Under Armour Inc Earnings Management Red Flags For the Year Ended December 31 2009 Analysis of Operating Income vs. Operating Cash Flows Revenue 856,4 Revenue Growth Operating income 85.2 Operating Income Growth Net Income 46.8] Net Income Growth Operating Cash Flows (OCF) OCF Growth 79.4 2010 1,063.9 24.2% 112.3 31.8% 68.5 46.4% 105.5 32.9% 2011 2012 2013 2014 2015 1,472.7 1,834,9 2,332.1 1,004,4 19633 38,4% 24.6% 27.1% 32.3% 28.5% 162.8 208.7 265.1 353.9 45.0% 28.2% 27.0% 33.5% 96.9 128.8 162.3 208.0 41.5% 32.9% 26.0% 28.2% 144.6 191.1 230.8 3232 37.1% 32.2% 20.8% 40.0% SHOW 15.4% 232.6 11.8% 395.7 22,4% 2016 2017 48133 4.9892 5.1912 22.0% 12% 4.18 LAN 417.5 279 -93.38 (249) 216.7 189.2% -10506 (483) (46.3) 92.1 -4,18 -29834 (575) 327.0 -658.7% -121.18 22% 257.0 10.5% 5012 26.7% -118. 2724 45.7% 2018 2019 TIRS 2020 44747 15.0% (613.4) -358.1% (5492) -696.3% (487.5) 249.1 2. Detecting earnings management is easier in theory than it is in practice. When interpreting the earnings management red flags, I would focus on what questions you would ask management, not on making definitive conclusions. For example, a decrease in inventory turnover could be due to many things. The important thing is identifying a potential problem requiring further investigation. For each of the four areas of analysis listed below, please answer the following questions. Are there any disruptions in trends or patterns that do not make sense? If you were a financial analyst, what would you ask management about these "red flags" during a conference call? Keep in mind that small fluctuations in the ratios are expected. Also keep in mind that to increase net income, a company would need to increase an asset or decrease a liability. a. Analyze operating income versus operating cash flows by comparing trends in revenue, operating income, net income, and operating cash flows for the period 2009 to 2020. Under Armour Inc Earnings Management Red Flags For the Year Ended December 31 2009 Analysis of Operating Income vs. Operating Cash Flows Revenue 856,4 Revenue Growth Operating income 85.2 Operating Income Growth Net Income 46.8] Net Income Growth Operating Cash Flows (OCF) OCF Growth 79.4 2010 1,063.9 24.2% 112.3 31.8% 68.5 46.4% 105.5 32.9% 2011 2012 2013 2014 2015 1,472.7 1,834,9 2,332.1 1,004,4 19633 38,4% 24.6% 27.1% 32.3% 28.5% 162.8 208.7 265.1 353.9 45.0% 28.2% 27.0% 33.5% 96.9 128.8 162.3 208.0 41.5% 32.9% 26.0% 28.2% 144.6 191.1 230.8 3232 37.1% 32.2% 20.8% 40.0% SHOW 15.4% 232.6 11.8% 395.7 22,4% 2016 2017 48133 4.9892 5.1912 22.0% 12% 4.18 LAN 417.5 279 -93.38 (249) 216.7 189.2% -10506 (483) (46.3) 92.1 -4,18 -29834 (575) 327.0 -658.7% -121.18 22% 257.0 10.5% 5012 26.7% -118. 2724 45.7% 2018 2019 TIRS 2020 44747 15.0% (613.4) -358.1% (5492) -696.3% (487.5) 249.1 2. Detecting earnings management is easier in theory than it is in practice. When interpreting the earnings management red flags, I would focus on what questions you would ask management, not on making definitive conclusions. For example, a decrease in inventory turnover could be due to many things. The important thing is identifying a potential problem requiring further investigation. For each of the four areas of analysis listed below, please answer the following questions. Are there any disruptions in trends or patterns that do not make sense? If you were a financial analyst, what would you ask management about these "red flags" during a conference call? Keep in mind that small fluctuations in the ratios are expected. Also keep in mind that to increase net income, a company would need to increase an asset or decrease a liability. a. Analyze operating income versus operating cash flows by comparing trends in revenue, operating income, net income, and operating cash flows for the period 2009 to 2020
