Nike & Puma Ratio Analysis

Presented by:

Yasir Chowdhary (06)

Islam Kilaniya (15)

Brijesh Vishwakarma (42)

Firdos Ahmed Shaikh (43)

NIKE, Inc.

Nike is without a doubt one of the world’s top sports and fitness companies, and has a legacy which dates back to 1962 when they first arrived on the scene under the

name of Blue Ribbon Sports. Today Nike is known for their top of the line sports

apparel and athletic shoes.

In the year 1962, Philip H. Knight reached out to an athletic shoe company in Japan called the Onitsuka Tiger Co., because he strongly believed in the quality in the running shoes that were manufactured there.

Knight set up a plan to gradually introduce some of the Onitsuka Tiger Company’s products to the United States.

In that same year Knight founded Blue Ribbon Sports (BRS), which pleased his Japanese counterparts.

In 1963 BRS finally set the plan in motion by taking delivery of the Onitsuka Tiger Company’s athletic shoes (200 pairs), and pushed to sell them at a lot of different track meets.

Continued…

History of NIKE, Inc.

In 1971 BRS expands its operations overseas, as they began to manufacture products through financing from the Nissho Iwai Corporation, and independent contractors.

In the same year BRS brought to the scene a product line called Nike, which had a Swoosh logo representing Greek mythology’s victory goddess. This was the first recorded line of Nike’s that were sold.

In 1972 the partnership between BRS and Onitsuka Tiger came to an end through failure to come to an agreement over distribution, and BRS began to push the Nike brand through the Olympic Trials in that same year.

In 1978 Blue Ribbon Sports changed its name to Nike, Inc., and the following year introduced the Nike Air shoe along with a new clothing line.

In 1980 Nike goes public.

In 1981 Nike begins to focus on promoting their products over seas in markets all across Europe, Asia, Japan, Africa, and Latin America.

In 1985 Nike furthered the success of the company by having Michael Jordan to sign a contract to endorse one of it’s versions of the Nike Air shoe and called this one the “Air Jordan.”

In 1988 the very popular slogan “Just Do It” was introduced to the world.

Company profile of Nike

• 1962 as Blue Ribbon Sports,

• 1978 Nike Inc by William Johnson,

• footwear, apparel, equipment and Accessory products,

• NIKE is a seller of athletic footwear and athletic apparel in the world,

• The Company sells its products through its owned retail stores, and Internet sales, and through a mix of independent distributors and licensees, in over 170 countries around the world

• It also markets footwear designed for baseball, football, golf etc.

Puma SE

Company profile of Puma• Rudolf dassler found puma in 1948.

• Puma is a Germany-based company.

• Making sporting equipment, operating worldwide through its subsidiaries.

• Its operations into three segments: Footwear, Apparel, and Accessories.

• The Company’s apparel line offers t-shirts, track jackets, pants, and hooded sweatshirts.

History

• The company was founded in 1924 in Germany by Rudolph and Adolf Dassler.

• Originally a shoe manufacturer with several Olympic athletes sporting Puma shoes through the years.

• In the 1950’s Puma gains attention for the development of their soccer shoes.

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• In 1960 Puma becomes the first sports shoe manufacturer to use the vulcanization production technique.

• In 1986 Puma became a publicly traded company on the Frankfurt stock exchange.

• In 1998 Puma merges sport and fashion by collaborating with designer Jil Sander.

• In 2001 Puma acquires Tretorn Group.• In 2007 more than 60% of company shares are

acquired by French luxury goods company PPR.

Ratio analysis• Current Ratio =Current Assets / Current Liabilities

• 2 : 1 is favorable,• Higher the ratio indicates company’s ability to pay its debts in

the short-term.

company 2008 2009 2010

NIKE (Million) 2.66 2.97 2.85

PUMA (Million) 2.22 2.19 2.06

• Quick Ratio = Quick Assets /Current Liabilities

• Standard ratio is 1:1,• Higher the ratio indicates lower the incidence of inventory in

inflating the current ratio.

company 2008 2009 2010

NIKE (Million)

2.41 2.74 2.99

PUMA (Million)

1.96 1.99 1.71

• Inventory Turnover = Cost of Goods Sold

Average Inventories

• ratio shows the number of times a company’s inventory is turned into sales.

Company 2008 2009 2010

NIKE (Million) 4.49 times

4.41 times

4.64 times

PUMA (Million) 3.03 times

3.09 times 3.47 times

• Proprietary Ratio =Shareholder’s Funds

Total Assets

• Higher the ratio shows the long term or future solvency of the business.

Company 2008 2009 2010

NIKE (Million) 0.63 0.66 0.67

PUMA (Million) 0.62 0.616 0.576

• GROSS PROFIT RATIO=GROSS PROFIT X 100

SALES

• The Ratio if we compare it shows that-

1)Failure in managing purchase, production, sales and inventory

2)Loose control over direct costs of labour, fuel, freights etc.

3)Lower productivity and lower margin to meet other expenses

Company 2008 2009 2010

NIKE (Million) 45.06 % 44.84 % 45.59 %

PUMA (Million) 51.76 % 51.30 % 50.56 %

• OPERATING RATIO = COGS + OPERATING EXPENSES X 100

sales

• The Ratio if we compare it shows that-• High efficiency in managing the Operations of the concern like

purchases made at lower prices, optimum level of production, good inventory management and good control of direct cost of labour,fuel,freight etc.

• A very good Margin available to meet non-operating Expenses.

Company 2008 2009 2010

NIKE (Million) 142.40 % 145.41 % 140.71%

PUMA (Million) 83.49 % 84.39 % 109.23%

• EXPENSES RATIO = EXPENSES X 100

NET SALES

• Expense ratios indicate the relationship of various expenses to net sales. The operating ratio reveals the average total variations in expenses. But some of the expenses may be increasing while some may be falling. Hence, expense ratios are calculated by dividing each item of expenses or group of expense with the net sales to analyze the cause of variation of the operating ratio.

Company 2008 2009 2010

NIKE (Million) 86.90 % 90.30 % 87.01 %

PUMA (Million) 35.26 % 35.45 % 33.76%

Return on Equity = Net profit after minority interests

Average Shareholder’s equity

Higher the ratio shows higher efficiency in the use of shareholder’s funds.

Company 2008 2009 2010

NIKE (Million) 24.55 % 18.00 % 20.68 %

PUMA (Million) 21.92 % 21.68 % 16.69 %

Profit after Tax

Return on Assets = × 100

Average Total Assets

Higher the ratio shows higher return on investments.

Company 2008 2009 2010

NIKE (Million) 15.76 % 11.58 % 13.78 %

PUMA (Million) 13.59 % 13.39 % 9.80 %

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