Financial Statement Analysis

Select two companies and perform an in-depth financial statement analysis using annual data for the past 5 years. One must be a blue chip company listed in the Dow Jones Industrial Average. Data can be found at and/or

Your discussion and analysis of each company should include:

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Company background
Industry outlook
Analysts’ forecasts
Revenue, price, and income trend analysis
Financial ratio analysis (use the Ratio Analysis Table; note that you will need to complete two charts, one for each company)
Altman’s Z-score calculation for at least three years
Discussion of any ethical concerns about this and explanation of what could be done to improve or promote ethical behavior
Analyze the financial health of each company and make recommendations to Mr. Smith on whether or not each company would be a good buy and why.

Your well-written draft should meet the following requirements:

Be two or three pages in length for the analysis and explanations
Include Excel spreadsheets with computations, using clearly labeled separate worksheets for each analysis (i.e. ratio analysis, trend analysis, Altman’s Z-score, etc.); these spreadsheets should be embedded in the Word document as an appendix after your analysis and explanations
Include a minimum of three credible references.


Sample Answer

Financial Statement Analysis

This essay provides financial statement analysis of two companies, Nike and Under Armour. Both companies operate in the apparel and footwear industry. The essay begins with a brief background of each company before delving into the industry outlook and analysts’ forecasts. Trend analysis section focuses on line items such as revenue and net income. Next, the essay focuses on ration analysis with a focus on liquidity, debt management/leverage, profitability, and efficiency ratios. Moreover, Altman’s Z-score for each company determines the possibility of it going bankrupt. The essay also focuses on ethical concerns and strategies to enhance ethical behavior. Finally, the essay discusses the financial health of both companies, providing recommendations to Mr. Smith regarding the company which is a buy in for him.

Company Background

Nike is a multinational corporation based in the United States (U.S.) whose business operations focus on designing, manufacturing, developing, and selling and marketing apparel, footwear, accessories, equipment, and services worldwide. The company’s headquarters are situated near Beaverton in Oregon. Established in 1964 by Phil Knight, Nike is among the largest sports equipment manufacturers and among the leading suppliers of apparel and athletic shoes (Mahdi, Abbas, Mazar, & George, 2015). Under Armour is also an apparel footwear firm, with its headquarters located in Maryland, U.S. The company pioneered the manufacture of performance-improving sports apparel that could regulate the wearers’ body temperature, enhance their comfort levels, and wick moisture from their bodies. Kevin Plank founded Under Armour in 1996 (Fashionabc, 2022).

Industry Outlook

The sports apparel and footwear industry in the U.S. is characterized by strong competitive rivalry among key competitors like Nike, Under Armour, Eastbay, Adidas, and Russell. The industry has many competitors, and the consumers have low switching costs, which is a threat to all companies that operate within this industry. It has renowned brand-name competitors and small, specialized-use competitors. While the former targets a variety of geographic locations, small competitors focus on a particular geographic region or country.

Analysts’ Forecasts

The sports apparel and footwear industry is projected to achieve its pre-COVID-19 levels in terms of growth due to the focus on industry disruptions, digital leaps, and consumer shifts. Particularly, athleisure is projected to experience tremendous growth, which will be driven by the remote working arrangements (McKinsey & Company, 2022). Consumers have increasingly become health-conscious following the COVID-19 outbreak and are more likely to embrace general fitness and sports, and This will drive the growth of the industry. One of the trends that will continue to shape this industry is the use of social media influencers and celebrity endorsement deals in the sales and marketing of sports apparel and footwear (McKinsey & Company, 2022).


Revenue, Price, and Income Trend Analysis

Trend analysis involved analyzing both companies’ data over a five-year period, starting from 2017 to 2021. It focused on two specific line items of each company’s consolidated statements of income, and the items were revenue and income. Taking 2017 as the base year, Nike’s revenue increased 6%, 14%, 9%, and 30% in 2018, 2019, 2020, and 2022, respectively. Under Armour’s revenue also revealed an upward trend, except in 2020, when it declined by 10%. In general, Nike outperformed Under Armour in terms of revenue growth, given that its revenue increased by 30% versus that of Under Armour which increased by 14% over the five years (See Appendix 2). Nike also demonstrated an upward trend in net income generation over the five years, albeit with a significant decline in net income generated in 2020. However, Under Armour experienced fluctuating net income oscillating between declines and losses.

Financial Ratio Analysis

Figure 1 and Figure 2 depicts liquidity, leverage or debt management, and efficiency ratios for Nike and Under Armour, respectively.

Figure 1: Liquidity, leverage/debt management, and efficiency ratios for Nike, 2017-2021

Figure 2: Liquidity, leverage/debt management, and efficiency ratios for Under Armour, 2017-2021

Liquidity Ratios

Nike’s current ratio declined from 2.93 in 2017 to 2.10 in 2019 before increasing to 2.72 in 2022. Under Amour also demonstrated the same trend, with its current ratio decreasing from 2.20 in 2017 to 1.90 in 2019 and then increasing to 2.30 in 2021.

Leverage/Debt Management Ratios

The leverage ratios are debt-to-assets ratio, debt-to-equity ratio, and debt-to-capital ratio. Nike shows a general upward trend in its debt-to-asset ratio, implying that it reduced its borrowing. The same trend was witnessed with Under Armour, which means this company also reduced its borrowing. Overall, both companies are not at risk of defaulting on their respective loans owing to the fact that the ratios are less than 1.00.

Nike’s debt-to-equity ratio increased from 0.89 in 2017 to 2.89 in 2020 before declining slightly to 1.96 in 2021. Similarly, Under Armour’s debt-to-equity ratio also increased from 0.98 in 2017 to 2.00 in 2020 before falling to 1.39 in 2021. The increase in the ratio shows increasing difficulties for both companies to cover all their respective debts or liabilities.

Efficiency Ratios

Efficiency ratios include asset turnover ratio and inventory turnover ratio. Nike shows a general increase in its asset turnover ratio, while Under Armour shows a general decline in its asset turnover ratio. The inventory turnover ratios for both companies fluctuated over the five-year period, indicating fluctuations in the replacement, sale, or use of their inventories.

Profitability Ratios

Figure 3 and Figure 4 shows fluctuations in net profit margins, gross profit margins, the net return on assets (ROA), and operating profit margins for Nike and Under Armour, respectively.

Figure 3: Profitability ratios for Nike, 2017-2021

Figure 4: Profitability ratios for Under Armour, 2017-2021

Altman’s Z-Score Calculation

Nike’s Altman’s Z-score was 3.97, 2.42, and 2.55 in 2019, 2020, and 2021, respectively. Under Armour’s Altman’s Z-score was 1.55, 1.28, and 2.88 in 2019, 2020, and 2021, respectively. Both companies are less likely to become bankrupt, given that their Z-scores are approximately 3.00 or greater in 2021.

Ethical Concerns

Both companies should focus on using recyclable materials in order to improve their ethical behavior. They should also adopt circular business models, as such models are among the drivers of sustainability (Baier, Rausch, & Wagner, 2020).

Financial Health and Recommendations

In terms of liquidity, Nike is more capable of meeting its short-term financial obligations using its current assets than Under Armour, even though both companies can meet such obligations using only their current assets. With regard to operating efficiency, Nike demonstrated increasing efficiency with which the company deployed its total assets to generate revenue. However, Under Armour demonstrated declining operating efficiency. With regard to debt management, both companies have experienced increasing difficulties in covering their debts. On a positive note, both companies cannot default on any of their liabilities. On the other hand, Nike is more profitable than Under Armour, so it is recommended that Nike be a good buy for Mr. Smith.




Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research6(3), 167-177.

McKinsey & Company. (2022). Sporting goods 2022: New normal is here. Retrieved on August 3, 2022, from

Baier, D., Rausch, T. M., & Wagner, T. F. (2020). The drivers of sustainable apparel and sportswear consumption: a segmented kano perspective. Sustainability12(7), 2788.

Fashionabc. (2022). Under Armour. Retrieved on August 3, 2022, from




Appendix 1: Ratio Analysis

Liquidity Ratios
Financial Year 2021 2020 2019 2018 2017
Current Ratio NKE 2.72 2.48 2.10 2.51 2.93
UA 2.30 2.28 1.90 1.97 2.20
Quick Ratio NKE 2.01 2.46 1.39 1.63 2.01
UA 1.74 25.16 1.27 1.20 1.11
Profitability Ratios
Net Profit Margin NKE 13% 7% 10% 5% 13%
UA 4% -12% 2% -1% -1%
Gross Profit Margin NKE 45% 43% 45% 44% 46%
UA 50% 48% 47% 45% 45%
Net Return on Assets NKE 4.1% 2.3% 4.1% 0.1% 4.7%
UA 2.8% -3.0% 0.5% -0.3% -0.3%
Operating Profit Margin NKE 15% 8% 12% 12% 14%
UA 8.6% -13.7% 4.0% -0.5% 0.6%
Leverage/Debt Management Ratios
Debt-to-Assets Ratio NKE 0.66 0.74 0.62 0.56 0.47
UA 0.58 0.67 0.56 0.52 0.55
Debt-to-Equity Ratio NKE 1.96 2.89 1.62 1.30 0.89
UA 1.39 2.00 1.25 1.10 0.98
Debt-to-Capital Ratio NKE 0.66 0.74 0.62 0.56 0.47
UA 0.58 0.67 0.56 0.52 0.55
Efficiency Ratios
Asset Turnover Ratio NKE 0.32 0.34 0.42 0.40 0.38
UA 0.28 0.25 0.29 0.31 0.33
Inventory Turnover Ratio NKE 0.86 0.81 0.99 0.99 0.96
UA 0.83 0.65 0.73 0.65 0.66





Appendix 2: Trend Analysis

Financial year 2021 2020 2019 2018 2017
NKE ($000,000)            44,538          37,403          39,117           36,397          34,350
Trend % 130% 109% 114% 106% 100%
UA      5,683,466    4,474,667    5,267,132     5,193,185    4,989,244
Trend % 114% 90% 106% 104% 100%
Net Income
NKE              5,727            2,539            4,029              1,933            4,240
Trend % 135% 60% 95% 46% 100%
UA          360,060     (549,177)          92,139         (46,302)       (48,260)
Trend % -746% 1138% -191% 96% 100%

Appendix 3: Altman’s Z-Score for Nike

Financial Year 2021 2020 2019
1.2*working capital/total assets                                0.53                                0.47                                0.44
1.4*retained earnings/total assets                                0.12                             (0.01)                                0.10
3.3*EBIT/total assets                                0.58                                0.30                                0.67
0.6*market value of equity/total liabilities                                0.14                                0.05                                0.10
1.0*sales/total assets                                1.18                                1.61                                2.67
Z-Score                                2.55                                2.42                                3.97



Appendix 4: Altman’s Z-Score for Under Armour

Financial Year 2021 2020 2019
1.2*working capital/total assets                                0.45                                0.43                                0.32
1.4*retained earnings/total assets                                0.29                                0.19                             (0.01)
3.3*EBIT/total assets                                0.26                             (0.32)                                0.14
0.6*market value of equity/total liabilities                                0.75                                0.10                                0.02
1.0*sales/total assets                                1.14                                0.89                                1.09
Z-Score                                2.88                                1.28                                1.55


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