Ad Id As 246l4o
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Business istration Faculty of economic and istrative science Al-Azhar university – GAZA
RATIOS ANALYSIS FOR ADIDAS
PREPARED BY / AHMED M. SHALTOOT OMAR Y. ALHAMARNA MAHMOUD K. TUBAIL UNDER SUPERVISION / MR. NIZAR NAIM
2009-2010 ADIDAS Income statement
1
Currency in Millions of Euros
Income statement
2
Dec 31 2009 EUR
Dec 31 2008 Reclassified EUR
Revenues
10,084.0
10,381.0
TOTAL REVENUES
10,084.0
10,381.0
Cost of Goods Sold
5,589.0
5,669.0
GROSS PROFIT
4,495.0
4,712.0
Selling General & Expenses, Total
1,592.0
1,376.0
Other Operating Expenses
2,012.0
2,796.0
OTHER OPERATING EXPENSES, TOTAL
3,604.0
4,172.0
891.0
540.0
-184.0
-138.0
37.0
16.0
-147.0
-122.0
2.0
-25.0
Other Non-Operating Income (Expenses)
-13.0
-3.0
EBT, EXCLUDING UNUSUAL ITEMS
733.0
390.0
--
--
1.0
3.0
Other Unusual Items, Total
-11.0
-35.0
EBT, INCLUDING UNUSUAL ITEMS
723.0
358.0
Income Tax Expense
227.0
113.0
Minority Interest in Earnings
-13.0
--
Earnings from Continuing Operations
483.0
245.0
NET INCOME
483.0
245.0
NET INCOME TO COMMON INCLUDING EXTRA ITEMS
483.0
245.0
NET INCOME TO COMMON EXCLUDING EXTRA ITEMS
483.0
245.0
OPERATING INCOME Interest Expense Interest and Investment Income NET INTEREST EXPENSE Currency Exchange Gains (Loss)
Impairment of Goodwill Gain (Loss) on Sale of Assets
Balance sheet Currency in Millions of Euros
Balance sheet
Dec 31 2009 EUR
Dec 31 2008 Reclassified EUR
311.0
775.0
65.0
58.0
Assets Cash and Equivalents Short-Term Investments
3
Trading Asset Securities
--
75.0
376.0
908.0
1,415.0
1,429.0
158.0
173.0
TOTAL RECEIVABLES
1,573.0
1,602.0
Inventory
1,607.0
1,471.0
Prepaid Expenses
213.0
208.0
Other Current Assets
156.0
296.0
TOTAL CURRENT ASSETS
3,925.0
4,485.0
Gross Property Plant and Equipment
1,187.0
1,480.0
-498.0
-757.0
689.0
723.0
1,516.0
1,478.0
Long-Term Investments
110.0
107.0
Deferred Tax Assets, Long Term
332.0
412.0
1,677.0
1,502.0
130.0
168.0
8,379.0
8,875.0
s Payable
752.0
1,166.0
Accrued Expenses
1,021.0
570.0
Current Portion of Long-Term Debt/Capital Lease
3.0
201.0
Current Portion of Capital Lease Obligations
3.0
1.0
Current Income Taxes Payable
283.0
194.0
Other Current Liabilities, Total
116.0
427.0
17.0
278.0
TOTAL CURRENT LIABILITIES
2,192.0
2,836.0
Long-Term Debt
2,578.0
1,579.0
Capital Leases
5.0
2.0
Minority Interest
8.0
5.0
12.0
17.0
Pension & Other Post-Retirement Benefits
134.0
168.0
Deferred Tax Liability Non-Current
522.0
433.0
Other Non-Current Liabilities
100.0
64.0
5,551.0
5,104.0
204.0
209.0
TOTAL CASH AND SHORT TERM INVESTMENTS s Receivable Other Receivables
Accumulated Depreciation NET PROPERTY PLANT AND EQUIPMENT Goodwill
Other Intangibles Other Long-Term Assets TOTAL ASSETS
LIABILITIES & EQUITY
Unearned Revenue, Current
Unearned Revenue, Non-Current
TOTAL LIABILITIES Common Stock ( 150,000,000 shares )
4
Additional Paid in Capital
--
722.0
2,199.0
3,350.0
425.0
-510.0
TOTAL COMMON EQUITY
2,828.0
3,771.0
TOTAL EQUITY
2,828.0
3,771.0
TOTAL LIABILITIES AND EQUITY
8,379.0
8,875.0
Retained Earnings Comprehensive Income and Other
Financial ratio analysis
A. Liquidity ratios
1. Current ratio = current assets / current liabilities = 3,925.0 / 2,192.0 = 1.79 times As we see the firm has less amount of liquidity to cover its own liabilities , so the firm doing really bad and it has to make more benefit from its own assets so that its current assets will increase then its current ratios will be nicer ( better ) .
2. Quick ratio = ( current assets – inventory) / current liabilities = (3,925.0 - 1,607.0 ) / 2,192.0 = 1.06 times As we see the firm has less amount of liquidity to cover its own liabilities , so the firm doing really bad and it has to take maximum advantages from its assets (except inventories ) to increase its current assets then its quick ratios .
5
B. Asset management ratios
Inventory turnover ratio
1.
= sales/inventory = 10,084.0 / 1,607.0 = 6.28 times As we see the firm doing bad here because of its remain long time in the warehouse so the firm manage its inventories in inefficient way . The firm has to make inventories spend less times in shelves so that it will turn rapidly to sales and then the inventories turn over ratios will increase .
2.
Days sales outstanding = s receivable / (sales /365) = 1,415.0 / (10,084.0 / 365) = 51 days
As we see the firm doing in inefficient way in collecting it’s a receivable resulting from selling on credit . the firm can manipulate this situation by modify its credit policy .
3.
Fixed assets turnover = sales / net fixed assets = 10,084.0 / 689.0 = 14.6 times As we see the firm use its net plant and equipment ( net fixed assets ) efficiently because its own net fixed assets contribute positively in its sales .
6
Total assets turnover
4.
= sales / total assets = 10,084.0 / 8,379.0 = 1.2 times As we see the firm manage its total assets negatively so its total assets turnover ratio does not look good , the firm has to fix this situation by minimizing its inventories then total assets will decrease so its total assets ratios will be better off.
C. Debt management Ratios
1.
Total debts to total assets = total debts / total assets = 5,551.0/ 8,379.0 = 66.2 % As we see the firm has high financial leverage that mean from one hand high risky shares or high risk of bankruptcy and from another hand high return on shares (high profit) .
2.
Times earned interest = EBIT / interest = 891.0 / 147.0 = 6 times As we see the firm has high ability to cover its interest expenses from its earning . so it's using its earning efficiently .
7
3.
EBITDA Coverage ratio = EBITDA + Lease payment / Interest + Principal payment + Lease payment Sorry, there is unavailable information .
D. Profitability ratios
1.
Net profit margin on sales = net income / sales = 483.0 / 10,084.0 = 4.8 %
As we see the firm has slightly low percentage because its sales not efficiently enough contribute on its net income so the firm should manage its cost of good sold ( COGS ) or its interest expenses .
2.
Basic earning power ( BEP ) = EBIT/ total assets = 891.0 / 8,379.0 = 10.6 %
As we see the firm does not use its total assets efficiently because its generate less amount of EBIT so the firm can handle that by get rid of unused assets .
3.
Returns on assets ( ROA ) = net income / total assets = 483.0 / 8,379.0 = 5.8 %
As we see the firm has low return on assets because its has low basic earning power ( BEP ) and high interest expenses resulted from using above average debt . 8
4.
Returns on common equity ( ROE ) = net income / common equity = 483.0 / 2,828.0 = 17.1 %
As we see the firm has slightly high on ROE because its use of debt, so the firm do good .
E. Market value ratios
1.
Price/earning ratio earning per share = net income / common shares outstanding = 483,000,000 / 150,000,000 = 3.22 € Price/earning ratio = market price per share / earning per share = 38.76 / 3.22 = 12 times
As we see the firm is risky and has weak growth prospect . 2.
Price/cash flow ratio
Cash flow per share = net income + depreciation + amortization / common shares outstanding = 483000000 + 0 + 0 / 150,000,000 = 3.22 € Price/cash flow ratio = market price per share / cash flow per share = 38.76 / 3.22 = 12 times
9
As we see the firm's future investments are mostly close to the red line ( poor future investment ) .
3.
Market/ book value
Book value per share = total common equity / common shares outstanding = 2,828,000,000 / 150,000,000 = 18.85 € Market/ book value = market price per share / book value per share = 38.76 / 18.85 = 2.1 times As we see investors are not willing to pay high price for book value per share because they are not expect that firm will have high return on its shares .
10
RATIOS ANALYSIS FOR ADIDAS
PREPARED BY / AHMED M. SHALTOOT OMAR Y. ALHAMARNA MAHMOUD K. TUBAIL UNDER SUPERVISION / MR. NIZAR NAIM
2009-2010 ADIDAS Income statement
1
Currency in Millions of Euros
Income statement
2
Dec 31 2009 EUR
Dec 31 2008 Reclassified EUR
Revenues
10,084.0
10,381.0
TOTAL REVENUES
10,084.0
10,381.0
Cost of Goods Sold
5,589.0
5,669.0
GROSS PROFIT
4,495.0
4,712.0
Selling General & Expenses, Total
1,592.0
1,376.0
Other Operating Expenses
2,012.0
2,796.0
OTHER OPERATING EXPENSES, TOTAL
3,604.0
4,172.0
891.0
540.0
-184.0
-138.0
37.0
16.0
-147.0
-122.0
2.0
-25.0
Other Non-Operating Income (Expenses)
-13.0
-3.0
EBT, EXCLUDING UNUSUAL ITEMS
733.0
390.0
--
--
1.0
3.0
Other Unusual Items, Total
-11.0
-35.0
EBT, INCLUDING UNUSUAL ITEMS
723.0
358.0
Income Tax Expense
227.0
113.0
Minority Interest in Earnings
-13.0
--
Earnings from Continuing Operations
483.0
245.0
NET INCOME
483.0
245.0
NET INCOME TO COMMON INCLUDING EXTRA ITEMS
483.0
245.0
NET INCOME TO COMMON EXCLUDING EXTRA ITEMS
483.0
245.0
OPERATING INCOME Interest Expense Interest and Investment Income NET INTEREST EXPENSE Currency Exchange Gains (Loss)
Impairment of Goodwill Gain (Loss) on Sale of Assets
Balance sheet Currency in Millions of Euros
Balance sheet
Dec 31 2009 EUR
Dec 31 2008 Reclassified EUR
311.0
775.0
65.0
58.0
Assets Cash and Equivalents Short-Term Investments
3
Trading Asset Securities
--
75.0
376.0
908.0
1,415.0
1,429.0
158.0
173.0
TOTAL RECEIVABLES
1,573.0
1,602.0
Inventory
1,607.0
1,471.0
Prepaid Expenses
213.0
208.0
Other Current Assets
156.0
296.0
TOTAL CURRENT ASSETS
3,925.0
4,485.0
Gross Property Plant and Equipment
1,187.0
1,480.0
-498.0
-757.0
689.0
723.0
1,516.0
1,478.0
Long-Term Investments
110.0
107.0
Deferred Tax Assets, Long Term
332.0
412.0
1,677.0
1,502.0
130.0
168.0
8,379.0
8,875.0
s Payable
752.0
1,166.0
Accrued Expenses
1,021.0
570.0
Current Portion of Long-Term Debt/Capital Lease
3.0
201.0
Current Portion of Capital Lease Obligations
3.0
1.0
Current Income Taxes Payable
283.0
194.0
Other Current Liabilities, Total
116.0
427.0
17.0
278.0
TOTAL CURRENT LIABILITIES
2,192.0
2,836.0
Long-Term Debt
2,578.0
1,579.0
Capital Leases
5.0
2.0
Minority Interest
8.0
5.0
12.0
17.0
Pension & Other Post-Retirement Benefits
134.0
168.0
Deferred Tax Liability Non-Current
522.0
433.0
Other Non-Current Liabilities
100.0
64.0
5,551.0
5,104.0
204.0
209.0
TOTAL CASH AND SHORT TERM INVESTMENTS s Receivable Other Receivables
Accumulated Depreciation NET PROPERTY PLANT AND EQUIPMENT Goodwill
Other Intangibles Other Long-Term Assets TOTAL ASSETS
LIABILITIES & EQUITY
Unearned Revenue, Current
Unearned Revenue, Non-Current
TOTAL LIABILITIES Common Stock ( 150,000,000 shares )
4
Additional Paid in Capital
--
722.0
2,199.0
3,350.0
425.0
-510.0
TOTAL COMMON EQUITY
2,828.0
3,771.0
TOTAL EQUITY
2,828.0
3,771.0
TOTAL LIABILITIES AND EQUITY
8,379.0
8,875.0
Retained Earnings Comprehensive Income and Other
Financial ratio analysis
A. Liquidity ratios
1. Current ratio = current assets / current liabilities = 3,925.0 / 2,192.0 = 1.79 times As we see the firm has less amount of liquidity to cover its own liabilities , so the firm doing really bad and it has to make more benefit from its own assets so that its current assets will increase then its current ratios will be nicer ( better ) .
2. Quick ratio = ( current assets – inventory) / current liabilities = (3,925.0 - 1,607.0 ) / 2,192.0 = 1.06 times As we see the firm has less amount of liquidity to cover its own liabilities , so the firm doing really bad and it has to take maximum advantages from its assets (except inventories ) to increase its current assets then its quick ratios .
5
B. Asset management ratios
Inventory turnover ratio
1.
= sales/inventory = 10,084.0 / 1,607.0 = 6.28 times As we see the firm doing bad here because of its remain long time in the warehouse so the firm manage its inventories in inefficient way . The firm has to make inventories spend less times in shelves so that it will turn rapidly to sales and then the inventories turn over ratios will increase .
2.
Days sales outstanding = s receivable / (sales /365) = 1,415.0 / (10,084.0 / 365) = 51 days
As we see the firm doing in inefficient way in collecting it’s a receivable resulting from selling on credit . the firm can manipulate this situation by modify its credit policy .
3.
Fixed assets turnover = sales / net fixed assets = 10,084.0 / 689.0 = 14.6 times As we see the firm use its net plant and equipment ( net fixed assets ) efficiently because its own net fixed assets contribute positively in its sales .
6
Total assets turnover
4.
= sales / total assets = 10,084.0 / 8,379.0 = 1.2 times As we see the firm manage its total assets negatively so its total assets turnover ratio does not look good , the firm has to fix this situation by minimizing its inventories then total assets will decrease so its total assets ratios will be better off.
C. Debt management Ratios
1.
Total debts to total assets = total debts / total assets = 5,551.0/ 8,379.0 = 66.2 % As we see the firm has high financial leverage that mean from one hand high risky shares or high risk of bankruptcy and from another hand high return on shares (high profit) .
2.
Times earned interest = EBIT / interest = 891.0 / 147.0 = 6 times As we see the firm has high ability to cover its interest expenses from its earning . so it's using its earning efficiently .
7
3.
EBITDA Coverage ratio = EBITDA + Lease payment / Interest + Principal payment + Lease payment Sorry, there is unavailable information .
D. Profitability ratios
1.
Net profit margin on sales = net income / sales = 483.0 / 10,084.0 = 4.8 %
As we see the firm has slightly low percentage because its sales not efficiently enough contribute on its net income so the firm should manage its cost of good sold ( COGS ) or its interest expenses .
2.
Basic earning power ( BEP ) = EBIT/ total assets = 891.0 / 8,379.0 = 10.6 %
As we see the firm does not use its total assets efficiently because its generate less amount of EBIT so the firm can handle that by get rid of unused assets .
3.
Returns on assets ( ROA ) = net income / total assets = 483.0 / 8,379.0 = 5.8 %
As we see the firm has low return on assets because its has low basic earning power ( BEP ) and high interest expenses resulted from using above average debt . 8
4.
Returns on common equity ( ROE ) = net income / common equity = 483.0 / 2,828.0 = 17.1 %
As we see the firm has slightly high on ROE because its use of debt, so the firm do good .
E. Market value ratios
1.
Price/earning ratio earning per share = net income / common shares outstanding = 483,000,000 / 150,000,000 = 3.22 € Price/earning ratio = market price per share / earning per share = 38.76 / 3.22 = 12 times
As we see the firm is risky and has weak growth prospect . 2.
Price/cash flow ratio
Cash flow per share = net income + depreciation + amortization / common shares outstanding = 483000000 + 0 + 0 / 150,000,000 = 3.22 € Price/cash flow ratio = market price per share / cash flow per share = 38.76 / 3.22 = 12 times
9
As we see the firm's future investments are mostly close to the red line ( poor future investment ) .
3.
Market/ book value
Book value per share = total common equity / common shares outstanding = 2,828,000,000 / 150,000,000 = 18.85 € Market/ book value = market price per share / book value per share = 38.76 / 18.85 = 2.1 times As we see investors are not willing to pay high price for book value per share because they are not expect that firm will have high return on its shares .
10
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