Hampton Company: The production department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the cans instead of purchasing them. The equipment needed would cost $1,000,000, with a disposal value of $200,000, and would be able to produce 27,500,000 cans over the life of the machinery. The production department estimates that approximately 5,500,000 cans would be needed for each of the next 5 years.

A Financial Statement Analysis A Comparative Analysis of Nike, Inc. and Under Armour, Inc. Jolunda Craig Accounting Professor Marsh Jun-16 Profile of Nike & Under Armour In 1964 Nike was founded and was formerly known as Blue Ribbon Sports and was initially operated as a distributor for the Japanese shoemaker Onitsuka Tiger who was known as Asics. It wasn't until 1971 that the store becaome Nike Inc. Nike was created by a track and field coach by the name of Bill Bowerman and a middle distance runner by the name of Phil Knight. Nike sells athletic shoes, apparel and sports equipment. Nike headquaters is located near Beaverton, Oregon. It has employed more than 44,000 people worldwide. In 1996, Kevin Plank was the captain of the special teams on the University of Maryland football team when he notice that the team cotton t-shirts they all wore under their pads were always soaked in sweat. Once he graduated, he hen decided to put his idea to work. He then set up shop in the basement of his grandmother's home in Washington, DC which a year later made his first team sale to Georgia Tech. Once on his way, he then moved his headquaters to South baltimore which he then developed his now famous gearlines, which included Heatgear, Coldgear and Allseason Gear. Since 2015, Under Armour has employed 13,400 people. The products includes all Athlethic Apparel. Ratios Nike, Inc Earnings per Share of Common Stock (basic - common) Current Ratio Gross (Profit) Margin Percentage Rate of Return (Net Profit Margin) on Sales Inventory Turnover Days' inventory outstanding (DIO) As given in the income statement Under Armour 3.05 $ 0.98 Current assets Current liabilities $13,696 $5,027 = 2.72 $1,549,399 $421,627 = 3.67 Gross margin Net sales $12,446 $27,799 = 0.45% $1,512,206 $3,084,370 = 49.0% Net income Net sales $2,693 $27,799 = 0.10% $208,042 $3,084,370 = 6.7% . Cost of goods sold Average inventory $15,353 $3,715 4.10 times $1,572,164 $502,860 3.1 times 365 Inventory turnover 365 4.1 = 89.00 days 365 3.1 = 117 days Accounts Receivable Turnover Net sales (assume all sales are credit sales) Average net accounts receivable $27,799 $3,275 = 8.49 $3,084,370 $244,893 = 12.6 Days' Sales Outstanding (DSO) 365 Accounts receivable turnover 365 8.5 43.00 days 365 12.6 = 29.0 29 days Asset turnover Rate of Return on Total Assets (ROA) Debt Ratio Times-Interest-Earned Ratio Dividend Yield (Please follow the Course Project instructions to calculate the current dividend yield.) Rate of Return on Common Stockholders' Equity (ROE) Free cash flow Price-Earnings Ratio (Multiple) = Net sales Average total assets $27,799 $18,069 = 1.54 $3,084,370 $1,836,412 = 1.68 Rate of return on sales times asset turnover 1.54*.10 = 0.15% 1.68*6.7 = 11.3% Total Liabilities Total Assets $7,770 $18,594 = 42.00% $744,783 $2,095,083 = 35.5% Income from operations Interest expense $3,680 $33 = 111.51 353,955 5,335 = 66.3 Dividend per share of common stock (Yahoo Finance June 17, 2016 closing cost) Market price per share of common stock (Yahoo Finance June 17, 2016) $0.64 $53.47 = 1.19% $0.00 $36.42 = 0.0% Net income - Preferred dividends Average common stockholders' equity $27,799 $10,953 . 2.54% $208,042 $1,201,827 = 17.3% Net cash provided by operating activities minus cash payments earmarked for investments in plant assets Market price per share of common stock as of 12/31/2014 Earnings per share 3003-880 $38.46 $0.39 = = = $2,123.00 98.60 219033-140528 $33.12 $0.48 $ = 78,505.00 69 Summary Measuring Ability to Pay Current Liabilities: Nike, Inc. & Under Armour are in the position to pay off current liabilities. Nike current assets are $2.72 it's liabilities while Under Armour current assets weighs in at 3.67 times it's current liabilities. Clearly Under Armour is in a better financial position to pay off it's current liabilities, it has a much larger current ration at $3.67 than Nike. Furthermore, Under Armour has more than enough cash and cash equivalients to pay it's liabilities without compromising any of it's other current assets such as account receivables, inventory, etc. On the other hand, Nike cash and cash equivalents is not enough to cover it' s liabilities without compromising it's other assets accounts. Measuring Turnover: In the case of inventory turnover, Nike has the advantage. Nike turns it's inventory 4.1 to Under Armour 3.1 allowing it to turn it's inventory over within 89 days in comparison to Under Armour 117 days. The shorter amount of days it takes to turn inventory is better. Measuring Leverage - Overall Ability to Pay Debts: Under Armour has the least amount of debt than Nike being that Under Armour debt-to-ratio is 35.5% compared to Nike 42% debt-to-asset ratio. Under Armour can cover it's interest expense 66.3 times with income before interest and taxes. Nike is in a better position to pay back it's interst expense with it's 111 times. Measuring Profitability: Under Armour has 5 out of 5 profitability ratio. Under Armour has a better return on common stock holder's equity with a 17.3% compared to Nike 2.54%. Under Armour has a higher gross profit rate (49% - 45%). Under Armour also has a better advantage for rate of return on asset turnover (1.68 - 1.54). Lastly Under Armour has a better rate of return on total assets (11.3% 15%). Analyzing Stock as an Investment: Nike returns a 1.19% dividend yield to it's investors while Under Armour has yet to pay out a dividend yield. Under Armour has a positive free cash flow of $78,505,000 while Nike has a positive free cash flow of $2,123,000,000. Nike has enough money to increase divideds, pay off debt, and if they choose to they can acquire Under Armour at it's current value (assets value of $2,095,083,000). Conclusion: Under Armour is the best investment to go along with if you want to play it safe because it's current assets weighs in at 3.67 times it's current liabilities as well as it's overall liabilities. Again, Under Armour has 5 out of 5 profitability ratio as well as their turnover. For a more conserative investor, they should go along with Nike because heir able to turn over their inventory in much less days than Under Armour. For the growth-oriented investor, Under Armour is their best bet because of their free cash flow and the company having a strong profitability ratio. Bibliography http://www.businessinsider.com/history-of-nike-facts-about-its-50th-anniversary-2014-11 http://about.nike.com/ http://successstory.com/companiesike-inc https://www.underarmour.com/en-us/ %7cp8647700266&gclid=Cj0KEQjwhZm7BRCUyfS6ho2VjOEBEiQAumpGMqmFplO7Sot3Pn5LCuzxVp0ut5FqAtF1MtBC62i5HEaAlTW8P8HAQ&gclsrc=aw.ds http://www.businessinsider.com/history-of-under-armour-2015-2 http://finance.yahoo.com/