# Fin 571

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University of phoenix | Interpreting Financial Results | MGMT-571 FINANCE | | Mario Medina | 3/11/2014 | | Financial ratios play a key role in determining how a company is doing financially either for the good or the bad. Financial Ratios can be used internally or externally to determine how financially stable a company is. For this assignment we will use three common ratios to determine how financially stable and how Under Armour is over the last three years. Current Ratio “To calculate the current ratio, we divide current assets by current liabilities. More liquidity is better because it means that the firm has a greater ability, at least in the short term, to make payments” (Parrino, Kidwell, &amp; Bates, 2012).…show more content…
Inventory Turnover=Sales/Inventory * 2011=1,472,684/324,409=4.54 * 2012=1,834,921/319,286=5.75 * 2013=2,332,051/469,006=4.97 Under Armours turnover ratio appears to be in good standing for the type of industry they are in. On average they are turning over there inventory 5 times per year. This makes sense for them because they are a seasonal business and depending on what season they are in, they need to turnover over there inventory for the next season in order to stay up with what is in demand. From 2011 to 2012 they were able to turnover there inventory faster than they did in 2011. But in 2013 there inventory turnover had a decrease by some. Overall UA seems to be steady in their inventory turnover, and they should strive to keep it around 5 times per year in order to keep up with demand of their products and services. Total Debt Ratio “The total debt ratio measures the extent to which the firm finances its assets from sources other than the stockholders. The higher the total debt ratio, the more debt the firm has in its capital structure” (Parrino, Kidwell, &amp; Bates, 2012). Below is a three year breakout of UA’s total debt ratio. Total Debt Ratio=Total Debt/Total Assets * 2011=282,778/919,210=.31 * 2012=340,161/1,157,083=.29 * 2013=524,387/1,577,741=.33 A company’s total debt ratio varies from industry to industry, for UA they have on average a total debt ratio of around .30 or 30%. This means that on average they have 30 % of their