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The Annual Report Project Template Guidelines

The Annual Report Project provides you the opportunity to perform an analysis of a corporate annual report. You will obtain the annual report of a publicly traded company and answer questions regarding the application of financial analysis concepts studied in Chapter 17.

The Annual Report Project:
• Will increase your interest in financial accounting by allowing you to personally choose the company you will review.
• Provides hands-on exposure to financial statements of a real-world company.
• Emphasizes the importance of the notes to the financial statements.
• Provides an opportunity to examine the application of procedures and methods discussed in your accounting textbook.
• Encourages you to work with spreadsheets.

The Annual Report Project consists of eleven sections as follows.

             Section 1 - Obtaining the Annual Report
             Section 2 - Company Information
             Section 3 - Overview of the Annual Report
             Section 4 - The Balance Sheet
             Section 5 - The Income Statement
             Section 6 - Current Assets
             Section 7 - Long-lived Assets
             Section 8 - Liabilities
             Section 9 - Stockholders’ Equity
             Section10 - Statement of Cash Flow
             Section11 - Overall Evaluation


Section 1
OBTAINING THE ANNUAL REPORT

Obtain the most recent annual report (2016 or 2015) of two corporations in the same industry which are traded on one of the US stock exchanges (NYSE, AMEX or NASDAQ).   
Do not select a public utility, brokerage firm, insurance company, bank, co-operative or government entity. In addition, please note that summary annual reports are not acceptable.
You should be able to retrieve and download a public traded company's report from an Internet site.   A useful resource is fortune.com. This site provides links to the Web sites of Fortune 500 companies.

1. Choosing a company
Choose a company in which you are interested in. Perhaps the company has been featured in the news lately. Perhaps you own stock in the company. Perhaps you would like to own stock in the company.

Section 2
INFORMATION ABOUT THE COMPANY

Prepare a one page or so introduction about the two companies to include the following:

1. Name of companies chosen for comparison.
2. Information about the companies:
What is the industry classification for the company (according to Fortune or the Internet site you are using)?

Describe the nature of the company’s business.
List the company’s primary products or services (use brand names where available).
What is the address of the company’s corporate headquarters?
What is the address of the company’s Web site?
List other countries in which the company operates:
What were the company’s revenues for the most recent fiscal year?
Who is the chairman of the company’s board of directors?
Who is the company’s CEO?

3. Provide the following market data:
On what stock exchange is the company’s stock traded?
What is the ticker symbol for the company?
What was the price of the company’s stock at the end of one day during this past week?
Price: _______________________ Date: ______________________
What were the lowest and highest stock prices during the past year?
52-week low: __________________ 52-week high: _________________

Section 3
OVERVIEW OF ANNUAL REPORT

      1. REVIEW THE CHAIRMAN’S LETTER TO THE SHAREHOLDERS.

Summarize the major points made in the letter in a paragraph or two.
Locate the management report(s) and the independent auditor’s report(s).

Answer the following questions.

a) Who is responsible for the preparation and integrity of the financial statements?
b) Does the company maintain a system of internal controls? Why?
c) Does the company have an audit committee? What is its purpose?
d) What is the name of the independent public accountant (auditor)?

(Note: There are two independent auditor’s reports: (1) a report on internal control, and (2) a report on the financial statements. The following questions relate to the financial statement audit.)

e) According to the auditor’s report on the financial statements, what is the auditor’s responsibility?
f) According to the audit report, what is an audit?
g) Summarize the auditor’s opinion.

Section 4
THE BALANCE SHEET

THE BASICS
Locate the company’s balance sheet.

1. The accounting equation is Assets = Liabilities + Stockholders’ Equity.   Replacing the words in the accounting equation with dollar amounts, give the company’s accounting equation at the end of the current and prior years.

                      Assets             =       Liabilities             +         Equity
This year _______________       ______________    _______________
Last year _______________       ______________    _______________

2. Calculate the company’s current ratio for both this year and the prior year.
Show your computations.
This year:

Current assets       =      ___________________   =
Current liabilities   

Last year                =      ___________________       =

Explain what information this ratio provides. (Hint: See the Financial Statement Analysis chapter of your textbook.) Use complete sentences.

Has the current ratio improved or worsened? Explain. Use complete sentences.


FURTHER ANALYSIS
4. Prepare common-size balance sheets for the two years presented, expressing each balance sheet item as a percentage of total assets (Total assets = 100%).
(Refer to the discussion of vertical analysis in the financial statement analysis chapter of your text.)

Use a spreadsheet program such as Excel to do this part of the assignment. Label the spreadsheet “Common Size Analysis – Balance Sheet.” Insert the accounts and classifications in column A and the amounts for each of the two years in columns B and C. In columns D and E, use a formula to convert the amounts in columns B and C to percentages.

INFORMATION FOR DECISION MAKING

5.   Answer the following questions: Use complete sentences.
a. In which assets does the company have the most significant investment?
b. Is the company financed primarily with debt or equity? Explain using the information obtained in questions 1–4.
c. Is the debt primarily short-term or long-term? Explain.
d. Comment on any significant changes in individual assets or liabilities. Use the information obtained in question 4.
e. Comment on any significant changes in the composition of current assets or current liabilities.
Use the information obtained in question 4.
f. Evaluate the company’s debt-paying ability. Refer to the information obtained in the previous questions.

Section 5

THE INCOME STATEMENT (for each company)

1. Calculate the following ratios for each of the three years presented.
Show your computations.
                                                               Current year                      Last year             Two years ago
• Gross profit rate (%)                           ____________               ____________         ____________

• Ratio of operating                               ____________               ____________          ____________
expenses to sales
(or operating revenue) (%)

• Profit margin (%)                                  ____________            ____________          ____________
Net income/sales or operating revenues
            
• Return on assets                                    ____________             ____________          ____________
Net income/average total assets

You will find prior years’ assets in the Five-Year Summary of Selected Financial Data.

FURTHER ANALYSIS
4. Prepare common-size income statements for the three years presented, expressing each income statement item as a percentage of total revenue. (Total revenue = 100%). (Refer to the discussion of vertical analysis in your textbook.)
Use a spreadsheet program to do this part of the assignment. Label the spreadsheet “Common Size Analysis – Income Statement.” List the revenue and expense classifications in column A, the amounts for the three years in columns B, C, and D. In columns E, F, and G, use a formula to convert the amounts to percentages.

INFORMATION FOR DECISION MAKING

5. Answer the following questions. Use complete sentences, and explain your answers by reference to the information you obtained in the preceding questions.
a. Comment on the trend in total revenue. Is it increasing or decreasing during the three year period?
b. How has the gross profit percentage changed over the three-year period?
Refer to the information obtained in question 2.
c. Comment on the ratio of total operating expenses to operating revenues over the three year period. Refer to the information obtained in question 2.
d. Comment on individual revenue and expense items that had significant percentage changes (changes as a percentage of total revenue or total expenses) over the three-year period. Indicate the percentages.
e. Comment on the overall trend in operating income and net income as a percent of sales over a three-year period. Refer to the information obtained in questions 2 and 4.
f. Comment on the significance of these changes. Do they indicate a positive or negative trend for the company? Explain.
g. Include any other comments that you consider relevant.

Section 6
CURRENT ASSETS

Refer to the notes to the financial statements. The first note, “Summary of Significant Accounting Policies,” provides information about the company’s inventory costing and other accounting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions.
IMPORTANT: For each answer given, indicate the page number on which the information was found.

THE BASICS

1. Accounts Receivable
(a) What is the amount of the company’s accounts receivable?                                                

Before subtracting the allowance for doubtful accounts (gross accounts receivable):

This year _______________ Last year ________________

After subtracting the allowance for doubtful accounts (net accounts receivable):

This year ________________ Last year ________________

(b) What is the amount of the allowance for doubtful accounts?                                                

This year __________________ Last year ________________

What percentage of the gross accounts receivables are considered bad debts?
The credit risk ratio: Allowance for doubtful accounts

Gross accounts receivable

This year __________________ Last year __________________

2. Inventories and Cost of Goods Sold

(a) What is the amount of inventory?                                                                                                

This year ____________________ Last year ____________________

(b) What is the amount of cost of goods sold?                                                                                 

This year ____________ Last year ____________ 2 years ago ____________

(c) What inventory costing method has the company chosen?                                                      

(d) What other information does the company provide in the note about its inventory?         

FURTHER ANALYSIS
Analysis of Current Assets

3.    Calculate the following ratios: Show your computations.

(a)    Receivables turnover            =                     Sales                   = ______________    =
                                                                   Average net receivables

(b)    Average collection period    =                     365                     = ______________   =
                                                                           Turnover

(c)       Inventory turnover                =          Cost of goods sold    = ______________ =
                                                                      Average inventory

(d) Average days inventories held    =                        365                = ______________ =
                                                                                  Turnover

4. Explain what information each of these ratios provides.
(a)
(b)
(c)
(d)

INFORMATION FOR DECISION MAKING

6. Evaluate the company’s receivables collection. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of customer it serves. Refer to the information obtained in the preceding questions.
7. Evaluate the company’s inventory management. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of customer it serves. Refer to the information obtained in the preceding questions.

Section 7
LONGLIVED ASSETS
Refer to the notes to the financial statements. The first note, “Summary of Significant Accounting Policies,” provides information about the company’s depreciation and amortization methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions.

THE BASICS
Property, plant and equipment

1. What depreciation method does the company use?                                                                  
2. What is the amount of depreciation expense for the current year?                                          
(Hint: Look at the operating activities section of the cash flow statement if the indirect method was used.)

Current year____________________ Last year___________________

Intangible assets

3.    Does the company have any intangible assets? If so, what are they?                                       
4.   Does the company report any goodwill?                                                                                    

What is the amount?




FURTHER ANALYSIS
5.    Calculate the following: Show your computations.

You will find prior years’ total assets in the Five-Year Summary of Selected Financial Data.

(a) Average useful life of plant assets =   Average cost of plant assets    = __________________
                                                                      Depreciation expense                  

(b) Average age of plant assets    =          Accumulated Depreciation =    ______________   =
                                                                     Depreciation Expense

(c) Asset turnover =          Sales                   =
                                  Average total assets

                              __________________          __________________         __________________
                                     current year                                  last year                        two years ago

(d) Return on assets    =    ___Net income__    =
                                          Average total assets                        
                                        __________________          __________________         __________________
                                     current year                  last year               two years ago

6.    What information is provided by:
(a) The asset turnover ratio
(b) Return on assets

INFORMATION FOR DECISION MAKING
Answer the following questions. Use complete sentences.

8.   How does depreciation expense affect cash flow?

9.   Comment on the average age of the company’s assets relative to their average useful life. Refer to the information obtained in question 5, above.

10. Refer to the investing activities section of the company’s cash flow statement.
What was the amount spent to purchase long-lived assets (capital expenditures) during each year presented?
                                    __________________      __________________   
                                                current year             last year                                 
11.   Evaluate your company’s capital spending. Compute the capital expenditure ratio

                      Cash provided by operating activities   = ____________________    =
                                    Capital expenditures

Comment on your company’s ability to finance its capital spending through operations. (A ratio of 2 would indicate that the company could have purchased twice as much property, plant and equipment as it did without any additional external financing.)

Section 8
LIABILITIES
Refer to the financial statements and notes to the financial statements. The first note, “Summary of Significant Accounting Policies,” provides information about the company’s accounting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions.

THE BASICS
1.   What is the amount of the company’s current liabilities?                                                      

                         This year ______________________ Last year ____________________

2.    What is the amount of the company’s long-term liabilities?                                                   

                         This year ______________________ Last year ____________________

3. Refer to the notes to the financial statements. Does the company report any other commitments or contingent liabilities? If yes, provide a description of any contingencies discussed.                                                                                                                                          


FURTHER ANALYSIS
6. Calculate the following ratios for both years presented in the balance sheet:

(a) Current ratio                                        = ____________ = (current year)
                           = Current assets
                              Current liabilities
                                                                  = ____________ =   (prior year)

(b) Quick or Acid-Test ratio                     = ____________ =   (current year)
                              = Quick assets
                                 Current liabilities
                                                                  = ____________ =   (prior year)

(c) Debt to total assets ratio                = ____________ =   (current year)
                                 = Total liabilities
                                    Total assets         
                                                                     = ____________ =   (prior year)

7. Explain what information each of these ratios provides.
(a)
(b)
(c)


INFORMATION FOR DECISION MAKING

8. Evaluate the company’s debt-paying ability. Use complete sentences. Refer to the ratios and other information obtained above. Your analysis should include a consideration of unused lines of credit and of any existing off-balance-sheet financing arrangements.

Section 9
STOCKHOLDERS’ EQUITY
Refer to the financial statements and notes to the financial statements. The first note, “Summary of Significant Accounting Policies,” provides information about the company’s accounting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions.

THE BASICS

1. How many shares of common stock have been issued? How many shares are outstanding?                                                                                                   
If these numbers differ, explain why.

2.   Does the company have any preferred stock outstanding?

If so, how many shares? _________ Par value _______ Dividend rate ___________                                                                                                                                                                                                         

3. Does the company report any stockholders’ equity accounts other than contributed capital (capital stock), paid-in capital in excess of par (additional paid-in capital) and retained earnings? List these accounts and their amounts (for example, treasury stock, accumulated other comprehensive income) Page _____

FURTHER ANALYSIS
4. Calculate the following ratios for each of the three years presented in the stockholders’ equity statement: (You may be able to find the year-end stock price in the financial review or financial highlights section of the annual report. If the year-end price is not available, compute the average of the high and low prices for the fourth quarter. Show your computations.

a. Dividend payout ratio    =    Total cash dividends paid on common stock
                                                                     Net income                                          
                              __________________    __________________   
                         current year                      last year                  


b. Dividend yield                         =    Dividends paid per share                                 
                                                             Stock price at year-end
                         __________________   __________________   
                        current year                   last year         

c. Earnings per share (provided in income statement)                                                
                         ________________    __________________
                        current year                   last year            

d. Price-earnings ratio = Market price per share of stock/Earnings per share
                            _______________    _______________                                                            
                            current year                last year            

e. Return on common stockholders’ equity = Net income – preferred stock dividends
                                                                           Average common stockholders’ equity

You will find prior years’ stockholders’ equity in the Five-Year Summary of Selected Financial Data.
                                    Current year                Prior year

5. Explain what information each of these ratios provides. Use complete sentences.
(a)
(b)
(c)
(d)
(e)

7. Refer to the financing activities section of the company’s cash flow statement.Page ____

(a) What amount, if any, was received from common stock issued in each of the years presented?
                   __________________    __________________      
                      current year             last year                           
(b) What amount, if any, was paid to purchase treasury stock in each of the years presented?
                   __________________      __________________   
                        current year            last year                              
(c) What was the amount paid in dividends in each of the years presented?
                     __________________    __________________   
                            current year       last year                                       

(d) Did these activities result in a net increase or decrease in the company’s cash balance?

INFORMATION FOR DECISION MAKING
8. Based on the ratios computed in question 4 and your understanding of their meaning as indicated in question 5, evaluate the company’s stock as an investment. Refer to each of the ratios in your discussion.

Section 10
THE STATEMENT OF CASH FLOWS
THE BASICS
Locate the company’s statement of cash flows.
What is the period covered by the statement?
On what page of the annual report does the statement appear?
1. What was the ending balance of cash and cash equivalents in the current year?
Does this agree with the ending balance of cash and cash equivalents reported on the balance sheet? Explain any discrepancy.
2. What was the net cash flow from investing activities?
Was it an inflow or an outflow of cash?
What activity accounted for the largest cash flow from investing activities?
Was it an inflow or an outflow of cash?
3. What was the net cash flow from financing activities?
Was it an inflow or an outflow of cash?
What activity accounted for the largest cash flow from financing activities?
Was it an inflow or outflow of cash?
4.   What was the net cash flow from operating activities?
Was it an inflow or an outflow of cash?
5.   Did the company use the direct or indirect method in reporting net cash flows from operating activities?
How can you tell?

6. What was the net income for each of the three years presented?                                             
                           __________________    __________________   
                     current year               last year            

What was the net cash flow from operating activities for each of the three years presented?
                            __________________    __________________   
                     current year               last year         

What were the major items accounting for the difference between these two numbers?

FURTHER ANALYSIS
7.   Calculate the following ratios. Show your computations.
a. Free cash flow =
Cash provided by operating activities - capital expenditures – cash dividends

                           __________________    __________________    __________________
                      current year               last year       two years ago

b. Current cash debt coverage ratio = Cash provided by operating activities
                                                                   Average current liabilities
Calculate this ratio for the current year only.

c. Cash debt coverage ratio = Cash provided by operating activities
                                                       Average total liabilities
Calculate this ratio for the current year only.

d. Cash return on sales ratio = Cash provided by operating activities
                                                                Net sales
                            __________________    __________________   
                        current year               last year         

10. Explain what information each of these ratios provides. Use complete sentences.
(a)
(b)
(c)
(d)
INFORMATION FOR DECISION MAKING
11. Evaluate the company’s liquidity, solvency, and profitability as indicated by the cash flow ratios computed above. Use complete sentences. Refer to each of the ratios in your discussion. Use an additional page if necessary.

Section 11
OVERALL EVALUATION AND RECOMMENDATION (1 to 2 pages maximum)

You have conducted an extensive review of two company’s annual report. Suppose that a friend has just inherited some money and is considering investing in the companies you have analyzed. What is your recommendation? Buy or pass? Which company? Fully explain the reasons for your recommendation in a one page summary. Refer to specific findings from your annual report project assignments, and provide full citations for any other sources you use. Include a discussion of:

• The company’s revenue, expense and income patterns
• Its asset base, asset composition, relationship between assets and liabilities and between liabilities and equity   
• Its cash flows
• Its liquidity, solvency and profitability
• Management effectiveness and efficiency, and the return and turnover ratios
• The accounting methods chosen by the company and the impact of these choices on the financial statements. These choices include the company’s inventory costing and depreciation methods.
• Any other information which you consider appropriate in coming to a decision, including dividend patterns and price-earnings ratios.

Begin your discussion with a thoughtful analysis of the company based on the guidelines above, and end with the recommendation that analysis supports.

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Section 1: Companies Selection
1. Name of Companies chosen
A : Nike INC
Beaverton,
Oregon,
United States
B : Under Armour INC
1020 HULL STREET
3RD FLOOR
BALTIMORE, MD 21230
Selection Criteria:
• We analysed these companies as a result of our interest in Sports apparel industry
• They are both well positioned against one another.
• Investment in one’s health via sports and physical activites have become the norm in the current scenario rather than seek medical help later. We wanted to see how much it is reflecting on the related companies’ fiscal reports
• Under Armour is the lesser known of the two when compared on a global scale. We wished to see how well they are positioning themselves against the global giant.

Section 2: Introduction
1.Information in detail
A: NIKE INC
• Industry : Apparel – Athletic / Gear maker
• Nature of business: Development, marketing and distribution of branded performance apparels, footwear and related accessories for men, women and youth.
• Products’ Key categories: Running Shoes, NIKE basketball, JORDAN brand, Football(Soccer), Men’s training, Women’s Training, Action sports, Sportswear, Golf
• Website(relating to Annual reports):
• Apart from the US, Nike’s revenue flow from foreign countries account for 53% of its fiscal revenue. Over its conventional network it also sell through e-commerce websites of 40 countries outside of US.
• Chairman: Mr. Mark G. Parker
• Current CEO: Mr.Mark G. Parker

B: UNDER ARMOUR INC
• Industry : Apparel – Athletic / Gear maker
• Nature of business: Development, marketing and distribution of branded performance apparels, footwear and related accessories for men, women and youth.
• Products’ Key categories:
o Apparel : HEATGEAR, COOLGEAR & ALLSEASONGEAR
o Footwear: Offerings for Running, Basketball, Performance training and outdoor wear
o Accessories: Athletic performance gloves, bags and headwear
• Website(relating to Annual reports):
http://investor.underarmour.com/annuals.cfm
• Apart from the US, Under Armour’s revenue flow from foreign countries accounted for 15.4% of its fiscal revenue. It has its presence in North America including Canada; EMEA – Europe, Middle east and Africa; Asia-Pacific and Latin America.
• Chairman: Mr. Kevin A.Plank
• Current CEO: Mr.Kevin A.Plank
Market Scenario:
A: Nike Inc
• Stock Exchanges Traded: NYSE, NASDAQ
• Ticker symbol: NKE
• Current Stock Price: $55.61 as on 28 Apr 2017, 7:56PM, GMT-4
• 52 Week - High: $60.33   Low: $49.01
B: Under Armour Inc
• Stock Exchanges Traded: NYSE, Class A
• Ticker symbol: UAA
• Current Stock Price: $21.49 as on 28 Apr 2017, 7:56PM, GMT-4
• 52 Week - High: $43.08   Low: $17.05

Section 3
OVERVIEW OF ANNUAL REPORT
A: NIKE INC
Chairman’s address :-
Nike Inc decided not to issue a separate Chairman’s address to shareholders but instead to include the report in FORM 10K issued to SEC. Excerpts from the report show the following
Nike Inc demonstrated the power of its portfolio to deliver continued growth and expanding profitability. At the end of last fiscal, Nov 2015, Nike had announced a stock split of both its CLASS A and CLASS B stock in the form of 100 per cent stock dividend payable on Dec 23, 2015. Nike’s revenues grew by 6% to $32.4 billion in fiscal 2016, gross margin expanding by 20 basis points, Net income increased by 15% and diluted earnings per common income share also grew 17% to $2.16. EBIT grew by 10% driven by revenue growth and gross margin expansions while the expenses were kept flat as a percent of revenues. This growth can be primarily attributed to
• Innovative performance and sportswear products with the incorporation of proprietary technology across products like NIKE Air, Flyknit, Dri-fit, Flywire, Zoom and Lunarwire.
• Deeper branded connections with endorsements by high profile brand ambassadors
• Stronger retail representation categorywise both online as well as NIKE owned and retail partners
While foreign currency markets continue to show volatility, our commitment to effective management of business towards achievement of financial growth over the long term shall continue by execution of operational strategies outlined above.
a) Who is responsible for the preparation and integrity of the financial statements?
Management of NIKE INC is responsible for the preparation and integrity of the financial statements.

b) Does the company maintain a system of internal controls? Why?
NIKE Inc Management has setup and maintains a system of Internal controls to provide reasonable assurance about the reliability of the financial statements in accordance with US GAAP. Apart from maintenance of proper transaction records, it controls unauthorized acquisitions or dispositions of company’s assets as well as detect fraud/manipulation by the collusion of company personnel including the management.

c) Does the company have an audit committee? What is its purpose?
Nike has a audit committee which serves the purposes of appointing independent audit firm and reviewing the scope and results of the annual audit, the effectivessness of the accounting system as well as other matters relating to NIKE’s financial affairs

d) What is the name of the independent public accountant (auditor)?
PriceWaterhouse Coopers LLP is the independent public accountant.


e) According to the auditor’s report on the financial statements, what is the auditor’s responsibility?
The auditor’s responsibility as stated under the auditor’s report includes expressing opinions in these financial statements, the financial schedules and on the company’s internal controls over the financial reporting based on their audit

f) According to the audit report, what is an audit?
As per the report, An audit is to plan and perform audits to obtain reasonable assurance that the financial statements are free of material misstatements and whether internal controls were maintained in all material aspects.

g) Summarize the auditor’s opinion.
In the independent auditor’s opinion, the financial statement listed under the report presented fairly well, in all material aspects, NIKE INC’s and its subsidiaries’ financial positions and the result of their operations were in conformity with generally accepted accounting principles of US.
B: Under Armour Inc:
Chairman’s address – UNDER ARMOUR INC :
Under Armour Inc decided to include a management’s statement under Form 10K than a chairman’s address to shareholder. Excerpts from the statement
We are a leading developer, marketer and distributor of branded performance apparel. Our products provide an alternative to traditional products as we continue to engineer moisture wicking fabrications designed to provide apparel for every climate.
Our net revenues have grown from $1834.9 million in 2012 to $4825 million in 2016. Financial highlights for fiscal 2016 include
• Increase in net revenues by 22% over 2015
• Wholesale and direct consumer sales rose by 19% and 27%
• Gross margin decreased by 170 basis points as compared to fiscal 2015
• Selling, general and administrative expenses grew by 22% as compared to 2015
We continue to expand our scope of business but are evaluating our cost structures and strategic resource allocation and prioritizations decisions to provide for a better structure for the growing potential of the business of performance apparel.

a) Who is responsible for the preparation and integrity of the financial statements?
Under Armour’s Management is responsible for the preparation and integrity of the financial statements.

b) Does the company maintain a system of internal controls? Why?
Under Armour Inc Management setup a system of Internal controls over financial accounting based on the framework in internal control – Integrated framework issued by COSO in 2013. It provided a basis for an evaluation of the documentation of controls, evaluation of design effectiveness of the controls, operating effectiveness of controls and a conclusion of this evaluation.

c) Does the company have an audit committee? What is its purpose?
Under Armour has an audit committee. The committee is responsible for much of the risk oversight management. Apart from that it has to oversee the legal and regulatory compliance program and the internal audit function.

d) What is the name of the independent public accountant (auditor)?
PriceWaterhouse Coopers LLP is the independent public accountant.


e) According to the auditor’s report on the financial statements, what is the auditor’s responsibility?
The auditor’s responsibility as stated under the auditor’s report includes expressing opinions in these financial statements, the financial schedules and on the company’s internal controls over the financial reporting based on their audit...

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