Trend Analysis

Discuss about the Financial Statement Of The Puma Plc And Adidas Plc.

Financial statement analysis is a process which contains the information about the financial transaction, performance, financial changes and the financial position of an organization. Financial statement analysis collects the information about the financial situation of an organization by evaluating the financial statements of an organization over a period of time. Financial statement analysis process involves various techniques which assists the analyst to identify the performance of the company quickly. Financial statement analysis could be used by internal stakeholders and the external stakeholders of the company to evaluate the financial situation of the company and make better decision about the company.

In the report, financial statement of the PUMA plc and ADIDAS plc has been evaluated on the basis of their last 3 years financial statement. The study has been done on both the companies to evaluate their financial performance and offer a base to the senior executives about the sustainability and profitability position of an organization.

Puma is a German established company which is operating its business at international level. The company designs and manufactures the casual footwear, athletic, accessories, apparel etc. Headquarter of the company is in Herzogenaurach, Bavaria, Germany. The company is the third largest company in the world in concern of sportswear manufacturing. In 1948, the company has been founded by Rudolf Dassler. In 1924, Rudolf and Dassler have founded a company (Dassler brother shoe factory) and in 1948, both the brothers have split and formed two new companies puma and Adidas (Home, 2018). Currently, 11787 people are employed by the company and the company is offering its products and services in more than 120 countries.

Adidas is also a German established company which is operating its business at international level. The company designs and manufactures the same products, casual footwear, athletic, accessories, apparel etc. Headquarter of the company is in Herzogenaurach, Bavaria, Germany. The company is the second largest company in the world in concern of sportswear manufacturing after Nike. As stated above, in 1948, both brothers, Rudolf and Dassler have split and formed two new companies puma and Adidas. Currently, 53,731 people are employed by the company and the company is offering its products and services in more than 128 countries (Home, 2018).

Financial statement of both the companies has been evaluated to evaluate the profitability and sustainability position of the companies. Financial statement analysis process has been conducted on the basis of trend analysis, vertical analysis and the ratio analysis.  Following is the analysis over financial statement of both the companies:

Vertical Analysis

Trend analysis is a process which evaluates the future performance and position of an organization on the basis of historical data of the company. This process explains that what will happen with the company in next year. Trend analysis process evaluation has been done on both the companies to identify their future performance.

Trend analysis study on Puma Plc explains that the Revenues of the company have been enhanced by 7.09% and 14.03% from 2015 in 2016 and 2017. However, the gross profit amount of the company ha been enhanced by 7.6% and 17.92% in 2016 and 2017. The overall performance of the company explains that the net income of the company has been lowered in 2016 and it has been enhanced in 2017 by -3440.54% and 155.02% respectively (Annual report, 2017). On the basis of this evaluation, it has been recognized that the performance of the company in terms of profitability and operating income has been better.

The trend analysis evaluation explains that the operating cost has affected the operating margin and net profit margin of the company in 2016. However, the company has reduced the operating cost as well as the other expenses have also been controlled by the company to manage the performance. The future prediction explains that the performance of the company would be better from 2017 in 2018.         

Trend analysis study on Adidas Plc explains that the Revenues of the company have been enhanced by 14.05% and 9.99% from 2015 in 2016 and 2017. Further, the gross profit amount of the company has been enhanced by 14.84% and 14.13% in 2016 and 2017. This trend analysis figure explains that the performance of the company has been enhanced in 2017 in terms of gross profit margin. Further, the net profit margin explains that the net profit of the company has been enhanced by 60.41% and 7.87% in 2016 and 2017 (Annual report, 2017). On the basis of this evaluation, it has been recognized that the performance of the company in terms of profitability and operating income has been better. The company is enjoying the rapid changes into the net profit.

The trend analysis evaluation explains that the depreciation and amortization expenses of the company have affected the net profit margin of the company in 2017. However, the overall performance of the company is quite competitive and explains about good financial position of the company. The future prediction explains that the performance of the company would be better from 2017 in 2018.

Ratio Analysis

However, according to the analysis over both the companies, Puma plc and Adidas plc, it has been recognized that the performance of both the companies are quite competitive. Both the companies explain about the rapid positive changes into the financial performance of the company.

Vertical analysis is a process of financial statement analysis which evaluates the each of the financial performance and position categories on the basis of top 3 categories which are total revenue, total assets and total liability and total stockholder’s equity of an organization. This process explains about the financial performance, financial position and financial situation of an organization in comparison with the other company in the same industry.

Puma plc:

Vertical analysis study on Puma Plc explains that the gross profit of the company was45.47%, 45.69% and 47.24% in 2015, 2016 and 2017. It explains that the gross profit margin of the company is continuously enhancing. Further, the EBITDA of the company is 0.41%, 0.36% and 0.44% in 2015, 2016 and 2017. Further, the net income of the company has been 1.09%, 1.71% and 3.29% in last 3 years. The overall performance of the company explains that the overall performance of the company explains about the rapid positive changes. The increment rate was lower in 2016 but it has been enhanced in 2017 (Annual report, 2015). On the basis of this evaluation, it has been recognized that the performance of the company in terms of profitability and operating income has been better.

The vertical analysis evaluation explains that the general and administration cost has affected the operating margin and net profit margin of the company in 2016. However, the company has reduced the operating cost as well as the other expenses have also been controlled by the company to manage the performance.

Adidas plc:

Vertical analysis study on Adidas Plc explains that the gross profit of the company was 48.28%, 48.62% and 50.45% in 2015, 2016 and 2017. It explains that the gross profit margin of the company is continuously enhancing. Further, the EBITDA of the company is 0.38%, 0.36% and 0.29% in 2015, 2016 and 2017. Further, the net income of the company has been 3.75%, 5.27% and 5.17% in last 3 years. The overall performance of the company explains that the overall performance of the company explains about the rapid positive changes (Annual report, 2016). The increment rate was lower in 2017 but the overall performance of the company is quite competitive. On the basis of this evaluation, it has been recognized that the performance of the company in terms of profitability and operating income has been better.

Puma plc

The vertical analysis evaluation explains that the operating cost has affected the operating margin and net profit margin of the company in 2017. However, the overall performance of the company is quite competitive.

Thus, according to the analysis over both the companies, Puma plc and Adidas plc, it has been recognized that the performance of both the companies are quite competitive. Both the companies explain about the rapid positive changes into the financial performance of the company. The comparative study explains that the performance of Adidas is way better than performance of Puma plc. However, the strategies and policies of Puma plc are also competitive.

Ratio analysis is a process of financial statement analysis which evaluates the each of the financial performance and position categories. This process explains about the various position of an organization such as liquidity position, profitability position, capital structure position, investment position, efficiency position etc. This process explains about the financial performance, financial position and financial situation of an organization. Ratio analysis study of both the companies is as follows:

Puma plc:

Ratio analysis study on financial statement of Puma plc is as follows:

Return on equity:

Return on equity ratio explains about the total profit of an organization in context with the total equity of an organization. On the basis of return on equity of the organization, the performance of the company has been enhanced from 2.30% to 8.16% in 2017. It explains that the position of the company is quite competitive.

Return on asset:

Return on asset is a profitability ratio which explains about the total profit of an organization in context with the total assets of an organization. The ratio of return on assets of the organization explains that the performance of the company has been enhanced from 1.41% to 4.84% in 2017 (Annual report, 2016). It explains that the profitability position of the company has been better.

Gross profit margin:

Gross profit margin ratio explains about the total gross profit of an organization in context with the total sales revenue of an organization. According to the calculations of gross profit margin of the organization, the performance of the company has been enhanced from 45.47% to 47.24% in 2017. It explains that the position of the company is quite competitive.

EBITDA margin:

EBITDA ratio briefs that the profitability position of the company express about the continuous increment. The EBITDA margin of the company has been higher than the performance of EBITDA expenses of 2016. These changes express that the with the changes into the sales, the expenses have also been enhanced but the increment rate of 2017 is quite higher.

Adidas plc

Net profit margin:

Net profit margin ratio explains about the total net profit of an organization in context with the total sales revenue of an organization. According to the calculations of net profit margin of the organization, the performance of the company has been enhanced from 1.09% to 1.71% in 2017 (Annual report, 2015). It explains that the position of the company is quite competitive.

Asset turnover:

Asset turnover ratio explains about the total revenue of the organization on the basis of total assets, It explains that how the resources of the company has enhanced the sales revenue of the company. the asset turnover ratio explains that the position of the company has been better from 1.29 to 1.47 in 2017 from 2015.

Current asset turnover:

Further, the capital asset turnover of the company explains that the turnover ratio of the company has been enhanced and explains that the working capital of the company is quickly turned by the comapny in context with the total assets of the company. The current asset turnover of the company has been enhanced to 2.01 to 2.27 in 2017. It explains about the better position of the company. 

Working capital turnover:

Working capital turnover of the organization explains that the performance of the company has been better in 2017. Now the less working capital is required by the company to manage the performance in 2017 than 2015 (Annual report, 2016).

Trade receivable turnover:

Trade receivable turnover explains about the lesser days in 2017 in context with the 2016. It explains that the less working capital would be required by the company to manage the performance than 2016.

Trade payable turnover:

Trade payable turnover explains about the average days in 2017 in context with the 2016 and 2015. It explains that the performance of the company is quite competitive and the daily operations could be handled by the company in less working capital (Annual report, 2017).

Inventory turnover:

Further, inventory turnover explains about the less turnover days in 2017 in context with the 2016 and 2015. It explains that the less working capital would be required by the company to manage the daily operations of the company.

PPE turnover:

PPE turnover of the company explains that the PPE level of the company has been enhanced by the company from 2015 in 2017 to manage the operations and the revenue of the company.

Current ratio is a liquidity ratio which explains that the company has reduced the level of current assets in context with the current liabilities to manage the performance and the high cash conversion cycle of the company.

Conclusion

Quick ratio:

Further, quick ratio is also a liquidity ratio which explains that the company has enhanced the level of quick assets in context with the current liabilities to manage the performance and the short term debt obligation of the company.

Leverage:

Leverage performance of the company explains about the total assets and equity position of the company. On the basis of the calculations, it has been found that the performance of the company has been better in 2017 (Annual report, 2017).  

Debt equity ratio:

Debt equity ratio explains that the company has enhanced the level of debt to manage the optimal capital structure in 2017. It explains about the better position of the company.

ROE breakdown:

Lastly, the ROE breakdown has been calculated and it has been found that the capital performance of the company has been better in 2017.

Following is the ratio analysis study of the company:

Return on equity:

On the basis of calculations of return on equity of the organization, the performance of the company has been enhanced from 11.19% to 16.76% in 2017. It explains that the position of the company is quite competitive.

Return on asset:

The ratio of return on assets of the organization explains that the performance of the company has been enhanced from 4.75% to 7.39% in 2017. It explains that the profitability position of the company has been better.

Gross profit margin:

According to the calculations of gross profit margin of the organization, the performance of the company has been enhanced from 48.28% to 50.45% in 2017. It explains that the position of the company is quite competitive.

EBITDA margin:

The EBITDA margin of the company has been higher than the performance of EBITDA expenses of 2016 (Annual report, 2016). These changes express that with the changes into the sales, the expenses have also been enhanced but the increment rate of 2017 is quite higher.

Net profit margin:

According to the calculations of net profit margin of the organization, the performance of the company has been enhanced from 3.75% to 5.17% in 2017. It explains that the position of the company is quite competitive.

Asset turnover:

The asset turnover ratio explains that the position of the company has been better from 1.27 to 1.43 in 2017 from 2015. It explains that the asset of the company s changing rapidly (Annual report, 2015).

Current asset turnover:

Further, the current asset turnover of the company has been enhanced to 2.26 to 2.42 in 2017. It explains about the better position of the company. 

Working capital turnover:

Working capital turnover of the organization explains that the performance of the company has been better in 2017. Now the less working capital is required by the company to manage the performance in 2017 than 2015.

Trade receivable turnover:

Trade receivable turnover explains about the lesser days in 2017 in context with the 2016. It explains that the less working capital would be required by the company to manage the performance than 2016 (Annual report, 2017).

Trade payable turnover:

Trade payable turnover explains about the lesser days in 2017 in context with the 2016 and 2015. It explains that the for managing the daily operations of the organization, high working capital is required by the company.

Inventory turnover:

Further, inventory turnover explains about the less turnover days in 2017 in context with the 2016 and 2015. It explains that the less working capital would be required by the company to manage the daily operations of the company.

PPE turnover:

PPE turnover of the company explains that the PPE level of the company has been enhanced by the company from 2015 in 2017 to manage the operations and the revenue of the company (Annual report, 2015).

Current ratio:

Current ratio is a liquidity ratio which explains that the company has reduced the level of current assets in context with the current liabilities to manage the performance and the high cash conversion cycle of the company.

Quick ratio:

Further, quick ratio is also a liquidity ratio which explains that the company has enhanced the level of quick assets in context with the current liabilities to manage the performance and the short term debt obligation of the company.

Leverage:

Leverage performance of the company explains about the total assets and equity position of the company. On the basis of the calculations, it has been found that the performance of the company has been better in 2017 (Annual report, 2016).  

Debt equity ratio:

Debt equity ratio explains that the company has enhanced the level of debt to manage the optimal capital structure in 2017. It explains about the better position of the company.

ROE breakdown:

Lastly, the ROE breakdown has been calculated and it has been found that the capital performance of the company has been better in 2017.

On the basis of the above study on the Puma and Adidas, it has been found that both the companies are operating their business in a better manner. The trend analysis study express that the future performance of both the companies would be more competitive. However, the trend analysis express that the performance of Adidas is way better than the Puma plc. Further, the study has been done on the ratio analysis and vertical analysis and it has been found that the performance of both the companies is quite competitive and it would offer huge return to the company. The sustainability and the profitability position of both the companies are quite better and it would offer huge return to its investors.

References:

Annual report. (2015). Puma plc. (Online). Available at: https://annual-report-2015.puma.com/en/downloads/ (Accessed 13 May 2018).

Annual report. (2016). Adidas plc. (Online). Available at: https://www.adidas-group.com/media/filer_public/a3/fb/a3fb7068-c556-4a24-8eea-cc00951a1061/2016_eng_gb.pdf (Accessed 13 May 2018).

Annual report. (2016). Puma plc. (Online). Available at: https://annual-report-2016.puma.com/en/downloads/ (Accessed 13 May 2018).

Annual report. (2017). Adidas plc. (Online). Available at: https://report.adidas-group.com/ (Accessed 13 May 2018).

Annual report. (2017). Puma plc. (Online). Available at: https://annual-report-2017.puma.com/en/downloads/ (Accessed 13 May 2018).

Home. (2017). Adidas plc. (Online). Available at: https://www.adidas.co.in/ (Accessed 13 May 2018).

Home. (2018). Puma plc. (Online). Available at: https://www.pumaenergy.com/ (Accessed 13 May 2018).