Comparative Analysis Case adidas and Puma The financial statements of adidas (DEU) and Puma (DEU) are presented in Appendices B and C, respectively.

The complete annual reports, including the notes to the financial statements, are available online.

Instructions Use the companies’ financial information to answer the following questions.

(a) Compute the debt to assets ratio and the times interest earned for these two companies. Comment on the quality of these two ratios for both adidas and Puma.

(b) What is the difference between the fair value and the historical cost (carrying amount) of each company’s borrowings at year-end 2012? Why might a difference exist in these two amounts?

(c) Do these companies have debt issued in foreign countries? Speculate as to why these companies may use foreign debt to finance their operations. What risks are involved in this strategy, and how might they adjust for this risk?