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Memorandum

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Memorandum
Date: December 5, 2012
To: Herbert Hainer, CEO Adidas
From: Team A Consulting Group
Subject: Financial Analysis

Dear Herbert:

Thanks to the firm giving our company the opportunity to review Adidas financial statements and make this analysis report and presented to CEO attention. Using 2011 annual report our consulting team analyzed data provided by accounting department and calculated the following ratios. As Current Ratio we have 1.53 : 1. For Acid-Test (Quick) Ratio we have .73 : 1. As Receivable Turnover we have 7.9 times. As Inventory Turnover we have 3.04 times. The previous ratios relates to Liquidity Ratios. As we mentioned above Current Ratio is 1.53, which is good but should be better if this ratio could be 2:1, which indicates company has good solvency. As we both know a healthy quick ratio should be between 0.5 and 1, where company is good so far with 0.73. Receivable turnover ratio tells us that company collects 1.5 times in a month for its accounts receivable. Inventory turnover tells us the that company’s inventory is sold and replaced in a period of 120 days. The best way to know if the above liquidity ratios are good or not, is by comparing them with competitor’s ratios. According to our principal competitor’s annual report, which is Nike, Adidas manage almost similar ratios besides current ratio 2.9, quick ratio 1.8, and inventory turn over 4.2. By compare them we notice Adidas is experiencing some difficulties to pay off its short-term debts rather than Nike. Profitability ratios composed from Asset Turnover 1.21 time, Profit Margin 5%, Return on Assets 6%, and Return on Common Stock Equity 13.5%. Asset turnover ratio tells us company’s ability to generate earnings, and competitor makes 1.7. In addition, Nike’s Profit Margin is 10.22%, double Adidas percentage. Adidas is also below Nike’s Return on

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