You work for adidas AG. in its acquisitions department. Adidas continually assesses the possible takeover of other sportswear manufacturers and is currently considering a major acquisition.

I have attached the financial report 2022 for Adidas and Puma and I would like to use the CORE Strategic Financial Analysis with all the ratios and the detailed explanation of the ratios, to decide if Adidas should acquire Puma or not. Include all key ratios. E.g. ROCE (make sure profit and capital numbers match) plus sales margin and asset utilisation. Should be an organised analysis; e.g. performance, working capital, liquidity/solvency and shareholders' view . Discussion should show understanding and interpretation and include appropriate comparisons. Explore links and trade-offs between ratios and explain why key ratios change by drawing on information in the context.

Discussion should show understanding and interpretation and include appropriate comparisons. Explore links and trade-offs between ratios and explain why key ratios change by drawing on information in the context.

Adidas Financial Statement

Income Statement Data ( in millions)

2022

2021 2020 2019 2018 2017 2016 2015 2014

Net sales^3,4,5

22,511

21,234

18,435

23,640

21,915

21,218

18,483

16,915

14,534

14,203

Gross profit^3,4,5

10,644

10,765

9,222

12,293

11,363

10,703

9,100

8,168

6,924

7,001

Royalty and commission income^3,4,5

112

86

61

154

129

115

105

119

102

103

Other operating income^3,4,5,6

173

28

42

56

48

17

119

8

37

12

Other operating expenses^3,4,5,6

10,260

8,892

8,580

9,843

9,172

8,766

7,741

7,201

6,102

5,883

EBITDA^3,4,5

1,874

3,066

1,967

3,845

2,882

2,511

1,953

1,475

1,283

1,496

Operating profit^{3,4,5,7,8,9,10}

669

1,986

746

2,660

2,368

2,070

1,582

1,094

961

1,233

Net financial result^3,4,5

(281)

(133)

(167)

(102)

10

(47)

(46)

(21)

(48)

(68)

Income before taxes^{3,4,5,7,8,9,10}

388

1,852

578

2,558

2,378

2,023

1,536

1,073

913

1,165

Income taxes^3,4,5,11

134

360

117

640

669

668

454

353

271

340

Net income attributable to_shareholders7,8,9,10,11,12

612

2,116

432

1,976

1,702

1,173

1,017

668

568

839

Income Statement Ratios

Gross margin^3,4,5

47.3%

50.7%

50.0%

52.0%

51.8%

50.4%

49.2%

48.3%

47.6%

49.3%

Operating margin^{3,4,5,7,8,9,10}

3.0%

9.4%

4.0%

11.3%

10.8%

9.8%

8.6%

6.5%

6.6%

8.7%

_{Effective tax rate}3,4,5,7,8,9,10,11

34.5%

19.4%

20.2%

25.0%

28.1%

29.3%

29.6%

32.9%

29.7%

29.2%

Net income attributable to shareholders in % of net_sales5,7,8,9,10,11,12

2.7%

10.0%

2.3%

8.4%

7.8%

5.5%

5.5%

4.0%

3.9%

5.9%

Net Sales by Product Category ( in millions)

Footwear^3,4,5

12,402

11,336

10,129

13,521

12,783

12,427

10,132

8,360

6,658

6,587

Apparel^3,4,5

8,732

8,710

7,315

8,963

8,223

7,747

7,352

6,970

6,279

5,811

Accessories and gear^3,4,5

1,493

1,187

991

1,156

910

1,044

999

1,585

1,597

1,806

Balance Sheet Data ( in millions)

Total assets

20,296

22,137

21,053

20,680

15,612

14,019

15,176

13,343

12,417

11,599

Inventories

5,973

4,009

4,397

4,085

3,445

3,692

3,763

3,113

2,526

2,634

Receivables and other current assets

4,961

4,072

3,763

4,338

3,734

3,277

3,607

3,003

2,861

2,583

Working capital

2,475

4,978

3,328

2,179

2,979

2,354

2,121

2,133

2,970

2,125

(Adjusted net borrowings)/ adjusted net cash¹³

(6,047)

(2,082)

(2,424)

(2,676)

959

484

(103)

(460)

(185)

295

Shareholders' equity

4,991

7,519

6,454

6,796

6,377

6,032

6,472

5,666

5,624

5,489

Balance Sheet Ratios

Adjusted net borrowings/_EBITDA3,4,5,13

3.2

0.7

1.2

0.7

(0.3)

(0.2)

0.1

0.3

0.1

(0.2)

Average operating working capital in % of net sales^3,4,5,14

24.0%

20.0%

25.3%

18.1%

19.0%

20.4%

21.1%

20.5%

22.4%

21.3%

Financial leverage^13,15

121.2%

27.7%

37.6%

39.4%

(15.0%)

(8.0%)

1.6%

8.1%

3.3%

(5.4%)

Equity ratio¹⁵

24.6%

34.0%

30.7%

32.9%

40.8%

43.0%

42.6%

42.5%

45.3%

47.3%

Return on equity^12,15

12.3%

28.1%

6.7%

29.1%

26.7%

18.2%

15.7%

11.2%

8.7%

14.3%

Return on capital employed^5,12

5.3%

21.2%

8.0%

27.9%

45.1%

41.2%

24.2%

16.5%

13.8%

23.6%

Data per Share

Share price at year-end (in )

127.46

253.20

297.90

289.80

182.40

167.15

150.15

89.91

57.62

92.64

Basic earnings (in )^{3,4,5,7,8,9,10,11}

1.25

7.47

2.31

9.70

8.46

7.05

5.39

3.54

3.05

3.93

1 2 3 4 5

TO OUR SHAREHOLDERS GROUP MANAGEMENT REPORT - OUR COMPANY

GROUP MANAGEMENT REPORT - FINANCIAL REVIEW

CONSOLIDATED FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

TEN-YEAROVERVIEW

2022 2021 2020 2019 2018 2017 2016 2015 2014 2013

Diluted earnings_{(in )}3,4,5,7,8,9,10,11

1.25

7.47

2.31

9.70

8.45

7.00

5.29

3.54

3.05

3.93

Price/earnings ratio at_year-end3,4,5,7,8,9,10,11

102.4

33.9

128.9

29.9

21.6

23.7

27.8

25.4

18.9

23.6

Market capitalization at year-end ( in millions)

22,756

48,512

58,110

56,792

36,329

34,075

30,254

18,000

11,773

19,382

Net cash (used in)/generated from operating activities (in )^5,16

(2.50)

14.79

7.00

14.26

13.31

8.14

6.73

5.41

3.36

3.03

Dividend (in )

0.70¹⁷

3.30

3.00

0.00

3.35

2.60

2.00

1.60

1.50

1.50

Number of shares outstanding at year-end (in thousands)

1,78,537

1,91,595

1,95,066

1,95,969

1,99,171

2,03,861

2,01,489

2,00,197

2,04,327

2,09,216

Employees

Number of employees at year-end^3,4,18

59,258

61,401

62,285

65,194

57,016

56,888

58,902

55,555

53,731

49,808

Personnel expenses ( in millions)^3,4,5

2,856

2,659

2,325

2,720

2,481

2,549

2,373

2,184

1,842

1,833

Puma Statment		2022		2021		2020		2019		2018		2017		2016		2015		2014		2013
Sales
Consolidated sales		8,465.1		6,805.4		5,234.4		5,502.2		4,648.3		4,135.9		3,626.7		3,387.4		2,972.0		2,985.3
- Change in %		24.4%		30.0%		-4.9%		18.4%		12.4%		14.0%		7.1%		14.0%		-0.4%		-8.7%
- Footwear		4,317.9		3,163.6		2,367.6		2,552.5		2,184.7		1,974.5		1,627.0		1,506.1		1,282.7		1,372.1
- Apparel		2,896.3		2,517.3		1,974.1		2,068.7		1,687.5		1,441.4		1,333.2		1,244.8		1,103.1		1,063.8
- Accessories		1,251.0		1,124.5		892.7		881.1		776.1		719.9		666.5		636.4		586.3		549.4
Result of operations
Gross profit		3,902.7		3,257.8		2,458.0		2,686.4		2,249.4		1,954.3		1,656.4		1,540.2		1,385.4		1,387.5
- Gross profit margin		46.1%		47.9%		47.0%		48.8%		48.4%		47.3%		45.7%		45.5%		46.6%		46.5%
Royalty and commission income		33.8		23.9		16.1		25.1		16.3		15.8		15.7		16.5		19.4		20.8
EBIT1)		640.6		557.1		209.2		440.2		337.4		244.6		127.6		96.3		128.0		191.4
- EBIT margin		7.6%		8.2%		4.0%		8.0%		7.3%		5.9%		3.5%		2.8%		4.3%		6.4%
EBT		551.7		505.3		162.3		417.6		313.4		231.2		118.9		85.0		121.8		53.7
- EBT margin		6.5%		7.4%		3.1%		7.6%		6.7%		5.6%		3.3%		2.5%		4.1%		1.8%
Net earnings		353.5		309.6		78.9		262.4		187.4		135.8		62.4		37.1		64.1		5.3
- Net margin		4.2%		4.5%		1.5%		4.8%		4.0%		3.3%		1.7%		1.1%		2.2%		0.2%
		2022		2021		2020		2019		2018		2017		2016		2015		2014		2013
Expenses
Marketing/retail		1,578.5		1,309.1		1,050.2		1,112.1		931.2		822.9		732.3		697.6		599.7		544.1
Personnel		846.5		712.4		583.7		640.5		553.8		549.1		493.1		483.8		425.3		415.7
Balance sheet
Total assets		6,772.7		5,728.3		4,684.1		4,378.2		3,207.2		2,853.8		2,765.1		2,620.3		2,549.9		2,308.5
Shareholders' equity		2,538.8		2,278.5		1,763.9		1,902.3		1,722.2		1,656.7		1,722.2		1,619.3		1,618.3		1,497.3
- Equity ratio		37.5%		39.8%		37.7%		43.4%		53.7%		58.1%		62.3%		61.8%		63.5%		64.9%
Working capital		1,086.8		727.9		465.8		549.4		503.9		493.9		536.6		532.9		455.7		528.4
- thereof: inventories		2,245.1		1,492.2		1,138.0		1,110.2		915.1		778.5		718.9		657.0		571.5		521.3
Cash flow
Free cash flow		177.5		276.2		276.0		330.0		172.9		128.5		49.7		-98.9		39.3		29.2
Investments (incl. acquisitions)		263.6		202.4		151.0		218.4		130.2		122.9		91.1		79.5		96.4		76.3
Profitability
Return on equity (ROE)		13.9%		13.6%		4.5%		13.8%		10.9%		8.2%		3.6%		2.3%		4.0%		0.4%
Return on capital employed (ROCE)		28.4%		31.9%		15.1%		29.6%		25.8%		20.7%		10.3%		7.9%		11.5%		5.6%
Additional information
Number of employees (year-end)		18,071		16,125		14,374		14,332		12,894		11,787		11,495		11,351		11,267		10,982
Number of employees (annual average)		16,669		14,846		13,016		13,348		12,192		11,389		11,128		10,988		10,830		10,750
		2022		2021		2020		2019		2018		2017		2016		2015		2014		2013
PUMA share*
Share price (in )		56.70		107.50		92.28		68.35		42.70		36.30		24.97		19.87		17.26		23.50
Earnings per share (in )		2.36		2.07		0.53		1.76		1.25		0.91		0.42		0.25		0.43		0.04
Average outstanding shares (in million)		149.65		149.59		149.56		149.52		149.47		149.43		149.40		149.40		149.40		149.40
Number of shares outstanding as of Dec, 31 (in million)		149.76		149.61		149.58		149.55		149.51		149.46		149.40		149.40		149.40		149.40
Market capitalization		8,491		16,083		13,804		10,222		6,384		5,426		3,730		2,968		2,578		3,511