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Student Name Instructor Course Name Date Nike Company Financial Data Analyses a. Solvency and profitability are the means by which the companys over position can be determined and near future prospective objected. Solvency is associated with the companys ability to hold enough assets to cover its liabilities when needed. The ratio that reveals companys solvency is current ration. Profitability is related to companys ability to generate earnings while enduring the costs associated with manufacturing products or providing services. Among the tools that help to determine companys profitability are profit margin, return on assets and return on equity ratios (Eisen). b. 1995 Current ratio Working capital 2045928= 1,107,535 2,045,928-1,107,535= (4,760,8342,865,280)*100%= 4,760,834 399664*100%= 1852819 1.85 $938,393 1,770,431= 561,987 1,770,431-561,987= (3,789,6682,301,423)*100%= 3,789,668 298,794= 1,691,884 1994 3.15

$1,208,444

Gross margin Return on equity

39.82% $21.57

39.27% $17.66

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Return on assets

(399,664+24,208)*100%= 2,758,280

$15.37

(298,794+15,282)*100%= 2,280,042

$13.78

c. Nike earned more money in 1995 than in 1995; the major reasons for the growth of income were increase in revenues, from $3,789,668 thousand to $4,760,834 thousand in 1994, and moderate expanses of 1995, also, good assets utilization. d. From looking at Nikes Income statement we can state that in 1995 Nike was more profitable that in 1994 (the profit in 1995 was $ 399,664 thousand and in 1994 $298,794 thousand). The growth was mostly caused by higher revenues of 1995, $ 4,760,834 thousand, comparing to 3,789,668 thousand in 1994. Nike Company was able to manage well its assets, which we can see from a better return on assets ratio, 15.37% in 1995 comparing 13.76% in 1994. Also, increase in total stockholders equity had a positive influence on companys profitability results in 1995 ($3,142,754 thousand in 1995 comparing to $2, 373,815 thousand in 1994). Return on equity ratio serves as a proof of positive influence of this factor on Nike growth of profit: return on equity has grown from 17.66% in 1994 to 21.57% in 1995. e. As of May 31, 1995 Nike had $216,071 thousand in cash and cash equivalents. f. As of May 31, 1995 Nike was in a good position to pay its liabilities, the way to check companys solvency for the given moment is to review its current ratio. The current ration of Nike on May 31, 1995 was 1, 84. In order to be able to cover its debts company should have the current ratio of no less than 1. Therefore, with 1.84 Nike Company would have been able to pay the debts. Also, Nike had a positive working capital of $938,393 thousand at the end of its fiscal year.

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g. Nikes operations in 1995 were a source of cash, until the end of year operational activities resulted in $254,913 thousand of cash inflow. h. Nikes major sources of cash in 1995 were net income, $399,664 thousand, and increase in accounts payable, accrued liabilities and income tax payables account by $172,638 thousand as the parts of operational activities, also, increase in notes payable, $263,874 thousand, in financing activities. Among the major uses of cash in 1995 were activities associated with additions to property, plan and equipment, which resulted in $154,125 thousand expense, acquisition of subsidiarities totally cost $430,020 thousand (sum of both Identifiable intangible assets & Goodwill and Net assets acquired accounts). Also, much cash in 1995 was used for repurchasing of stock, $142,919 thousand. i. Debt Ratios Debt Ratio Debt-Equity Ratio Capitalization Ratio Interest Coverage Ratio Cash Flow to Debt Ratio Total Liabilities Total Assets Total Liabilities Shareholders' Equity Long-term Debt/ Long-term Debt + Shareholders' Equity Earnings Before Interest and Taxes Interest Expense Operating Cash Flow Total Debt 1,177,756 3,142,745 1,177,756 1,964,689 70,221 70,221+1,964,689 674,072 24,208 254,913 1,177,756 1995 37.48% 59.95% 3.45% $27.85 0.22

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Efficiency ratios Collection Period Ratio Sales to Inventory Ratio Assets to Sales Ratio Sales to Net Working Capital Ratio Accounts Payable to Sales Ratio Accounts Receivebavle*365 Days Sales Annual Net Sales Inventory Total Assets Net Sales Sales Net Working Capital Accounts Payable Net Sales 1,053,237*365 4,760,834 4,760,834 629,742 3,142,745 4,760,834 4,760,834 938,393 297,656 4,760,834

1995 81 7.56 66.01% 5.07 6.25%

Glenn Eddleman & Company Financial Data Analyses

1. Analyses of Financial Statements Glenn Eddleman and Company had a Sales Revenue of $14,745 thousands in 2005,

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as of year 2004 the this number was $12,908 thousands, thus the company has experienced growth in sales. The income the Company made in 2005 was $494 thousand, which is less comparing to the previous year; in 2004 the Eddlemans income was $658 thousand. Such decrease in income despite the growth of revenue was caused by increase of cost of goods sold, advertising and sales commissions and general and administrative expenses accounts. Over the year Eddleman has increased its assets by $1,693 thousand, at the same time the current assets for both years were almost the same, $ 5,556 thousand in 2005 and $ 5,279 thousand in 2004, which means that growth happened in Plant and Equipment accounts. Aspect that is worth mentioning is that the Company gets the almost equal amount of capital in cash and accounts receivables. This feature has eventually bad influence on the Cash Flow of the company, which was negative for both 2005 and 2004 years. Therefore, company should pay better attention on managing its cash and equivalents, the aspects the determine companys liquidity.

2. Industry Analyses Assets between $ 10 million and $25 million 2.24 1.33 7.22 5.43 1.76 5,78 7.83 1.95 1.31 9.38 3.16 1.42 5.77 6.54 Eddleman 1.28 0.74 12.09 4.59 1.37 19.00 6.30

Industry analyses Current ratio Quick ratio Net sales to working capital Coverage ratio Total asset turnover Inventory turnover Receivables turnover

Total Industry

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Debt ratio Return on assets Return after tax on equity Return before taxes on equity Profit margin before tax Profit margin after tax

69.51 9.3 16.12 11.11 6.67 4.49

65.99 10.4 15.85 11.73 3.88 2.61

59.08 6.74 12.63 15.78 4.18 3.35

Eddleman Companys ratios are very similar to the ones of the industr y. In order to provide better insights in how the Eddleman doing comparing to its direct competition which is the companies within the industry whose assets are of similar value. Although, the current and quick ratios of Eddleman are lower than those of its competitors, main reason for that is a small number of inventory used in the goods manufacturing process. Though, there is another ratio which benefits from low debit on Manufacturing Inventory account, and that is Inventory Turnover ratio. While the industry average is 5,78, Eddleman shows it as high as 19.00 as that is due to ability to generate revenues while holding inventory low. This aspect characterizes the company as the one that manages its inventory assets very well. Eddleman has good Net sales on working capital ratio, coverage ratio and has a good profit margin. These factors characterize company as profitable and sustainable. At the same time Eddleman should watch its quick ratio and current ratio, as it was stated above, and total asset turnover, receivables turnover, return on assets as those ratios are lower than the averages in the industry. 4. Trend Analyses Current ratio Quick ratio Net sales to working capital Coverage ratio Total asset turnover 2001 2.07 1.00 9.33 6.31 1.11 2003 1.79 1.01 9.97 4.48 1.34 2004 1.32 1.13 10.09 8.39 1.43 2005 1.28 1.12 12.09 4.59 1.37

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Inventory turnover Receivables turnover Debt ratio Return on assets Return after tax on equity Return before taxes on equity Profit margin before tax Profit margin after tax

10.88 4.80 54.95 5.22 10.98 14.48 4.68 3.06

11.81 5.10 61.69 5.34 11.05 15.43 4.44 3.31

18.63 5.18 62.00 8.75 19.75 30.40 7.85 5.10

19.00 6.30 59.08 6.74 12.63 15.78 4.18 3.35

The Company has showed growth in its net sales to working capital ratio, which happened due to increase in revenues in 2005 and keeping liabilities on the level of 2004. Also, inventory turnover ratio has increase, which was, also, caused by the increase in revenue sales, and keeping Manufacturing Inventory low. While return on equity after tax has decreased in 2005 comparing to the previous year only on 7.12%, the return on equity before taxes decreased almost twice. Such big difference was mainly caused by great increase in advertising and sales commission account (in 2004 Eddleman spent $546 thousand and this number almost doubles in 2005 - $1,022 thousand), this consequently had an influence on income statement, and resulted in lower Income before Interest and Tax account, and in lower net Income as well. According to the ratio analyses we may see that 2005 was less successful for the Eddleman Company than previous 2004. Before that, company used to show a steady growing trend.

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Work Cited Eisen, Peter J.. Accounting. 4th ed. Hauppauge, N.Y.: Barron's Educational Series, 2000. Print. (Eisen)