Question

Choose a company to write a comprehensive report
Component
a. Firms’ business model (i.e. business concept and strategy)
b. How well firms utilise their assets
c. Firms’ ability to manage short-term financial obligations
d. Firms’ ability to manage long-term financial obligations
e. How well firms generate profits

Answer 1

Company chosen is Nike.

A) Firm's business model-

The concept of Nike is to fill gap in sports shoe market. It delivers sports shoes which enhances running of players by reducing risk of injury leading to accomplish set goals. While, business strategy of Nike is generic competitive strategy of differentiation that helps company to enter new markets on the basis of product attractiveness. Thus, profitability is accomplished through this strategy.

B) How well firms utilise their assets-

For assessing asset utilisation of Nike, Return on Assets (ROA) can be used. Firm has ROA of 8.44 % in 2018 which increased to 17.42 % in May 2019. This shows enterprise is using its assets fully to generate profits.

C) Firms’ ability to manage short-term financial obligations-

For assessing short term obligations, use of current ratio and quick ratio is made. Current ratio was 2.51 in 2018, decreased to 2.10. While, quick ratio was 1.45 in previous year and reduced to 1.14. This implies firm is managing its short-term liabilities quite nicely.

D) Firms’ ability to manage long-term financial obligations-

For assessing long term obligations, use of debt equity ratio is made. The ratio was 0.35 in 2018 which increased to 0.38 in 2019. It shows that firm should have 0.40 ratio which means that debt should be 40 % and equity should be 60 %. Nike is managing it properly as well.

E) How well firms generate profits-

For assessing profits, use of net profit margin is made. The figure was 5.31 % in 2018 which maximized to 10.30 % in 2019 showing that firm is generating profits at a higher rate.