Task 1: Finding financial information (33 marks)
You are required to find the appropriate financial information in Adidas’s financial statements and calculate the following ratios for the financial years 2018 to 2019, and of 1 of its competitors – Nike:
1. return on capital employed
2. return on sales
3. asset utilisation ratio
4. gross profit margin
5. current ratio and quick ratio
7. interest cover
8. stock days
9. current trade receivables days*
10. current trade payables days*
11. return on equity.
Show all steps needed to calculate your results, including ratio definition and input values.
Task 2: Financial analysis (67 marks) [no more than 2,000 words]
Conduct a financial analysis of Adidas using the ratios calculated in Task 1 and the additional financial information provided in the assessment resources area for Adidas, and Nike (one of Adidas’s main competitors).
Describe what you observe about Adidas’s performance as well as the performance of its competitors. Explain possible causes for differences in performance and discuss implications for Adidas.
In your analysis, you should also discuss whether, according to their financial performance, Adidas should be concerned about Nike.
Your analysis should not be longer than 2,000 words, excluding bibliography.
If you use information that is not included in the financial statements but elsewhere in the company’s annual report (e.g., notes) or in external sources, please cite the exact location and source of this information.
*Note: it is suggested that you use current trade receivables and current trade payables to calculate trade receivables days and trade payables days ratios in annual reports rather than trade and ‘other’ receivables, and trade and ‘other’ payables to be able to compare like with like.
This assessment is not just testing your ability to calculate the different ratios; it is also assessing your understanding of how to source relevant financial information and make considered decisions about whether and how to deploy it. This is reflected in the following allocation of marks for this question:
· 33 marks for the calculations
· 57 marks for the analysis of the financial performance of Adidas, and Nike
· 10 marks to discuss whether Adidas should be concerned about Nike.
Remember to show all your calculations in detail. Tables should be included within the body of the analysis. We recommend you also submit a spreadsheet showing your calculations, as this will help your tutor to give feedback on your calculations.