Ratio's

For this assignment I chose to do a financial analysis of Nike. I really enjoy Nike products and thought it would be a good chance to look more into the company and their finances.
The first ratio that I did was the gross margin percentage which was 44.6%. Since Nike is a retail company this shows that they have a stable gross margin so it would be good for their company.
The current ratio is found by taking current assets divided by current liabilities. Nike had current assets of $9.73 billion and current liabilities of $3.28 billion which led to a current ratio of 2.97. Since the general rule of thumb is to shoot for a ratio of at least 2 Nike is in good shape with a current ratio of 2.97. This is good because Nike is able to pay short-term debt.
The Acid-Test ratio at Nike is 2.81. This can be looked at as a good thing because this is a more in-depth measure of the company’s ability to pay debt.
The debt-to-equity ratio is 0.46. This is good because it shows that for every dollar that is provided by Nike’s stockholders, their creditors were providing 46 cents.
The average sales period was 85.68 days. This was found by taking 365 and dividing by the inventory turnover which was found by taking the cost of goods sold and dividing it by the average inventory balance. The inventory turnover was 4.26. For the industry that Nike is in an average sales period of 86 days is reasonable. This is good for the company.
The times interest earned ratio was 4.98. This is good because a times interest earned ratio of 2 or more is generally sufficient to protect long-term creditors.
I was unable to find adequate information to calculate the book value per share but the website where I found the balance sheet and income statement had the book value per share listed at 16.96. The market price was $57.92 so the stock may be overpriced. This could also be good because it often reflects expectations about future earnings.
The earnings per share are $3.73. This is a good indication that investors will have the chance to realize a return and possible make a profit.
I struggled to find the dividends per share information but I was able to find that the dividend yield ratio was 1.71 % and that the dividend payout ratio is of 33. The yield ratio is neither bad nor good because it is low. It is the same for the payout ratio since there is no “right” ratio.
The price earnings ratio is 15.53. The stock is selling for about 15.53 times its current earnings per share.
The return on common stockholders’ equity is 18 %. The return on total assets is 11.94 %. These can both be considered good or bad ratios as they are determined by financial leverage.
In conclusion, if I had money that I could invest I would not be afraid to invest in Nike. They control a large portion of a small market. They compete with two main companies in Adidas and Reebok. There are several brands that are starting to come into the mix but Nike controls the majority of the market. They are a great company with a history of manufacturing the best products. Many of today’s top athletes perform in Nike apparel. Nike is a good company and after computing the financial ratios I am more confident that it is a good investment.