Corporate Finance Assignment: PUMA's Financial Performance Analysis

This report provides a comprehensive financial analysis of PUMA, examining its capital structure, dividend policy, and their impact on the company's performance over a three-year period. The analysis includes an overview of PUMA's background, key corporate objectives, and a comparison with competitors like Nike and Adidas. The report delves into PUMA's capital structure, presenting financial data and ratios such as the debt-equity ratio and dividend payout ratio. It also explores various sources of finance, discussing the potential impact of equity shares and debentures. Furthermore, the report identifies and evaluates financial management appraisal techniques, including payback period, internal rate of return, profitability index, and net present value, to aid in effective decision-making. Finally, the report concludes with a discussion of the strengths and weaknesses of the analysis, offering recommendations for future financial strategies. The report uses financial statements, ratios and comparisons to explain the performance of the company and its standing in the market.

Corporate Finance Assignment

Table of Contents
Introduction......................................................................................................................................3
Background......................................................................................................................................3
Dividend policy and capital structure..............................................................................................5
Sources of Finance.........................................................................................................................13
Financial management evaluation (appraisal) techniques.............................................................15
Advantages and disadvantages of Appraisal techniques...............................................................20
Weakness and Strength of the analysis..........................................................................................23
Conclusion.....................................................................................................................................24

Introduction
In this paper, the dividend policy and the capital structure of “PUMA” have been evaluated and
also their effect on the company performance in the last three years has been analyzed in detail.
Financial management and investment management appraisal methods and techniques has also
been identified and evaluated. Different appraisal techniques such as payback period, internal
rate of return, profitability index, and net present value which can help the management in taking
effective decisions has been discussed.
Background
PUMA is a multinational company which manufactures casual and athletic footwear, and
accessories. It was founded in the year 1971 and it’s headquarter is in Germany. After analyzing
the financial report of 2019 it has been analyzed that the operating expenditure of the company
has been increased by almost 17%. The rise is due to higher margin of sales as compared to the
previous year 2018. In the third quarter of 2019 it has been noticed that the trade payables
increased by 722.1 million euro which means that the liabilities has also been increased.
Companies like NIKE and Adidas are the main competitors of PUMA so it has to maintain huge
revenues than its competitors. The Adidas Company in 2018 generated huge revenue of €21.9
billion while the revenue of PUMA was €4.65 billion. The total revenue of NIKE in 2018 was
$36.4 billion. After comparison of PUMA with both of its competitor it can be seen that the
revenue of PUMA is lower due to low sales ratio. However in 2019 the sales of PUMA rose by
almost 16 percent and the net earnings also showed an increase of 29.7 percent. The increase in
the sales ratio was because of strong sales in China, ASIA, and also in America.

The net worth which determines the value of company in the stock market is an essential
elements for shareholders to evaluate whether to invest in the company or not. As per the
financial statement of 2019 of Adidas the net worth was determined as $16.7 billion and the net
worth of PUMA was $4 billion. So it can be verified that the market value of PUMA is less than
its competitors. So strategies should be taken to expand the business by diversification or
expansion so as to increase the market value and also revenue of the organization.

Dividend policy and capital structure
Puma
Capital Structure
As on 31st December
Amount in € million
Particulars 2018 2017 2016 2015 2014
A. Shareholders' Equity
Subscribed capital 38.60 38.60 38.60 38.60 38.60
Non-controlling interest 18.90 31.20 15.30 8.00 23.10
Treasury Stock (28.90) (30.00) (31.40) (31.40) (31.40)
Total Equity Capital (A) 28.60 39.80 22.50 15.20 30.30
B. Reserves
Retained Earnings 1,546.70 1,566.10 1,496.60 1,441.70 1,412.00
Group Reserves 146.80 50.70 203.20 162.50 176.00
Total Reserve (B) 1,693.50 1,616.80 1,699.80 1,604.20 1,588.00
C. Total Equity (A+B) 1,722.10 1,656.60 1,722.30 1,619.40 1,618.30
D. Debt
Non-Current Financial Liabilities 180.70 30.90 16.20 7.20 0.30
Current Financial Liabilities 57.20 94.90 70.20 115.90 51.00
Total Debt (D) 237.90 125.80 86.40 123.10 51.30
Debt-Equity Ratio (D/C) 0.14 0.08 0.05 0.08 0.03
Puma

Comparison of Business Brand Value
As per Forbes.com
Values in million $
Brand Name Rank
Brand Value
(in million $)
Nike 1 36,800.00
Adidas 3 11,200.00
Puma 6 4,000.00
Reebok 10 800.00
Puma
Global Revenue
Yearly Comparison
As per Statista.com
Amount in billion €
Particulars 2018 2017 2016 2015 2014
Nike 31.35 30.57 29.10 27.51 24.99
Adidas 21.91 21.22 18.48 16.92 14.53
Puma 4.65 4.14 3.63 3.93 2.97

Puma
Product Range
Particulars
Team-sport
Running and
training
Basketball
Golf
Motorsport
Sport-style
Licensing
Accessories
Puma
Cash Flow
Yearly Comparison

Amount in € million
Particulars 2018 2017 2016 2015 2014
Gross cash flow 398.00 330.90 182.90 134.50 172.20
Free cash flow 172.90 128.50 49.70 (98.90) 39.90
Closing cash and cash equivalents 463.70 415.00 326.70 338.80 401.50
Puma
Summary of Profitability Statement and Ratios
Yearly Comparison
Amount in € million
SL. No. Particulars 2018 2017 2016 2015 2014
A Net Sales 4,648.30 4,135.90 3,626.70 3,387.40 2,972.00
B Gross Profit 2,249.40 1,954.30 1,656.40 1,540.20 1,385.40
C Operating Expenses 1,928.40 1,725.60 1,544.50 1,460.50 1,276.80
D Operating Profit 337.40 244.60 127.60 96.30 128.00
E Net Profit 229.80 168.00 88.40 61.70 84.80
F Gross Profit margin 48.39% 47.25% 45.67% 45.47% 46.62%
G Operating Expenses (as a % of sales) 41.49% 41.72% 42.59% 43.12% 42.96%
H Operating Profit margin 7.26% 5.91% 3.52% 2.84% 4.31%
I Net Profit margin 4.94% 4.06% 2.44% 1.82% 2.85%
J Earnings per share (€) 12.54 9.09 4.17 2.48 4.29

Puma
Analysis of Financial Ratios
Yearly Comparison
Particulars 2018 2017 2016 2015 2014
1. Net Working Capital
(a) Current Assets 2,192.80 1,884.80 1,765.50 1,684.80 1,682.60
(b) Current Liabilities 1,195.40 1,056.60 894.90 879.90 822.70
Net Working Capital (a-b) 997.40 828.20 870.60 804.90 859.90
2. Current Ratio
(a) Current Assets 2,192.80 1,884.80 1,765.50 1,684.80 1,682.60
(b) Current Liabilities 1,195.40 1,056.60 894.90 879.90 822.70
Current Ratio (a/b) 1.83 1.78 1.97 1.91 2.05
3. Quick Ratio
(a) Current Assets 2,192.80 1,884.80 1,765.50 1,684.80 1,682.60
(b) Inventories 915.10 778.50 718.90 657.00 571.50
(c) Quick Assets (a-b) 1,277.70 1,106.30 1,046.60 1,027.80 1,111.10
(d) Current Liabilities 1,195.40 1,056.60 894.90 879.90 822.70
Quick Ratio (c/d) 1.07 1.05 1.17 1.17 1.35
4. Inventory Turnover Ratio
(a) Sales 4,648.30 4,135.90 3,626.70 3,387.40 2,972.00
(b) Opening Inventories 778.50 718.90 657.00 571.50 521.30
(c) Closing Inventories 915.10 778.50 718.90 657.00 571.50
(d) Average Inventories 846.80 748.70 687.95 614.25 546.40
Inventory Turnover (a/d) 5.49 5.52 5.27 5.51 5.44
5. Asset Turnover Ratio
(a) Sales 4,648.30 4,135.90 3,626.70 3,387.40 2,972.00
(b) Total Assets 3,207.30 2,853.80 2,765.20 2,620.20 2,550.00

Asset Turnover (a/b) 1.45 1.45 1.31 1.29 1.17
6. Gross Profit Margin
(a) Gross Profit 2,249.30 1,954.40 1,656.40 1,540.20 1,385.30
(b) Sales 4,648.30 4,135.90 3,626.70 3,387.40 2,972.00
Gross Profit Ratio [(a/b)x100] 48.39% 47.25% 45.67% 45.47% 46.61%
7. Net Profit Margin
(a) Net Profit 229.60 167.90 88.50 61.70 84.70
(b) Sales 4,648.30 4,135.90 3,626.70 3,387.40 2,972.00
Net Profit Ratio [(a/b)x100] 4.94% 4.06% 2.44% 1.82% 2.85%
8. Return on Equity
(a) Profit after tax 229.60 167.90 88.50 61.70 84.70
(b) Total equity 1,722.10 1,656.60 1,722.30 1,619.40 1,618.30
Return on Equity [(a/b)x100] 13.33% 10.14% 5.14% 3.81% 5.23%
9. Debt-Equity Ratio
(a) Long Term Debts 237.90 125.80 86.40 123.10 51.30
(b) Total equity 1,722.10 1,656.60 1,722.30 1,619.40 1,618.30
Debt-Equity Ratio (a/b) 0.14 0.08 0.05 0.08 0.03
10. Capital Gearing Ratio
(a) Total equity 1,722.10 1,656.60 1,722.30 1,619.40 1,618.30
(b) Long Term Debts 237.90 125.80 86.40 123.10 51.30
Capital Gearing Ratio (a/b) 7.24 13.17 19.93 13.16 31.55
11. Total Investment to Long-term Liabilities
(a) Total Investment - 16.60 16.50 15.20 15.20
(b) Long-term Liabilities 289.80 140.60 148.00 120.90 109.00
Total Investment to Long-term Liabilities 0.00 0.12 0.11 0.13 0.14
12. Ratio of Fixed Assets to Funded Debts
(a) Fixed Assets 294.60 260.10 252.10 232.60 224.00
(b) Total Debts 237.90 125.80 86.40 123.10 51.30
Ratio of Fixed Assets to Funded Debts (a/b) 1.24 2.07 2.92 1.89 4.37
13. Ratio of Current Liabilities to Proprietors' Funds
(a) Current Liabilities 1,195.40 1,056.60 894.90 879.90 822.70
(b) Proprietors' Funds 1,722.10 1,656.60 1,722.30 1,619.40 1,618.30
Current Liabilities to Proprietors' Funds (a/b) 0.69 0.64 0.52 0.54 0.51

14. Ratio of Reserves to Equity Capital
(a) Total Reserves 1,693.50 1,616.80 1,699.80 1,604.20 1,588.00
(b) Total Equity Capital 28.60 39.80 22.50 15.20 30.30
Ratio of Reserves to Equity Capital 59.21 40.62 75.55 105.54 52.41
15. Dividend Payout Ratio
(a) Dividend per share 3.50 12.50 0.75 0.50 0.50
(b) Earnings per share 12.54 9.09 4.17 2.48 4.29
Dividend Payout Ratio 27.91%
137.51
% 17.99% 20.16% 11.66%
Puma
Statement of Financial Position
Yearly Comparison
Particulars 2018 2017 2016 2015 2014
A. Equity and Capital
Share Capital 38.60 38.60 38.60 38.60 38.60
Reserves 1,693.50 1,616.80 1,699.80 1,604.20 1,588.00
Non-controlling interests 18.90 31.20 15.30 8.00 23.10
Treasury stock (28.90) (30.00) (31.40) (31.40) (31.40)
Total (A) 1,722.10 1,656.60 1,722.30 1,619.40 1,618.30
B. Non-current Liabilities
Provision on pensions 28.90 29.70 31.60 23.80 26.00
Liabilities towards acquisitions 3.30 4.80 5.00 - 2.50
Deferred tax liabilities 47.70 37.60 63.10 64.20 54.60
Other non-current provisions 26.30 34.60 29.80 23.50 23.10
Other non-current financial liabilities 180.70 30.90 16.20 7.20 0.30
Other non-current liabilities 2.90 3.00 2.30 2.20 2.50
Total (B) 289.80 140.60 148.00 120.90 109.00
C. Current Liabilities
Current financial liabilities 20.50 29.00 25.30 14.00 19.80
Trade and other payables 705.30 646.10 580.60 519.70 515.20
Liabilities towards income tax 68.00 54.70 41.40 49.70 58.80
Liabilities towards acquisitions - - - 3.00 0.50
Other current provisions 39.60 86.20 56.00 52.70 69.50
Other current financial liabilities 57.20 94.90 70.00 115.90 51.00

Other current liabilities 304.80 145.70 121.60 124.90 107.90
Total (C) 1,195.40 1,056.60 894.90 879.90 822.70
Total Equity and Liabilities (A+B+C) 3,207.30 2,853.80 2,765.20 2,620.20 2,550.00
D. Non-current Assets
Property, plant and equipment 294.60 260.10 252.10 232.60 224.00
Intangible assets 437.50 412.90 423.10 403.30 391.40
Investments in associates - 16.60 16.50 15.20 15.20
Deferred tax assets 207.60 207.90 229.50 219.80 178.80
Other non-current financial assets 65.40 51.70 59.80 39.30 34.60
Other non-current assets 9.40 19.80 18.70 25.20 23.40
Total (D) 1,014.50 969.00 999.70 935.40 867.40
E. Current Assets
Inventories 915.10 778.50 718.90 657.00 571.50
Trade and other receivables 553.70 503.70 499.20 483.10 449.20
Receivables towards income tax 33.90 26.80 37.40 50.50 75.00
Cash and cash equivalents 463.70 415.00 326.70 338.80 401.50
Other current financial assets 111.20 66.70 114.10 76.80 93.60
Other current assets 115.20 94.10 69.20 78.60 91.80
Total (E) 2,192.80 1,884.80 1,765.50 1,684.80 1,682.60
Total Assets (D+E) 3,207.30 2,853.80 2,765.20 2,620.20 2,550.00
Puma
Statement of Profit or Loss
Amount in million €
Yearly Comparison
Particulars 2018 2017 2016 2015 2014
Net Sales 4,648.30 4,135.90 3,626.70 3,387.40 2,972.00
Less: Cost of sales (2,399.00) (2,181.50) (1,970.30) (1,847.20) (1,586.70)
Gross Profit 2,249.30 1,954.40 1,656.40 1,540.20 1,385.30
Add: Commission and Royalty income 16.30 15.80 15.70 16.50 19.40
Less: Operating Expenses (1,928.40) (1,725.60) (1,544.40) (1,460.50) (1,276.80)
Operating Profit 337.20 244.60 127.70 96.20 127.90
Add: Profit from associate segments (1.50) 1.60 1.20 1.00 1.30

Add: Interest Income 11.60 10.30 10.50 11.20 4.80
Less: Interest Expenses (34.10) (25.30) (20.40) (23.40) (12.30)
Profit before deducting tax 313.20 231.20 119.00 85.00 121.70
Less: Tax (83.60) (63.30) (30.50) (23.30) (37.00)
Profit after deducting tax 229.60 167.90 88.50 61.70 84.70
Less: Profit attributable to Non-Controlling Interests (42.40) (32.20) (26.00) (24.60) (20.80)
Profit attributable to the Parent 187.20 135.70 62.50 37.10 63.90
Weighted average no. of common shares outstanding :
Basic (in millions) 14.947 14.943 14.940 14.940 14.940
Diluted (in millions) 14.947 14.943 14.940 14.940 14.940
Basic Earnings Per Share 12.54 9.09 4.17 2.48 4.29
Diluted Earnings Per Share 12.54 9.09 4.17 2.48 4.29
Sources of Finance
There are various method to raise long term finance for a company such as equity shares,
preference shares, bonds, debenture, bank finance, convertible loan, stock etc.,
Equity shares- if any company raise finance by issuing equity then the firms profitability will
not be impacted by the equity rather the holdings of the existing shareholders get diluted. The
holdings are diluted as the net income is distributed among huge number of shareholders.
According to Raposo and Lehmann (2019, p-51), risk is also shared by all the shareholders and
the new shareholders at the time of liquidation will not be given preferential rights.
Debenture- the management of PUMA can also manage the loan of 50 million dollar by issuing
long term debenture. According to Alani and Apata (2016, p-242), the interest of the debenture

will not be diluted but the cash flow and the net income of firm will be reduced by the payment
of interest amount. Though the debt holders will get lower interest than the equity shareholders
but the debenture holders will be paid regular interest and redemption amount. Debt holders do
not have any right to vote but the equity holders ate given the right to vote at the meeting. They
will receive the liquidation amount prior to preference and equity shareholders
Preference shareholders- the voting rights of the preference shareholders are not diluted by the
issuance of preference shares. The shareholders get regular and fixed percentage of dividends.
The other name of this kind of finance is hybrid finance. According to Acheson et al. (2016, p-
725), preference shares are not effective for tax savings and at winding up they are paid after
debenture holders and preferential creditors but before equity shares.
Bond- when the rate of interest increases the prices of bonds fall. The bondholder will receive
fixed percentage of return from the organization. According to Chang et al. (2017, p-90), the
bond which has a high credit rating is safer for the bondholder and is less risky to invest. The
company issue bonds because it is cheaper than any other sources.
Bank loan- it is less expensive than preference and equity. According to Carbo‐Valverde et al.
(2016, p-113), if the company has raised any loan on variable interest rate then there is a risk of
increasing rate. Firm have to pay a larger amount of interest if rate changes or increases. But in
case of fixed percentage of interest the firm will need to pay a fixed sum of amount.

Financial management evaluation (appraisal) techniques
Investment appraisal methods Profitability Index (PI) - it signifies the relationship between the return and cost
of a project. The projects are ranked as per the prescribed formula of PI.
According to Cuthbert and Magni (2016, p-130), an index which a ratio of 1.0
will generally be accepted by the management. The estimated capital in flow is
divided by the estimated capital outflow to compute the PI. The initial investment
and the discounting value of inflows are used for the calculation.
Calculation of Profitability Index (PI)
Particulars Amount in
€ millions
Present Value of Cash Inflows (A) 8,358.00
Initial Cash Outflow (B) 1,500.00
Profitability Index (A/B) 5.57
 Net present value- it is a known method which is used to compute the present
value of future cash inflows accrued from any project of organization. The initial
investment is also included in the cash flows. This method is mostly used by
organization to take relevant decisions as to which projects are generating higher
profit and which should be considered. According to Rossi (2015, p-43), present
value is determined by considering the discounting factor. The terminal value of

the last year inflow is also discounted. The investment or proposal should only be
accepted when NPV is higher than zero and the project should be rejected when
NPV is lower than zero. While calculating NPV the time value is to be
considered.
Puma
Computation of Net Present Value
Year
Estimated
Cash Flows
(Amount in €
millions)
Present
Value
Factor
@10%
Present Value
of Estimated
Cash Flows
(Amount in €
millions)
1 417.90 1.1000 0.9091 379.91
2 438.80 1.2100 0.8264 362.64
3 460.73 1.3310 0.7513 346.16
4 483.77 1.4641 0.6830 330.42
5 507.96 1.6105 0.6209 315.40
Terminal Value 10,667.16 1.6105 0.6209 6,623.47
Present Value of Cash Flows: 8,358.00
Less: Initial investment (assumed) 1,500.00
Net Present Value 6,858.00
Initial investment of 1500 million euros has been assumed. The growth rate and
discounting factor of 5% and 10% has also been assumed.

Calculation of Estimated Cash Flow
(Amount in € millions)
Yea
r
Growth
Rate @5%
(assumed)
Estimated
Cash Flow
1 398.00 1.05 417.90
2 417.90 1.05 438.80
3 438.80 1.05 460.73

4 460.73 1.05 483.77
5 483.77 1.05 507.96
Calculation of Terminal Value of the 5th Year
Particulars Amount in
€ millions
Estimated Free Cash Flow of the 5th Year 507.96
Add: Growth @5% (assumed) 25.40
Estimated Free Cash Flow of the 6th Year 533.36
Divided by Discount Rate minus Growth Rate 5%
Discount Rate @10%
Growth Rate @5%
Terminal Value of the 5th Year 10,667.16

Payback period technique- the time taken by the company to recover the initial
investment is known as payback period. When the investment touches the breakeven point the
amount of investment invested is realized. The concept of payback period is generally applied in
capital and financing budgeting. According to Su et al. (2018, p-11), corporate analyst uses
payback concept to evaluate the highest profitable project among the portfolio selected by the
analyst. In this method there is no use of time value concept. It is used mostly by solar panel
Company to analyze the return on its technology. The opportunity cost is not included while
computing the payback period.
The investments look more attractive when the payback periods are shorter while the paybacks
period which are longer are less attractive as per the view point of investor.

Calculation of Payback Period & Discounted Payback Period
Yea
r
Estimated Cash
Flows
(Amount in €
millions)
Present Value
of Estimated
Cash Flows
(Amount in €
millions)
Cumulative
Cash
Inflows
Cumulative
PV
of
Cash Inflows
1 417.90 379.91 417.90 379.91
2 438.80 362.64 856.70 742.55
3 460.73 346.16 1,317.43 1,088.71
4 483.77 330.42 1,801.20 1,419.13
5 507.96 315.40 2,309.16 1,734.53
Payback Period (PBP) = 3+ (1500-1317.43)/483.77
= 3+ 182.57/483.77
= 3+ 0.38
=3.38 years
Discounted Payback Period (DPBP) = 4+ (1500-1419.13)/315.40
= 4+ 80.87/315.40
= 4+ 0.26
= 4.26 years
Internal rate of return (IRR) - this method is used to compute the profitability earned from the
potential investments. The discounting rate is applied in cash flows to make the NPV zero. The
IRR formula is same as the NPV formula. According to Lane and Rosewall (2015, p-1), present
values of all the future inflows will be equal to initial net investment. When the cost of capital

(ke) is less than the IRR, the project is accepted. It is also called as economic return expected by
the company. A hit and trial method is applied to calculated the appropriate percentage of IRR.
Puma
Computation of Internal Rate of Return (IRR)
Year
Estimated
Cash Flows
(Amount in
€ millions)
Present
Value
Factor
@64%
Present
Value
of
Estimated
Cash
Flows
(Amount
in €
millions)
Present
Value
Factor
@65%
Present
Value
of
Estimated
Cash
Flows
(Amount
in €
millions)
1 417.90 1.6400 0.6098 254.82 1.6500 0.6061 253.27
2 438.80 2.6896 0.3718 163.15 2.7225 0.3673 161.17
3 460.73 4.4109 0.2267 104.45 4.4921 0.2226 102.56
4 483.77 7.2339 0.1382 66.88 7.4120 0.1349 65.27
5 507.96 11.8637 0.0843 42.82 12.2298 0.0818 41.53
Terminal Value 10,667.16 0.0843 899.14 0.0818 872.23
PV of Cash Inflow 1,531.25 1,496.04
Less: Initial Investment 1,500.00 1,500.00
NPV 31.25 (3.96)
IRR = 64+ [31.25/ (31.25+3.96)] x (65-64)
= 64+ (31.25/35.21) x1
= 64+ 0.89
= 64.89%
Assumption: Weighted average cost of capital (WACC) has been assumed to be 10% as
sufficient data is not available to compute WACC.

Accounting rate of return (ARR) - it is the return which is expected on the initial investment.
Calculation of Accounting Rate of Return (ARR)
Particulars Amount in
€ millions
Net Profit of 2018 229.80
2017 168.00
2016 88.40
2015 61.70
2014 84.80
Total Profit of last 5 years 632.70
Average Profit of last 5 years
(A) 126.54
Initial Investment (B) 1,500.00
ARR (A/B) 8.44%
Advantages and disadvantages of Appraisal techniques
IRR
Advantages Disadvantages

In all the cash flows the time
value are considered and equal
weights are given to the cash
flows.
While calculating the IRR the
size of the various projects are
ignored

Various projects are compared
easily with the help of IRR
Future costs are also ignored
while computing the IRR rate.

IRR technique does not
consider any hurdle rate which
helps to eradicate the risk of
The assumptions are taken that
the cash flows are reinvested

determining any wrong rate using the same IRR rate.
WACC
Advantages Disadvantages
inter firm comparison can be
done easily with the use of
WACC
It is very difficult to compute
the cost of equity
It also helps in valuation of
any firm
Assumption has to be taken
the WACC rate are constant
while valuing any company
It assist the finance analyst as
to whether reject or accept any
project
With the introduction of debt
amount in the capital structure
WACC will be reduce
NPV
Advantages Disadvantages
The pattern of cash flow is
conventional
Estimation related to
opportunity cost are
considered
Reinvestment assumption is The sunk cost are ignored in

taken while evaluating NPV of
any firm
this method
Decision related to acceptance
or rejection of the plan or
project can be taken easily by
applying the NPV technique
The ROE and EPS will not be
boosted by applying this
method
Payback period
Advantages Disadvantages
Simple to understand and easy
to calculate
Time value is not considered
Effective method in case of
any uncertainty
It does not cover each and
every cash flows of any entity
In case of liquidity problem
this method is preferred
Profitability are ignored and
are nit realistic
Weakness and Strength of the analysis
Strength- Internal factors and strength of PUMA are the main factors that enable the company to
improve its overall performance. An internal factor assists the business to compete with other
multinational sports companies such as NIKE and ADIDAS. The factors enumerated below are
the main strength of PUMA:
 Producing innovative products

 Large sales network and distributional channels
 Huge number of supply chain
 Supportive and strong brands
Weaknesses: there are different factors which are responsible for the weaknesses of the
organization such as:
 Low percentage of diversification of the brands
 Imitability of sports products
These weaknesses should be overcome by the company so that they does not reduce the income
and revenue of the organization
Strength of this paper is that it includes the whole background of PUMA which indicates
the issues and weakness related to revenue, profits, and operating expenses. Different methods of
capital budgeting which are relevant for effective decision has been examined effectively.
The assignment was quite interesting. The word count was limited so all the micro level factors
of the enterprise has not been covered.
Conclusion
After examining the investment appraisal tools it has been found that each and every technique is
important for the management to take relevant decision on any project. Management can apply
all the technique to select the appropriate project. It has also been studied that equity shares are
much riskier as compared to any other financing source. Investor can get a fixed installment of

interest amount even at the time of loss. Preference shareholders will not receive any interest
amount when the company incurs any loss. They are not bound to receive the interest but the
debt holders are bound by the company to receive the amount.

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