Adidas: When Company's Performance Is Analysed

Topics: Financial ratio, Reebok, Adidas Pages: 1 (288 words) Published: November 18, 2010
When company's performance is analysed, the following indicators are studied- profitability, liquidity, solvency, miscellaneous ratios and some others. Using example of Adidas and Nike, as global leaders in sportswear products, one can conduct these companies' ratio analysis.

Acquisition of Reebok brand by Adidas aimed to stabilize position of number one leader in the market of footwear industry. Analysing ratios of Adidas and Nike, it is interesting to investigate how operations and performance of company changes with changes in its structure.

So, it is surprising how situation had changed for Adidas during the period from 2004 till 2005. Some indicators of company's overall performance had slightly improved, some has slightly dropped. Particularly, return on equity decreased, but return on assets rose, these indicators highlight improvement of company's management and smarter usage of resources.

Overall, the position of Adidas can be described as stable with its unchanging profit margin of 5.9%. Liquidity ratios indicate considerate improvements in company's operations, their increasing efficiency. Quick Ratio of Adidas proves that this group is reliable and better prepared for unexpected events or failures. Nevertheless, Adidas does face some risk connected with its market valuations and investments.

However, the purchase of Reebok had probably significant impact on the performance of company and its indicators. Unfortunately, these operations were not reflected in 2005 ratio analysis report, since the final agreement was finalized only by January of 2006.

It was predicted, that Adidas group should enjoy increase in sales, revenue and income. On the other hand, company will probably face higher long term debt, leading to the decrease of company's liquidity. Efficiency of investments in Reebok remains controversial issue, since its positive contribution to Adidas group is still questionable.
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