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Chapter 13
Discuss three comparative benchmarks a company can use to assess its financial performance.
Discuss the four key categories of financial ratios.
Identify three companies you would compare Under Armour’s financial ratios against?
Who would be three external stakeholders interested in a company’s financial ratios? + 300 words include references citation in-text is APA
Comparative benchmarks are tools that a company can use to assess its financial performance in relation to competitors. Comparative benchmarks allow a company to compare itself against others in their industry and may be used to analyze a variety of factors such as expenses, revenue, growth, profitability, and efficiency. Three ways companies can measure their financial performance compared with other organizations include: peer group comparison; industry averages; and trend analysis.
Peer group comparison involves looking at the financial ratios of similar businesses within the same sector or industry. This allows companies to identify any areas where they lag behind or excel in comparison with their peers. Industry averages provide an overview of the entire sector’s average performance for specific metrics such as return on investment (ROI) or net profit margin (NPM). Finally, trend analysis looks at how certain metrics have changed over time for both a company’s own business and its competitors.
Financial ratios are numerical expressions that show relationships between different pieces of financial data from a company’s income statement and balance sheet statements. They provide insights into the health of an organization by measuring liquidity, leverage, activity, profitability, valuation and coverage. Ratios can also indicate potential changes in trends over time by comparing current results against historical figures or those of key rivals in the same sector/industry. The four categories of financial ratios are: liquidity ratios; solvency ratios; activity ratios; and profitability ratioaes..
Under Armour Incorporated is an American apparel brand specializing primarily in sports-related clothing items including footwear and accessories. It could be beneficial for Under Armour to compare its own performance with companies like Nike Inc., adidas AG., Puma SE., Lululemon Athletica Inc., Asics Corporation., Adidas AG., VF Corporation., New Balance Athletics Inc.. These are all major players within the sportswear market who have significant presence throughout North America as well as international markets – making them suitable benchmark partners for Under Armour’s comparative analysis purposes .
External stakeholders interested in reviewing a company’s financial ratio information typically include investors/shareholders (who wish to determine if their investment will yield returns), creditors (who want assurance that debts will be paid back on time) suppliers/vendors who need assurance that payments will be made promptly). Additionally regulators may also look at these numbers when analyzing whether companies comply with set rules or not while banks may take interest when providing financing solutions since they need evidence showing good management practices which help meet repayment requirements on loans granted .
In conclusion , comparative benchmarks ,financial ratio calculations ,analzying trends & understanding external stakeholder concerns each play important roles when assessing & evaluating corporate financila performance . Companies should therefore make sure submstainable measures are taken regularly so as to ensure accurate insights related fo this aspect remain available thereafter .
References :
1) Investopedia.(n,.d.).What Are Financial Ratios ? Retrieved from https://www.investopedia com /terms /f/financialratiohtmll#ixzz6Z3qggLKj2 (Accessed June 16th 2021 )
2 ) Iyer Ajay.( 2019 ). What Is A Peergroup Comparison?Retrieved From https:// www investinganswers com /business -dictionary/peer-group-comparison 1887 ( Accessed June 16th 2021 ) 3 ) Investing Solutions.(2017 ). 8 Types Of Financial Ratios You Should Know About Retrived From http // www investinganswers com /investment strategies techniques /8-types-financial -ratios -you -should know about 1131 (Accessed June 16th 2021)