07 May Discussion Reply 2.1
The publicly traded firm that will be discussed is Nike.
PERFORMANCE RATIOS:
Profit Margin equals the Net Profit divided by sales. This ratio for the year 2015 is 1.96%, while for the previous year it was 1.38%. There is a large increase in the profitability of the firm. This indicates that the firm is operating at a profit.
ACTIVITY RATIOS:
Inventory turnover ratio equals to Cost of goods sold divided by average inventory. The ratio for 2015 is 3.033, whereas it was 2.886 for the previous year. This ratio shows there has been an important reform in the way the inventories are managed. Adequate steps have been taken so as to see that there is no dead investment in inventory.
FINANCING RATIOS:
Debt Ratio equals to total debt divided by the total assets. It is 46% for 2015. This shows that debt funds finance 46% of all the total assets in the company.
LIQUIDITY RATIOS:
Quick Ratio equals to Quick Assets divided by the Current liabilities. It is 1.21 for the current year. A quick ratio of 1 is considered ideal. Since the company’s ratio is above ideal, it is not going to face any liquidity crunch and is in good financial health as regards to its short-term liabilities.
Nike has a low manufacturing cost which has helped increase profits for the firm. Nike has gained a lot of profits from the sales since the inventory turnover has indicated an increase over the years. A major weakness is the prices of their products but leads to great profits. Nike operates on profit since the profit margin is increasing over the years. Nike’s sales are also increasing year after year.
Reference
Nike Inc. (2015). Form 10K. Retrieved from http://investors.nikeinc.com/investors/news-events-and-reports/?toggle=filings
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