Management Accounting- I

POST GRADUATE PROGRAMME IN MANAGEMENT

MANAGEMENT DEVELOPMENT INSTITUTE, MURSHIDABAD, 2019

GROUP A9
SHOBHA CHAKRABORTY 19PGPM067

SNEHADEEP BOSE 19PGPM059

PRIKHIL AGRAWAL 19PGPM046

AKANSHA MODI 19PGPM006

DEVASHISH PARMAR 19PGPM016

M AKSHAY 19PGPM030

SHUBHAM GILL 19PGPM058

SUBMITTED TO:
DR. PINKU PAUL
Introduction

Over the past few years India has rapidly caught up with the wider global fitness trend. Driven
by the country's growing wealth, changing lifestyles, and rising urbanization, an increasing
amount of Indian consumers are becoming more health conscious and are adding new health and
wellness routines to their hectic lifestyles as a result.

From 2015 to 2016, the Indian sportswear market grew 22 percent, outpacing the segment's
global increase of 7 percent according to Euro monitor. By 2020, it is expected to grow an
additional 12 percent CAGR (compound annual growth rate) with sales expected to reach $8
billion.

We have used Comparative, Common size, ratio analysis and cash flow tools for financial
analysis.

Nike

Just the best

Nike Inc. is an American multinational corporation that is engaged in the design, development,
manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories,
and services. The company is headquartered near Beaverton, Oregon in the Portland
metropolitan area.

Who originated the logo?

Phil H. Knight, who studied accounting at the University of Oregon, was a middle distance
runner in the university team coached by the legendary Bill Bower man.

Early name of Nike?

We call it as “the swoosh”. The brand was named after the Greek goddess of victory by Jeff
Johnson, the first employee of the company.

Tag line of Nike- “just do it”

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In 1976, the company hired John Brown and Partners, based in Seattle, as its first advertising
agency. The following year, the agency created the first "brand ad" for Nike, called "There is no
finish line", in which no Nike product was shown. By 1980, Nike had attained a 50% market
share in the U.S. athletic shoe market, and the company went public in December of that year.
Under Armour

Under Armour was founded in 1996 by Kevin Plank who was at that time a captain of the
American football team of the University of Maryland. Plank didn’t like how sweaty his cotton
T-shirts became after games comparing to his compression shirts and decided to establish a
startup.

Before the company got its logo, Plank had to choose the name. Initially, he was thinking about
“Body Armor”, but because of problems with trademark registration, the idea was abandoned.
“Under Armour” name emerged when Bill, Kevin’s brother, misheard the company’s name and
called it so accidentally. Kevin liked that idea, but he chose to stick to the British spelling
because he liked how it looked in a phone number - 888-4ARMOUR.

Since Kevin obviously wasn’t a designer himself, the logo he came up with was very simplistic.
Yet, that is probably what made it extremely recognizable. The crossing letters “U” and “A” are
now a worldwide brand worn by thousands of athletes. Some also see it as a chain interlocking
because of symmetry and balance the logo has.

In 1997, the company customized its font using a bold sans-serif with cut pieces of letters D, A,
and R in a place where the left end of the lower horizontal line sticks to the vertical line. A
modern, refined version of a logo looks both stylish and aggressive as if trying to remind that
Under Armour is primarily a sports brand.

Nike Comparative and Common Size Balance Sheet

(in millions) Comparison Common Size

2017-
ASSETS
18 2016 Absolute change Percentage Change 2017 2016
Current assets:
Cash and equivalents 3,808 3,138 670 21 16.37216 14.677955
Short-term investments 2,371 2,319 52 2 10.1939 10.847093
Accounts receivable, net 3,677 3,241 436 13 15.80893 15.159736
Inventories 5,055 4,838 217 4 21.73352 22.629683
Prepaid expenses and
1,150 1,489
other current assets -339 -23 4.944323 6.9647785
Total current assets 16,061 15,025 1036 7 69.05284 70.279246
Property, plant and
3,989 3,520
equipment, net 469 13 17.15035 16.464755
Identifiable intangible
283 281
assets, net 2 1 1.216733 1.3143739
Goodwill 139 131 8 6 0.597618 0.6127508
 Deferred income taxes
2,787 2,422
and other assets 365 15 11.98246 11.328874
TOTAL ASSETS 23,259 21,379 1880 9 100 100
LIABILITIES AND
SHAREHOLDERS’
EQUITY
Current liabilities:
Current portion of long-
6 44
term debt -38 -86 0.025796 0.2058094
Notes payable 325 1 324 32,400 1.397309 0.0046775
Accounts payable 2,048 2,191 -143 -7 8.805194 10.248375
Accrued liabilities 3,011 3,037 -26 -1 12.94553 14.205529
Income taxes payable 84 85 -1 -1 0.361151 0.3975864
Total current liabilities 5,474 5,358 116 2 23.53498 25.061977
Long-term debt 3,471 1,993 1478 74 14.92326 9.3222321
Deferred income taxes
1,907 1,770
and other liabilities 137 8 8.198977 8.2791524
Commitments and
contingencies
Redeemable preferred
— —
stock
Shareholders’ equity:
Common stock at stated
value:
Class A convertible —
329 and 353 shares — —
outstanding
Class B — 1,314 and
3 3
1,329 shares outstanding 0 0 0.012898 0.0140325
Capital in excess of
8,638 7,786
stated value 852 11 37.13831 36.418916
Accumulated other
comprehensive (loss) -213 318
income -531 -167 -0.91577 1.4874409
Retained earnings 3,979 4,151 -172 -4 17.10736 19.41625
Total shareholders’ equity 12,407 12,258 149 1 53.34279 57.336639
TOTAL LIABILITIES
AND SHAREHOLDERS’ 23,259 21,379
EQUITY 1880 9 100 100
 Under Armour Comparative Balance Sheet

Comparison
Assets 2017-18 2016-17 Absolute change Percentage Change
Current assets
Cash and cash equivalents 312.483 250.47 62.013

Accounts receivable, net 609.67 622.685 -13.015 -2.09014

Inventories 1158.548 917.491 241.057 26.2735

Prepaid expenses and other current 256.978 174.507 82.471 47.25942

assets
Total current assets 2337.679 1965.153 372.526 18.95659

Property and equipment, net 885.774 804.211 81.563 10.14199

Goodwill 555.674 563.591 -7.917 -1.40474

Intangible assets, net 46.995 64.31 -17.315 -26.9243

Deferred income taxes 82.801 136.862 -54.061 -39.5004

Other long term assets 97.444 110.204 -12.76 -11.5785

Total assets 4006.367 3644.331 362.036 9.934224

Liabilities and Stockholders’ Equity

Current liabilities

Revolving credit facility, current 125 0 125

Accounts payable 561.108 409.679 151.429 36.96284

Accrued expenses 296.841 208.75 88.091 42.19928

Current maturities of long term debt 27 27 0 0

Other current liabilities 50.426 40.387 10.039 24.85701

Total current liabilities 1060.375 685.816 374.559 54.61509

Long term debt, net of current maturities 765.046 790.388 -25.342 -3.20627

Other long term liabilities 162.304 137.227 25.077 18.2741

Total liabilities 1987.725 1613.431 374.294 23.19864

Stockholders’ equity

Class A Common Stock 0.061 0.061 0 0

Class B Convertible Common Stock 0.011 0.011 0 0

 Class C Common Stock 0.074 0.073 0.001 1.369863

Additional paid-in capital 872.266 823.484 48.782 5.923855

Retained earnings 1184.441 1259.414 -74.973 -5.95301

Accumulated other comprehensive loss -38.211 -52.143 13.932 -26.7188

Total stockholders’ equity 2018.642 2030.9 -12.258 -0.60357

Total liabilities and 4006.367 3644.331 362.036 9.934224

stockholders’ equity

Under Armour Common Size Balance Sheet

Assets 2017-18 2016-17

2017-18 2016-17
Current assets

Cash and cash equivalents 250.470 7.79965989 6.8728664

312.483
Accounts receivable, net 609.670 622.685 15.2175275 17.086401

Inventories 1,158.548 917.491 28.9176703 25.175842

256.978 174.507 6.41424013 4.7884509

Prepaid expenses and other current assets
Total current assets 2,337.679 1,965.153 58.3490978 53.92356

Property and equipment, net 885.774 804.211 22.1091577 22.067452

Goodwill 555.674 563.591 13.8697728 15.464869

Intangible assets, net 46.995 64.310 1.17300786 1.7646586

Deferred income taxes 82.801 136.862 2.06673527 3.7554767

Other long term assets 97.444 110.204 2.4322285 3.0239844

Total assets 100 100

4,006.367 3,644.331
Liabilities and Stockholders’ Equity

Current liabilities

Revolving credit facility, current 0 3.12003369

125
Accounts payable 561.108 409.679 14.0054069 11.241542

Accrued expenses 296.841 208.750 7.40923136 5.7280746

Current maturities of long term debt 27 27 0.67392728 0.7408767

 Other current liabilities 50.426 40.387 1.25864655 1.1082144

Total current liabilities 1,060.375 685.816 26.4672458 18.818708

Long term debt, net of current maturities 765.046 790.388 19.0957543 21.688151

Other long term liabilities 162.304 137,227 4.05115158 3.7654922

Total liabilities 1,987.725 1,613,431 49.6141517 44.272351

Stockholders’ equity

Class A Common Stock .061 .061 0.00152258 0.0016738

Class B Convertible Common Stock .011 .011 0.00027456 0.0003018

Class C Common Stock .074 .073 0.00184706 0.0020031

Additional paid-in capital 823.484 21.7719944 22.596301

872.266
Retained earnings 1,259.414 29.5639666 34.558167
1,184.441
Accumulated other comprehensive loss -52.143 -0.9537569 -1.430798
-38.211
Total stockholders’ equity 2,018.642 2,030.900 50.3858483 55.727649

Total liabilities and stockholders’ 4,006.367 100 100

3,644.331
equity

Nike Comparative and Common Size Income Sheet

Nike Comparative and Common Size Income Sheet

common
size
Absolute Percentage
2017-18 2016-17
Change Change 2017-18 2016-17
Revenues 34,350 32,376 1,974 6.09710897 100 100
Cost of sales 19,038 17,405 1,633 9.38236139
55.42358079 53.75896
Gross profit 15,312 14,971 341 2.277736958
44.57641921 46.24104
Demand
creation 3,341 3,278 63 1.9219036
expense 9.726346434 10.12478
Operating
overhead 7,222 7,191 31 0.431094424
expense 21.02474527 22.2109
Total selling
and
10,563 10,469 $94 0.897889006
administrative
expense
30.7510917 32.33568

Interest
expense 59 19 $40 210.5263158
(income), net
0.171761281 0.058685

Other
(income) -196 -140 ($56) 40
expense, net
-0.5705968 -0.43242

Income
before 4,886 4,623 $263 5.688946571
income taxes
14.22416303 14.2791
Income tax
646 863 ($217) -25.14484357
expense
1.880640466 2.665555
NET
4,240 3,760 $480 12.76595745
INCOME 12.34352256 11.61354

Under Armour Comparative and Common Size Income Statement

Percentage Percentage
2017-18 2016-17
2017-18 2016-17
$4,976.553 $4,825.335 100 100
Net revenues
Cost of goods 55.0145854 53.56569026
2,737.830 2,584.724
sold
2,238.723 2,240.611 44.9854146 46.43430974
Gross profit
Selling, general
and
2,086.831 1,823.140
administrative 41.93326184 37.78266172
expenses
Restructuring
and impairment 124.049 — 2.492669123 #VALUE!
charges
Income from 0.559483643 8.65164802
27.843 417.471
operations
Interest -0.694014512 -0.547816887
-34.538 -26.434
expense, net
Other expense, -0.072620547 -0.057094482
-3.614 -2.755
net
Income (loss)
before income -10.309 388.282 -0.207151416 8.046736651
taxes
Income tax 0.762596118 2.721116772
37.951 131.303
expense
Net income -0.969747534 5.325619879
-48.260 256.979
(loss)

Under Armour Ratio Analysis

Ratio Formulas 2017-18 2016-17 Percentage

Current ratio Current assets/Current Liabilities 2.20 2.8654 -23%

Quick ratio Quick assets/Quick Liabilities 1.79942 1.8102 -1%
Inventory turnover ratio COGS/Avg inventory 2.3631 2.8171 -16%
Inventory days 365/Inventory turnover ratio 154.458 129.5658 19%
Debt to equity ratio Total borrowed fund/proprietors fund 0.4593 0.4567 1%
Gross profit ratio Gross profit/net sales 0.4498 0.4643 -3%
Net profit ratio Net profit/net sales -0.0096 0.0532 -118%
Return on equity PAT/Equity share capital+reserves &surplus -0.023 0.1233 -119%
Total asset turnover ratio Sales / net assets 1.2421 1.324 -6%
Fixed asset turnover ratio Sales / net fixed assets 2.9823 2.8736 4%
Current asset turnover ratio Sales / Current assets 2.1288 2.4554 -13%
Working capital turnover ratio Sales/working capital 3.8961 3.7717 3%
Return on fixed assets Net income/Fixed assets -0.0289 0.15303 -119%

Nike Ratio Analysis

Ratio Formulas 2017-18 2016-17 Percentage

Current ratio Current assets/Current Liabilities 2.93 2.8042 5%

Quick ratio Quick assets/Quick Liabilities 1.3384 1.6885 -21%
Inventory turnover ratio COGS/Avg inventory 3.7661 3.5975 5%
Inventory days 365/Inventory turnover ratio 96.917 101.459 -4%
Debt to equity ratio Total borrowed fund/proprietors fund 0.4334 0.3069 41%
Gross profit ratio Gross profit/net sales 0.4458 0.4624 -4%
Net profit ratio Net profit/net sales 0.1234 0.11641 6%
PAT/Equity share capital+reserves
Return on equity &surplus 0.3359 0.3149 7%
Total asset turnover ratio Sales / net assets 1.4768 1.5147 -3%
Fixed asset turnover ratio Sales / net fixed assets 4.7721 5.095 -6%
Current asset turnover ratio Sales / Current assets 2.1387 2.154 -1%
Working capital turnover ratio Sales/working capial 3.2445 3.3491 -3%
Return on fixed assets Net income/Fixed assets 0.589 0.5917 0%

Cash Flow Statement of Nike

2017-18 2016-17
Cash provided by operations:
Net income $4,240 $3,760
Income charges (credits) not affecting cash:
Depreciation 706 649
Deferred income taxes -273 (80))
Stock-based compensation 215 236
Amortization and other 10 13
Net foreign currency adjustments -117 98
Changes in certain working capital components and other
assets and liabilities:

(Increase) decrease in accounts receivable -426 60)

(Increase) in inventories -231 (590))
(Increase) in prepaid expenses and other current assets -120 (161))

(Decrease) increase in accounts payable, accrued

-364 -889
liabilities and income taxes payable
Cash provided by operations 3,640 3,096
Cash used by investing activities:
Purchases of short-term investments -5,928 (5,367))
Maturities of short-term investments 3,623 2,924
Sales of short-term investments 2,423 2,386
Investments in reverse repurchase agreements — 150)

Additions to property, plant and equipment -1,105 (1,143))

Disposals of property, plant and equipment 13 10

Other investing activities -34 6
Cash used by investing activities -1,008 -1,034
Cash used by financing activities:
Net proceeds from long-term debt issuance 1,482 981

Long-term debt payments, including current portion -44 (106))

Increase (decrease) in notes payable 327 (67))
Payments on capital lease and other financing
-17 (7))
obligations
Proceeds from exercise of stock options and other stock
489 507
issuances
Excess tax benefits from share-based payment
177 281
arrangements
Repurchase of common stock -3,223 (3,238))

Dividends — common and preferred -1,133 (1,022))

Cash used by financing activities -1,942 (2,671))

Effect of exchange rate changes on cash and equivalents -20 (105))

Net increase (decrease) in cash and equivalents 670 -714

Cash and equivalents, beginning of year 3,138 3,852
CASH AND EQUIVALENTS, END OF YEAR $3,808 $3,138
Cash Flow Statement of Under Armour

2017-.18 2016-17
Cash flows from operating activities

Net income (loss) ($48.260) $256.979

Adjustments to reconcile net income (loss) to net cash used in

operating activities

Depreciation and amortization 173.747 144.770

Unrealized foreign currency exchange rate loss (gains)
-29.247 12.627

Impairment charges 71.378 —

Amortization of bond premium
.254 —

Loss on disposal of property and equipment 2.313 1.580

Stock-based compensation
39.932 46.149

Excess tax benefit (loss) from stock-based compensation

-.075 44.783
arrangement

Deferred income taxes 55.910 -43.004

Changes in reserves and allowances
108.757 70.188
Changes in operating assets and liabilities (net of acquisitions):

Accounts receivable -79.106 -249.853

Inventories -222.391 -148.055

Prepaid expenses and other assets -55.503 -25.284

Accounts payable 202
145.695

Accrued expenses and other liabilities 109.823 67.754

Income taxes payable and receivable
-39.164 -16.712

Net cash provided by operating activities 234.063 364.368

Cash flows from investing activities

Purchases of property and equipment -281.339 -316.458

Purchases of property and equipment from related parties
— -70.288

Purchase of businesses, net of cash acquired — —

Purchases of available-for-sale securities
— -24.230

Sales of available-for-sale securities — 30.712

Purchases of other assets -1.648 -.875

Net cash used in investing activities -381.139

-282.987
Cash flows from financing activities

Proceeds from long term debt and revolving credit facility 763.000 1,327.601
Payments on long term debt and revolving credit facility -665.000 -1,170.750

Employee taxes paid for shares withheld for income taxes -2.781 -15.098

Proceeds from exercise of stock options and other stock issuances

11.540 15.485

Payments of debt financing costs — -6.692

Cash dividends paid — -2.927

Contingent consideration payments for acquisitions — -1.505

Net cash provided by financing activities
106.759 146.114

Effect of exchange rate changes on cash and cash equivalents 4.178 -8.725

Net increase (decrease) in cash and cash equivalents 62.013 120.618

Cash and cash equivalents
Beginning of period 250.470 129.852
End of period $312.483 $250.470
Detailed Report Analysis of Nike

Nike Income Statement Analysis (2016-17)

 Operating income during the year fell 17.57% on a year-on-year (YoY) basis.
 Depreciation charges increased by 8.78% and finance costs increased by 9.38% YoY,
respectively.
 Other income grew by 40% YoY.
 Net profit for the year grew by 12.76% YoY.

Balance Sheet Analysis for Nike

 The company's current liabilities during FY17 down at $116 million thereby witnessing
an increase of 2.16%.
 Long-term debt stood at $1478 million during FY17growth of 74.15%.
 Current assets rose 6.89% and stood at $1036 million, in FY17.
 Overall, the total assets and liabilities for FY17 stood at $1880 million, thereby
witnessing a growth of 8.79%.

Cash Flow Statement Analysis of Nike

 Nike’s cash flow from operating activities during FY17 stood at $193 million on a YoY
basis.
 Cash flow from investing activities during FY17 stood at $ 561 million on a YoY basis.
 Cash flow from financial activities during FY17 stood at $ 729 million on a YoY basis.
 Overall, net cash flows for the company during FY17 stood at $ 670 million.

Ratio Analysis for Nike

Current Ratio: The Company’s current ratio improved and stood at 2.93:1 during FY16-17,
from 2.80:1 during FY15-16. The current ratio measures the company's ability to pay short-term
and long-term obligations.

Gross Profit ratio: This ratio indicates the percentage of gross profit on net sales. In FY 2016-
2017 the gross profit ratio was 0.44 compared to 0.46 in FY 2015-2016.
Net Profit Ratio: This ratio indicated the percentage of net profit on net sales. In FY 2016-17
the net profit ratio was 0.1234 compared to 0.11641 in F.Y 2015-2016.
Return on equity indicated the ratio of PAT to Equity Share Capital+ Reserves+ Surplus which
was calculated to be 0.3359 in the year 2016-17 as compared to 0.3149 for the year 2015-16.

Working capital turnover ratio indicated the ratio of Sales to Working capital which was
calculated to be 3.2445 for the year 2016-17 as compared to 3.3491 for the year 2015-16.

Return on fixed assets ratio was to be calculated as Net Income to Fixed Assets as 0.589 for the
year 2016-17 as compared to 0.5917 for the year 2015-16

Detailed Report Analysis of Underarmour

Under armour Income Statement Analysis (2016-17)

 Operating income during the year fell by 35.76% on a year-on-year (YoY) basis.
 Depreciation charges increased by 20.71% and finance costs decreased by 26.93% YoY,
respectively.
 Other income grew by 48.58% YoY.
 Net profit for the year decreased by 118.77% YoY.

Balance Sheet Analysis for Under armour

 The company's current liabilities during FY17 down at $374 million thereby witnessing
an increase of 54.61%.
 Long-term debt stood at $25 million during FY17growth of 3.2%.
 Current assets rose by 6.89% in FY17.
 Overall, the total assets and liabilities for FY17 witnessed a growth of 14%.

Cash Flow Statement Analysis of Under armour

 Under armour cash flow from operating activities during FY17 stood at $157 million on a
YoY basis.
 Cash flow from investing activities during FY17 stood at $ 385 million on a YoY basis.
 Cash flow from financial activities during FY17 stood at $627 million on a YoY basis.
 Overall, net cash flows for the company during FY17 stood at $ 582 million.

Ratio Analysis for Under armour

Current Ratio: The company's current ratio improved and stood at 2.80:1 during FY16-17, from
2.865:1 during FY15-16. The current ratio measures the company's ability to pay short-term and
long-term obligations.

Gross Profit ratio: This ratio indicates the percentage of gross profit on net sales. In FY 2016-
2017 the gross profit ratio was 0.44 compared to 0.46 in FY 2015-2016.

Net Profit Ratio: This ratio indicated the percentage of net profit on net sales. In FY 2016-17
the net profit ratio was -0.0096 compared to 0.0532 in F.Y 2015-2016.
Return on equity indicated the ratio of PAT to Equity Share Capital+ Reserves+ Surplus which
was calculated to be -0.023 in the year 2016-17 as compared to 0.1233 for the year 2015-16.

Working capital turnover ratio indicated the ratio of Sales to Working capital which was
calculated to be 3.8961 for the year 2016-17 as compared to 3.7717 for the year 2015-16.

Return on fixed assets ratio was to be calculated as Net Income to Fixed Assets as -0.0289 for
the year 2016-17 as compared to 0.15303 for the year 2015-16.