Under Armor Financial Analysis

Posted: August 12th, 2013

Under Armor Financial Analysis




Under Armor Financial Analysis

Performance measurement

The measurement of performance refers to the various dissimilar statistical measures to assess how efficient a company uses its resources to make revenues. Ordinary examples of parameters used to measure performance include operating income, net asset value and earning before interest. It is significant to point out that no single performance measure should be considered independently. Instead, to reach at a realistic position of the performance a company, an analysis must use different combination of measures. The analysis will assess the cash flow from all business activities in 2011 and the balance sheets for 2011 and 2010.

Financial performance

Assessing the financial performance of Under Armour will require a prejudiced measure of how well the company uses the assets amassed from its main form of business, and come up with revenues. The term “financial performance” is also utilized as a universal evaluation of a company’s overall financial wellbeing over a period, and can be applied to evaluate similar companies that operate on the same industry. Without measuring, there is no way that we can realize the trend that the company is taking. The best way to do this evaluation is using financial ratios that are the relationships between two or more financial elements. Through the ratios, a manager can easily determine the level of performance for their company.

Company background

Under Armour is a group of expansive sports, accessories and clothing stores situated in America. The company deals in the supply of a broad variety of sportswear and informal attire with the focus being on technical sportswear that can serve the needs of career athletes. The Under Armour was established in 1996 when it started selling footwear. The international headquarters of the company are situated in Maryland while the European head office is in Amsterdam. Other subsidiary offices are sited in Guangzhou, Denver, Toronto and Hong Kong. Some of the products developed by Under Amour include AllseasonGear, ColdGear, and StreetGear. The Under Amour products are traded worldwide and are used by sportspeople in different sports from young people to professional players. Measuring the financial performance of Under Amour Company will involve assessing the revenues, financial records and other statistics (Douglas, 2012).

Summary Report

Under Armor Company implements an accounting cycle that incorporates several activity series that start with a transaction and conclude with closing the books of account. Primarily, this cycle includes several major steps. The cycle begins at the stage of identifying or recognizing a transaction or an event. This step is followed by the preparation of the source document for the transaction such as an invoice or purchase order. Consequently, an analysis and classification of the transaction is carried out. This part serves to quantify the transaction in terms of money value, that is, cents or dollars. Additionally, identification of the account to be credited or debited also occurs at the third stage of the cycle.

The cycle then proceeds on to the fourth step, and this involves recording the transaction in an appropriate journal entry such as cash receipt, sales journal, purchase journal and others. These kinds of entries and executed in a chronological sense. The journal entries are hence posted to ledger accounts. It is prudent to understand that the Under Armor employs the steps highlighted above through the whole accounting period since the occurrence of the transactions happen in period batches. The rest of the cycle steps explained below are performed when the accounting period concludes. These steps include the preparation of the trial to certify the equality between the debits and credits. At this part of the cycle, no adjustment of the accounts takes place. If any discrepancy between the accounts is identified, action is taken to sight the posting errors, math errors or recording errors. Finally, the company’s accounting cycle ends with the preparation of the balance sheet and the profit and loss account.

Business efficiencies created by solid accounting have to be valued with a view of establishing whether a business, or in this case the company, is enjoying optimum profitability. Since the company is operating in an environment with volatile economic factors, variable costs with frequent fluctuations pose dramatic negative effects on the company’ s product margin. Efficient business performance is dependent on the accuracy of product profitability and cost analysis of raw materials.

Recommendations to the company include focusing on the female market whose sales only earn the company about 25% its entire revenue (Reuters, 2012). The company should look to put more focus on this market and maximize its profitability. The company should also look to expand its global sales. More than 90% of the company’s sales come from distribution channels within North America (Reuters, 2012). Companies such as Nike and Adidas have established their market channels throughout the globe. The company should also look to venture into soccer deals as fashion giants like Puma and Nike have. Making this move would allow the company to strengthen its brand.

For example, Nike in comparison to Under Armor is very much ahead in terms of operating activities, assets, and income revenue. For example, statistics in 2011 stated that Under Armor raked in over 900,000 million dollars in assets compared to Nike’s 15,000 billion. Net income was 90,000 million and approximately 3 billion dollars for both Armor and Nike respectively. If Under Armor Company is to compete with giants like Nike Company, then they have to shift their focus on capitalizing on their opportunities while mitigating their weaknesses at the same time mitigating their weaknesses. The company should look to anticipate and react to changing preferences of consumers. Additionally, it would be a good idea if the company employs critical sale events. This would function well in boosting customer loyalty. Furthermore, an outline of the company’s financial performance exhibited success and the trend are expected to continue if careful implementation is exercised (Reuters, 2012). This is true judging by the company’s 27.8 percent growth in revenue from 2010 to 2011. In the same period, the company’s gross revenue grew.






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