days in Inventory. Under Armour however
converts receivables to cash faster than Nike Inc. from the receivables ratio.
Solvency: This set of ratios is used to measure the ability of a company to meet its long-term
debts obligations. By comparison, Nike Inc. has a higher debt ratio and may have little difficulty
in paying off their debts. Nike however has a higher free cash flow meaning that they have
enough cash at hand which can be used for reducing debt, dividends and expanding the business.
Under Armour has to improve on its solvency ratio especially its debt ratio. We can see the effect
of Nike Inc.s free cash flow because every year, they strive to bring out new products to
customers and they are also a much bigger company than Under Armour.

Profitability
The profit margin of Under Armour is just a little bit higher than Nike Inc. which means the price
of their product is higher than Nike Inc. Nike Inc.s low margin could indicate that their goods
are under priced
Under Armour has a higher asset turnover ratio which implies that the management of Under
Armour are using the companys assets more efficiently than Nike Inc.
Nike has a higher ROE which means that they earned more dollars of net income for each dollar
of common stockholders equity than Under Armour.

Conclusion
As an investor, Under Armour has an edge over Nike Inc. in liquidity and solvency and is a
better company to invest in because they provide a better return as they have more liquidity to
cover current debts. Nike Inc. Under Armour has a good profit margin which would appeal to me
as a investor.
For Nike Inc. with a strong times-earned ratio they would be a good investment for a
conservative investor.

Under Armour profile: http://www.uabiz.com/company/history.cfm

Nike Profile: http://finance.yahoo.com/q/pr?s=NKE+Profile
Under Armour Profile: http://finance.yahoo.com/q/pr?s=UA+Profile
Under Armour Market share price 12/31/2014: https://www.google.ca/finance/historical?
cid=702407&startdate=Dec+29%2C+2014&enddate=Jan+7%2C+2015&num=30&ei=N3NkV6r
-F8ebigLky43IAQ

Nike Market share price 5/30/2014: https://www.google.com/finance/historical?

cid=25670&startdate=May+25%2C+2014&enddate=Jun+6%2C+2014&num=30&ei=nHNkV8
HAKcebigLky43IAQ
Nike Market share price 6/15/2014: http://finance.yahoo.com/q/hp?
s=NKE&a=05&b=10&c=2016&d=05&e=16&f=2016&g=d
Under Armour Market share price 6/15/2016:
https://finance.yahoo.com/q/hp?s=UA&a=05&b=10&c=2016&d=05&e=16&f=2016&g=d