Business Communication

Financial Accounting Homework

Name: Kuang-Cheng Lo

The above is some financial ratios between Nike and Under Armour that will be explained in the following statement.

I select two athletic apparel companies- Nike and Under Armour to  decide which company to invest. Based on the ratios above, we can observe that the ROE and ROA ratios are both higher in Nike which means that Nike possess a strong ability to gain income.  Next, the profit margin in Nike is better than UA and it represents Nike can control the level of expenses to sales more efficiently. Plus, Nike’s working capital is far more than UA’s since Nike is brand for a period of time and they are the leader in this industry. Both companies have fantastic current ratio and quick ratio meaning that they own enough cash or current assets. Equally important to gain profit is the capability to pay debt; as a consequent, we have to look at the ratio of Liabilities to Asset Ratio, Long-Term Debt Ratio and Debt-Equity Ratio. We can find that the long-term debt ratio in UA is greater than that of Nike. Hence, it is possible that UA pours a lot of capital to invest in their products or factories because it is growing rapidly in recent years. It seems like Nike has a better looking at the financial ratios so we should invest on Nike.

However, there are other factors involved to decide which company to invest. Nike, without a doubt, owns a considerable reputation both in the states and in the world.   The reason why they gain such renowned brand is that Nike sighed Michael Jordan-arguably the most fantastic player in the NBA history. Jordan’s awesome performance really does a big favor to the marketing of Nike and Nike started to expand their scale. What is more, in the football shoes market, it has 68% of the market share. In the aspect of entertainment, the Just Do It team had an animated short film tied to World Cup. In the video, Nike-sponsored athletes like Cristiano Ronaldo and Neymar , tells the story of a mad scientist  trying to form world-class players in a lab, only for those players to be defeated by the creativity and boldness of the real-life stars. Undoubtedly, the film effect is fabulous. Lastly, Nike exerts a tremendous effect on pop culture and it is hard for Under Amour to wield such impact.

In contrast, Under Armour is a rising star full of potential and possibility. It set up in Baltimore in 1995 and special fabric is their strength. Under Armour is a company full of innovation. To illustrate, they make a live video of Bundchen who is a model working out in the gym and we can all witness Bundchen doing a variety of exercises. The most outstanding part is that it pulls in live tweets about the model and projects them on the blank wall in the gym! Moreover, they posted a marvelous picture about Andy Murray on Instagram. Likewise, they perform a great impact on social media, which is an important part in a company’s marketing as well as reputation; as a result, they can easily catch eyes on the new generation and the main customers. Numerically, according to graph 1, the 5 years trailing growth rates of Under Armour is the highest among their competitors especially the main rival- Nike. More importantly, their stock price continues to grow up dramatically since IPO because investors are confident enough about the rising company and customers agree with their core value.

Based on the argument above, although Nike has great financial ratios in the most part as well as a significant name worldwide, I still go for Under Armour. To explain, Under Armour possesses a lot of potential and they are now turning the potential into real influence. They have a great social savvy on the internet and they are innovative since Under Armour keep producing some state-of-the-art shoes or outwears that are very comfortable and relaxing. To sum up, the sky is the limit for Under Armour, so I would rather give a shot to invest in Under Armour rather than Nike.

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graph 1

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