Stock Analysis- NIKE (NKE)
Nike, Inc. is a company focus on design, development, worldwide marketing and sale of a wide range of athletic footwear, apparel, equipment, and accessory products. It sells its products through NIKE-owned retails stores and internet websites (direct to consumers), and through independent distributors and licensees, such as footwear stores, athletic specialty stores and department stores in nearly 200 countries around the world. The company’s target consumers are men, women and kids. It lays considerable emphasis on innovation and high quality construction in footwear products. Running, training, basketball, soccer, sport-inspired casual shoes, and kids’ ...view middle of the document...
53 times with its current assets, which indicates a good short-term financial strength. ADIDAS is slightly lower at 2.07. Focusing on its main competitor ADIDAS, NIKE’s higher liquidity may mean that it leaves its assets idle and not using it to its full potential.
Current ratio 0.86
Besides, the quick ratio of NIKE is 2.31, which highlights a similar movement in liquidity. This means that with the exclusion of its most illiquid asset in the form of inventory, Nike is still able to cover its current liabilities. In comparison with its competitor ADIDAS, whose quick ratio is only 0.83, NIKE is more liquid.
Asset management ratios measure how efficiently NIKE is using its investment in current and fixed assets. The inventory turnover ratio of NIKE is 2.97, a little bit lower than its competitor ADIDAS, whose ratio is 3.01. This means that NIKE turned over its entire inventory 2.97 times. As long as NIKE is not running out of stock and thereby foregoing sales, the higher this ratio is the more efficiently inventory is being managed. NIKE’s lower inventory turnover ratio may be result from its higher cost of goods sold, since it spent more money on innovation and high quality construction in footwear products.
Inventory turnover 6.98
Days sales outstanding measures how long between sales and collection. Days sales outstanding of NIKE is 30.87, shorter than it of ADIDAS, this is 40.37. This shows that it takes NIKE approximately 30.87 days to receive its cash after making a sale, while ADIDAS takes 9.5 days more to receive its cash after making a sale. It is a common sense that cash plays a significant role in running a business, the quicker NIKE collect outstanding receivables, the better. Since by quickly turning sales into cash, NIKE has the chance to reinvest with the cash and make more sales, which turn out to be a great advantage to NIKE.
Fixed asset turnover ratio measures how efficiently NIKE uses its fixed assets, such as plant and equipment, to generate sales. The figure for NIKE is 10.65%, compared to ADIDAS of 13.81%, showing that NIKE does not uses its assets to generate sales better than ADIDAS, possibly because NIKE did not use its fixed asset efficiently. Besides, NIKE’s total asset turnover ratio is 1.57%, while ADIDAS’s ratio is 1.24%. NIKE uses its total assets to generate sales better than ADIDAS.
Debt Ratio measures the percentage of funds provided by creditors. NIKE’s debt-to-asset ratio is 5.35, shows that Nike uses more debt in its financing and is therefore highly leveraged. ADIDAS is much more leveraged with the capital structures that weigh more on the debt side with a figure of 12.76.
Debt to equity 0.81
Times-interest-earned ratio is used to determine NIKE’s ability to pay interest on outstanding debt. NIKE’s ratio of 40.27 means that the company is making 40.27 times its interest payment expense. Therefore, NIKE is considered to have enough capital to pay off...