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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Comparative Analysis: Under Armour, Inc., versus Columbia Sportswear

Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com.

Required:

Calculate Under Armour’s and Columbia’s operating margin for 2015 and 2016. ( Note: Round answers to two decimal places.) Comment on these measures assuming the industry average is around 7.6%.

To determine

Concept introduction:

Profitability ratios:

Sales is very important for any business and a company’s growth and its future is determined by the sales revenue it has generated. Therefore analysts measure the return the company is earning on sales through some ratios and these are called as profitability ratios. The three important profitability ratios are gross profit margin ratio, operating margin ratio and net profit margin ratio.

Calculate Operating margin for 2015 and 2016 of Under Armour and Columbia Sportswear. Comment these measures as against assuming industry average as 7.6%.

Explanation

The net sales and operating income of Under Armour has been taken from the Cengagebrain.com website. The net sales of Under Armour for 2015 and 2016 is 3963313000 and 4825335000 respectively. The operating income of Under Armour for 2015 and 2016 is 408547000 and 417471000 respectively. Now the Operating margin is calculated using the following formula:

Operating margin for 2015

= Operating income / Net sales

= 408547000 / 3963313000 = 10.31%

Operating margin for 2016

= Net income / Net sales

= 417471000 / 4825335000 = 8.65%

The net sales and operating income of Columbia Sportswear has been taken from the Cengagebrain.com website. The net sales of Columbia Sportswear for 2015 and 2016 is 2326180000 and 2377045000 respectively...

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