Dupont Analysis Project - Assignment Example

Adidas AG is on the other had a German MNC that designs and manufactures sports accessories and apparels. Adidas also produces shirts, watches, bags, eyewear, and other sports related accessories. The products of Nike can be categorized into seven key types namely, Basketball, Football or Soccer, Women’s Training, Running, Men’s Training, Nike Sportswear, and Action Sports. In addition to the products mentioned above the portfolio of Adidas also include products like Cricket, Tennis, Golf, Rugby, Lacrosse, Gymnastics, Skateboarding, and Hockey.

The companies operate in a very competitive domestic and macroeconomic environment. This is apparent from the level of diversification strategies adopted by Adidas and Nike in order to reduce the level of competition. Both companies have also diversified their operations internationally and but still faces competition from other local and international firms like Puma. Rapid transition in technology and consumer preferences in market for athletic apparel and accessories posed considerable risk for business operations.

Some of the specific identified risk factors are: The DuPont analysis can be used to analyse the inherent strengths and weakness of any firm as reflected from it’s publish financial statements. Basically, the analysis involves determination of three types of key ratios namely profitability, efficiency, and equity multiplier that estimates operating efficiency, asset utilization and financial leverage respectively. The DuPont analysis calculates the return on equity that is calculated using the following formula: Profitability- This ratio is a comprehensive measure of profitability that gives the rate at which the sales are being transformed into corporate profits at different levels of business operations.

The profitability of Nike was higher than that of Adidas from 2010 to 2012. When profitability trends of both