This case is based on Under Armour, Inc.’s, consolidated balance sheets, consolidated statements of income, and Note 2 of its financial statements (Significant Accounting Policies) found online in the filings section of www.sec.gov. You can retrieve the 2016 Under Armour financial statements at www.sec.gov by clicking on Filings and then searching for “Under Armour” under Company Filings. When you see the list of filings for the company, select the Form 10-K for 2016. Be sure to retrieve the 2016 financial statements, not another year.

Requirements

1. Describe Under Armour, Inc.’s, revenue recognition policy. According to the Concentration of Credit Risk section of Note 2, from what sources does it earn most of its revenue?

2. Since Under Armour, Inc., is a consumer retail business, most of its retail sales are cash sales. However, accounts receivable still comprise about 18% ($280/$1,549) of its current assets. What type of customers do business with Under Armour, Inc., on account? Why is this necessary? Use Note 2, Concentration of Credit Risk section.

3. Compute the following for 2016:

a. Average daily sales, using total revenues.

b. Days’ sales outstanding. Assume all sales are on account.

4. Calculate the current ratio, quick (acid-test) ratio, and net working capital for Under Armour, Inc., for 2016 and 2015. Evaluate the two-year trend in Under Armour, Inc.’s, liquidity. What other information might be helpful in evaluating these statistics?