Nike vs Under Armour

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Section 1: Tests of Profitability Return on Equity | 2012 | Under Armour | 15.8% | Nike, Inc. | 21.4% | The return on assets ratio measures how effectively a company can earn a return on its investment in assets. In other words, ROA shows how efficiently a company can covert the money used to purchase assets into net income or profits. Based on Nike, Inc.’s ROE of 21.4%, it can be concluded that Nike, Inc. could be more efficient in utilizing its equity base and may have a better return to investors than Under Armour, whose ROE is 15.8%. Return on Assets | 2012 | Under Armour | 11.1% | Nike, Inc. | 14.4% | The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company. In other words, the return on equity ratio shows how much profit each dollar of common stockholders' equity generates. Based on Nike, Inc.’s ROA of 14.4%, it can be determined that Nike, Inc. is may be more efficient in managing the utilization of its asset base versus Under Armour, whose ROA is 11.1%. The higher the ratio the better profit gain the company produces. Financial Leverage Percentage | 2012 | Under Armour | 4.7% | Nike, Inc. | 7% | The financial leverage percentage measures the advantage or disadvantage that occurs when a company’s return on equity differs from its return on assets. Under Armour’s financial leverage ratio (4.7%) is lower because it utilizes less debt in its capital structure and it is not earning as high on its assets, compared to Nike, Inc. (7%). Component Percentage Analysis of the Income Statements | Component Percentages | | Under Armour | Nike, Inc. | | In thousands | In millions | Income Statement | 2012 | Percent | 2012 | Percent | Net Sales | $1,834,921 | 100.0% | $24,128 | 100.0% | Cost of Goods Sold |

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