Compute the following ratios for two years. You may use Excel to compute your ra

Question

Compute the following ratios for two years. You may use Excel to compute your ratios. (all these formulas should be bases on the company you picked, in this case Under Armour) use numbers from balance sheet and income statements found online. http://investor.underarmour.com/income.cfm

Debt ratio

Gross profit margin

Free cash flow

Times interest earned

Accounts receivable turnover

Inventory turnover

Prepare a DuPont Analysis of ROE for two years, including computations of

Return on Sales

Asset Turnover

Return on Assets

Financial Leverage

Return on Equity

Briefly evaluate the ratio trends. Indicate on your worksheet whether each ratio is:

stronger / weaker

quicker /slower

more / less liquid

more / less risk

Explanation / Answer

______________________________________________________________________________________________

S.NO. RATIO                    FORMULA                                                  2014                                      2015                      

1         DEBT RATIO       TOTAL DEBT/TOTAL ASSETS          744,783/2099083 =0.35;        1200678/2868900=0.42

2         GP MARGIN        GROSS PROFIT/TURNOVER      1512206/3084370=48.70%;    1905547/3963313=48.08%

3         FREE CF             OPERATING CASH FLOW

                                      - CA;ITAL EXPENDITURE

4.        TIMES INTEREST

           EARNED=             EBIT/INTEREST EXPENSES       353,995/5335=66.35;     408,540/14628=27.93    

5.        AR TURNOVER

= TOTAL URNOVER/AV.RECEIVABLES=3084370/332,333+433638/2=10.18;3963313/248329+332333/2=13,65   

6. INVENTORY TURNOVER

=COGS/AVERAGE INVENTORY=             1572164/536714+469006/2=3.13;    2057766/536714+783031/2=3.12

7. DUE PONT ANALYSIS=

    ROE = RETURN ON SALES X ASSET TURNOVER X RETURN ON ASSETS X FINANCIAL LEVERAGE X RETURN ON EQUITY = FOR 2014 = 11 X 1.47 X 0.16 X 1.03 X 0.15 = 0.40

                                     = FOR 2015 = 9.76 X 1.38 X 0.13 X 1.06 X 0.14 = 0.26

8. RETURN ON SALES

= OPERATING PROFIT BEFORE TAX/NET SALES= 342,210/3084370 = 11%; 386685/3963313=9.76%

9. ASSET TURNOVER=TURNOVER/TOTAL ASSETS=3084370/2095083=1.47;   3963313/2868900=1.38

10. RETURN ON ASSET=EARNINGS BEFORE TAX/ASSETS = 342210/2095083=0.16; 386,685/2868900=0.13

11. FINANCIAL LEVERAGE= EBIT/EBT=            353955/342210=1.03;        408547/386685=1.06

12. RETURN ON EQUITY=

      NET INCOME/SHAREHOLDERS EQUITY = 208042/1350300=0.15;         232573/1668222=0.14

DEBT RATIO = WEEK; GP RATIO = STRONGER; TIMES INTEREST RATIO = STRONGER IN 2014 THAN 2015;ACCOUNTS RECEIVABLES TURNOVER IS STONGER; INVENTORY TURN OVER IS WEEK;

NOTE: GP = GROSS PROFIT; CF = CASH FLOWS; AV. AVERAGE; AR =AVERAGE RECEIVABLES;COGS=COST OF GOODS SOLD; AR =ACCOUNTS RECEIVABLE

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