Richard J. Bocchinfuso

"Be yourself; everyone else is already taken." – Oscar Wilde

FIT – MGT 5000 – Week 4

Discussion Post

1. Three important pieces of inventory information are (a) the cost of inventory on hand, (b) the cost of sales, and (c) the cost of inventory purchases. Identify or compute each of these items for Under Armour, Inc., at December 31, 2014. Assume “food and paper” are cost of goods sold.
2. Which item in requirement 1 is most directly related to cash flow? Why? (Challenge)
3. Assume that all inventory purchases were made on account and that only inventory purchases increased Accounts Payable and Other Current Liabilities. Compute Under Armour, Inc.’s cash payments for inventory during 2014.
4. How does Under Armour, Inc., value its inventories? Which costing method does Under Armour use?
5. Did Under Armour, Inc.’s gross profit percentage and rate of inventory turnover improve or deteriorate in 2014 (versus 2013)? Consider the overall effect of these two ratios. Did Under Armour, Inc., improve during 2014? How did these factors affect the net income for 2014? Under Armour, Inc.’s inventories totaled $319 million at the end of fiscal 2012. Round decimals to three places.

Note:  Spreadsheet detailing calculations embedded below.

Req. 1

a. $537
b. $1,572
Cost of goods sold (millions) = $1,572
Less: Beginning inventory (millions) = ($469)
Add: Ending inventory (millions) = $537
Cost of inventory (millions) = $1,640

Req. 2

Cost of inventory purchases.

Req. 3

Beginning accounts payable (millions) = $165
Add: Cost of inventory (inventory purchases) (millions) = $1,640
Less: Ending account payable (millions) = ($210)
Cash payments for inventory (millions) = $1,595

Req. 4

Under Armour values inventories using Lower-of-Cost-or-Market Value.
Under Armour FIFO to compute cost of inventory.
Stated in Appendix B, Under Armour, Inc. 2014 Annual Report – page 860, Note 2 (Summary of Significant Accounting Policies) under Inventories.

Req. 5

2014 Gross profit percentage = 49.03%
2013 Gross profit percentage = 48.76%

Gross profit from 2013 to 2014 improved.

2014 Inventory turnover ratio = 3.125
2013 Inventory turnover ratio = 3.033

The inventory turnover ratio from 2013 to 2014 improved.
Both gross profit and inventory turnover improved from 2013 to 2014.
Gross profit percentages and increase in gross profits suggest increasing efficiency and value and healthy business which is avoiding commoditization.
The higher inventory ratio shows that Under Armour is moving more inventory faster indicating increasing sales.


Note:  Spreadsheet detailing calculations

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FIT – MGT 5000 – Week 3

Discussion Post

Requirement 1

Focus on cash and cash equivalents. Why did cash and cash equivalents change during 2014? The statement of cash flows holds the answer to this question. Analyze the seven largest individual items on the statement of cash flows (not the summary subtotals such as “net cash provided by operating activities”). For each of the seven individual items, state how Under Armour’s actions affected cash. Show amounts in millions and round to the nearest $1 million. (Challenge)

Numbers below are in 000s

Cash increased from $347,498 (Dec 31, 2013) to $593,175 (Dec 31,2014)

  1. Y/Y net income increase = 46,072 (from $162,330 (Dec 31, 2013) to 208,402 (Dec 31,2014)) increased cash and cash equivalents
  2. Depreciation and amortization expense = $72,093 increased cash and cash equivalents via operating activities
  3. Accounts receivable = $101,057 decreased cash and cash equivalents via operating activities
  4. Inventories = $84,658 decreased cash and cash equivalents via operating activities
  5. Purchases of private property and equipment = $140,528 decreased cash and cash equivalents amount via investment activities
  6. Payments on revolving credit facility = $100,000 decreased cash and cash equivalents via financing activities
  7. Proceeds from term loan = $250,000 increased cash and cash equivalents via financing activities

Requirement 2

Refer to Exhibit 4-2 on page 205 that contains the Report of Management on Internal Control over Financial Reporting. Under Armour, Inc. has a similar report included in its annual report. Show how this report corresponds to the objectives of internal control included in this chapter. (Challenge)

The Financial Statement and Supplemental Data (Item 8) section of Under Armour’s Annual report states that “Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.” This depicts what the text calls “tone at the top”. This section also states that “This evaluation included the review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation”, this depicts control procedures and monitoring controls. There is clearly a correspondence between what is conveyed here and what is outlined in chapter four of the text.


Under Armour Annual Report. (n.d.). Retrieved May 18, 2017, from



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FIT – MGT 5000 – Week 2

Discussion Post

1. Which was larger for Under Armour, Inc. during 2014: (1) sales revenue, or (2) cash collected from customers? Why? Show computation. (Challenge)

2014 Sales revenue = $3,084,370 > Cash collected from customers in 2014 = $3,014,487

2. Investors are vitally interested in a company’s sales and profits and its trends of sales and profits over time. Consider Under Armour, Inc.’s sales and net income (net loss) during the period from 2012 through 2014. Compute the percentage increase or decrease in net sales and also in net income (net loss) from 2012 to 2014. Which item grew faster during this two-year period—net sales or net income (net loss)? Can you offer a possible explanation for these changes? (Challenge)

Net sales (revenue) grew faster than net income.
A potential explanation for income growth not keeping pace with or outgrowing revenue growth is expense increases which grew at a greater rate than revenue.

Note: Detailed calculations and explanations contained in the attached spreadsheet.

Detailed Calculations

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FIT – MGT 5000 – Week 1

Discussion Post

1. Go on the Internet and do some research on Under Armour, Inc., and its industry. Use one or more popular websites like or Write a paragraph (about 100 words) that describes the industry, some current developments, and a projection for where the industry is headed.

Founded in 1996 by former University of Maryland football player Kevin Plank, Under Armour claims to be the originator of performance apparel. Under Armour differentiates their apparel by stating it keeps athletes cool, dry and light throughout the course of a game, practice or workout. Under Armour has experienced excellent market traction and has risen to be one of the top performance apparel providers in the word. Under Armour is the official footwear supplier of the NFL and MLB and partners with the NBA. Under Armour heavily relies on athlete endorsements from top performers in football, basketball, soccer, and baseball. Under Armour’s products are made from its moisture-wicking and heat-dispersing fabrics which keep athletes dry and relatively comfortable. Under Armour is entering the technology space and leveraging their foothold in the apparel market to enter the wearable market to allow customers track their fitness. Under Armour sells online, by catalog, through its own retail and outlet stores, and in more than 25,000 retail stores worldwide.

Under Armour is in the apparel manufacturing company that develops, manufactures, markets and sell its own products. Under Armour is an apparel maker and retailer and they are impacted by trends in both the apparel and retail sectors. As Under Armour enters the tech sector they will be impacted by technology adoption and obsolescence, this will be interesting to watch.

Under Armour is being impacted by a struggling retail sector. After years of steady, double-digit growth, the high-performance athletic apparel and footwear maker reported 7% growth on revenues of $1.1 billion with a net loss of $2 million in the first quarter 2017 and a $0.01 loss in diluted earnings per share.  Stiff competition and lost U.S. retailers (e.g. – Sports Authority & Sports Chalet) are sighted as having a material impact on Under Armour’s results.  Source:

While Under Armour had a difficult Q1 2017 their balance sheet remains healthy.

Competition includes the likes of Nike, Adidas, and Columbia Sportswear.  Increased competition may have played a role in gross profits being down 70 basis points to 45.2 percent.

The apparel industry is highly competitive and this trend will continue. Under Armour needs to continue to innovate, they need to continue to expand both direct-to-consumer and international sales. Under Armour will also have to continue to pursue new retailers while maintaining margins.

2. Read Note 1—(Description of Business) of Under Armour, Inc.’s annual report. What do you learn here and why is it important?

The Description of Business in the 10-K filing is exactly that, a description of what the company does, any subsidiaries it might own, what markets it operates in. This section might also include significant recent events like competition, regulations, or labor issues, special operating costs, seasonality, etc… This is a summary of what the business is and how it operates.

Under Armour is in the apparel business.
Under Armour develops, markets and distributed branded apparel, footwear, and accessories.
Under Armour is focused on athletic apparel.
Under Armour conducts worldwide operations.
Under Armour is an active lifestyle brand.

3. Name two of Under Armour, Inc.’s competitors. Why is this information important in evaluating Under Armour, Inc.’s financial performance?

Nike and Adidas are the two competitors pointed out in Under Armout, Inc.’s 2014 10-K filing. (Harrison, Horngren & Thomas, 2017, p. 855)
Understanding the market segment, the trend within that segment and the total market opportunity is critical to understanding is how Under Armour is performing.
Competition provides both market opportunity, the ability to share shift an already defined market with a proven need but it also creates margin pressure. This greater the supply, the greater the competition the more advantageous it is for the consumer. Margin erosion is likely with increased competition. Under Armour, like it’s competition Nike and Adidas attempt to offset what could be called commodity apparel by creating “lifestyle” brands and creating “brand loyalty”

4. Write Under Armour, Inc.’s accounting equation at December 31, 2014 (express all items in millions and round to the nearest $1 million). Does Under Armour, Inc.’s financial condition look strong or weak? How can you tell?

Assets = Liabilities + Owners’ Equity (Harrison, Horngren & Thomas, 2017, p. 12)
$2,095,083 = 744,883 + $1,350,300

Owner’s (stockholder’s) equity has show y/y growth indicating that Asset growth is outpacing liability growth, indicating a strong financial position and a healthy trajectory.
Owner’s Equity = Assets – Liabilities

5. What was the result of Under Armour, Inc.’s operations during 2014? Identify both the name and the dollar amount of the result of operations for 2014. Does an increase (or decrease) signal good news or bad news for the company and its stockholders?

2014 Net Income (in thousands) = $208,042
Net Income (in thousands) increased from 162,330 in 2013 to $208,042.

6. Examine retained earnings in the Consolidated Statements of Shareholders’ Equity. What caused retained earnings to increase during 2014?

2014 Retained earnings (in thousands) = 856,867
2013 Retained earnings (in thousands) = 653,842

When revenues exceed expenses the result will be a positive balance in retained earnings. (Harrison, Horngren & Thomas, 2017, p. 18)

7. Which statement reports cash and cash equivalents as part of Under Armour, Inc.’s financial position? Which statement tells why cash and cash equivalents increased (or decreased) during the year? Which activities caused Under Armour, Inc.’s cash and cash equivalents to change during 2014, and how much did each activity provide or use?

Which statement reports cash and cash equivalents as part of Under Armour, Inc.’s financial position? Consolidated Balance Sheet
Which statement tells why cash and cash equivalents increased (or decreased) during the year? Consolidated Statement of Cash Flows
Which activities caused Under Armour, Inc.’s cash and cash equivalents to change during 2014, and how much did each activity provide or use?

Cash and cash equivilents – Beginning of period (in thousands) = 347,489
+ 2014 Cash flows from operating activities (in thousands) = 219,033
+ 2014 Cash flows from investing activities (in thousands) = (153,312)
+ 2014 Cash flows from financing activities (in thousands) = 245,686
+ 2014 Effect of exchange rate changes on cash and cash equivilents = (3,341)
= Cash and cash equivilents – Beginning of period (in thousands) = 347,489

347,489 + 219,033 + (153,312) + 245,686 + (3,341) = 593,175


Hall, J. (1970, January 01). Under Armour Inc Is Feeling the Impact of a Changing Retail Landscape. Retrieved May 04, 2017, from

Harrison, W. T., Horngren, C. T., & Thomas, C. W. (2017). Financial accounting. Boston: Pearson.



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