Financial Analysis of Nike and Adidas: Solvency, Liquidity and Financial Flexibility Ratio

Running head: FINANCIAL ANALYSIS
Financial Analysis
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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Solvency Ratio.............................................................................................................................2
Liquidity Ratio.............................................................................................................................5
Financial Flexibility Ratio...........................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
Financial Analysis helps an investors and stakeholders understand and analyze the
various aspects in terms of performance and activities undertaken for increasing the business
operations. The financial analysis of the Nike and Adidas Company was undertaken for a period
of three year time frame where the relevant changes in the financial performance and position of
the companies were taken into consideration. The analysis for the companies have been done on
the basis of solvency ratio, liquidity ratio and financial flexibility ratio of the company. The trend
period taken into consideration is from the time period of 2016-2018. Adidas is a multinational
corporation based in Germany that is operating in the clothes and accessories services. The
company is the largest sportswear manufacturer in world after Nike1. On the other hand, Nike
Inc. is an American Multinational Corporation that is currently into designing, manufacturing,
developing and marketing of various footwear, apparel, equipment, accessories and services2.
Discussion
Solvency Ratio
In terms of solvency the Nike Company is having an adequate coverage of current assets
with respect to the current liabilities of the company but if the same is seen from the trend
analysis comparison the same has been falling consistently for the company in the trend period
for the company3. On the other hand, for the Adidas Company the liquidity ratio has increased
1 "Adidas Financial Statement Analysis." Rstudio-pubs-static.s3.amazonaws.com. N. p., 2019. Web. 14 Sept. 2019.
2 "NIKE, Inc. 2018 Annual Report." Materials.proxyvote.com. N. p., 2019. Web. 14 Sept. 2019
3 "Nike Inc. (NKE) | Financial Analysis And Stock Valuation." Stock Analysis on Net. N. p., 2019. Web. 14 Sept.
2019.

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consistently for the company in the trend period indicating that the company may be taking
several of the initiatives in covering up the current liabilities of the company.
Current Ratio: The current ratio shows the liquidity position of the company by comparing the
current assets coverage over the current liabilities that the company owes. The current ratio for
the Nike Company has been well consistent in accordance with the industry level but the same
has slightly decreased from the trend period 2016-2018 from 2.80 times to 2.51 times4. On the
other hand side the ratio for the Adidas Company has increased slightly from 1.31 times to 1.44
times in the trend period 2016-2018, indicating better coverage of current assets with respect to
current liability5.
Ratio Analysis
Solvency Ratio NIKE ADIDAS
2016 2017 2018 2016 2017 2018
Current Assets
15025
000
16061
000
15134
000
88860
00
86450
00
98130
00
Current Liabilities
53580
00
54740
00
60400
00
67650
00
62910
00
68340
00
Current Ratio (Current
Asset/Current Liabilities) 2.80 2.93 2.51 1.31 1.37 1.44
Quick Ratio: The quick ratio for the Nike has decreased consistently for the company in the
trend period 2016-2018 from 1.90 times to 1.63 times in the trend period6. The quick ratio for
Adidas Company on the other hand, has been comparatively low, but has increased when
compared to Nike. The ratio has been around 0.76 times in 2016 and has slightly increased to
around 0.93 times in the year 2018.
4 "Nike Current Ratio | NKE - Gurufocus.Com." Gurufocus.com. N. p., 2019. Web. 14 Sept. 2019.
Report.adidas-group.com. N. p., 2019. Web. 14 Sept. 2019.
5 "Adidas AG Adr (ADDYY) Dividend History - Dividata." Dividata.com. N. p., 2019. Web. 14 Sept. 2019.
6 Williams, Edward E., and John A. Dobelman. "Financial statement analysis." World Scientific Book Chapters
(2017): 109-169.