Question

NIKE Industry Ratios 5/31/2019 5/31/2018 5/31/2017 5/31/2016 Gross Profit Margin 44.67% 43.84% 44.58% 46.24% 38.02% Operating Profit Margin 12.20% 12.21% 13.83% 13.91% 13.08% Net Profit Margin 10.30% 5.31% 12.34% 11.61% 12.57% Return on Assets 16.99% 8.58% 18.23% 17.59% 23.83% Return on Equity 45.74% 19.52% 33.60% 31.49% Current Ratio 210.08% 250.56% 293.41% 280.42% 270.00% Quick Ratio 138.61% 163.46% 201.06% 190.13% 92.00% Debt to Total Assets Ratio 61.88% 56.46% 46.66% 42.66% Debt to Equity Ratio 166.61% 128.47% 85.99% 76.39% Average Collection Period 39.86 35.08 39.07 36.54 Inventory Turnover Ratio 6.96 6.92 6.80 6.69 4.3 Total Asset Turnover Ratio 1.65 1.62 1.48 1.51 Fixed Asset Turnover Ratio 8.25 8.17 8.61 9.20 Given the above information, describe Nike’s performance when compared to the sports apparel industry as a whole. Which, if any, ratios would concern a financial analyst and why?

Answer 1

The question is based on the concept and utilization of ratio analysis for comperative performance of Nike sports.

Answer a. On the basis of concept of ratio analysis of Nike Sportsin comparison to industry as a whole, Nike has better perfromance in terms of profitability ratios and  asset  return . The comapny has higher debt equity ratio , indicate need of better a capital structure.

Answer b. Financial analyst is concerned with profitability ratio , return of aaset , Debt equity ratio and asset quality.

A analyst is mainly concern about expected  future cash flow for investment purpose , as all the above metioned ratio will help to achieve the objective.