Dick's Sporting Goods Essay

Dick’s Sporting Goods is a very popular chain sporting goods retailer, but when looking to invest or when attempting to enter the same competitive market it is not enough just to analyze the superficial data. One might look at Dick’s and say with 610 locations across the U.S. they appear to be stiff competition in the sporting retail industry, but without looking at their financial records as well as the records of their competition one cannot effectively determine their stability in the market. Nike, though significantly bigger as far as their overall operations go, remains a good company comparison because not only do they make their money in the same sporting retail industry but they also have similar brand awareness in the USA. By looking

and not an overseas industry. But when considering its size Dick’s working capital of $581,071,000 shows short-term creditors much more. Dick’s Sporting Goods has a little over half a million dollars of working capital meaning they should have plenty of short-term assets to cover any short-term debts, but working capital does not show the full story. Though having over half a million dollars in working capital their current ratio is only 1.41 which compared to Nike’s 2.93 is fairly low Dick’s only has half the ability to pay off its current liabilities that Nike does. The current ratio is much more reliable both with indicating liquidity and with comparing companies across different levels of financial standing. Dick’s current ratio is significantly lower when compared to Nike’s it is only slightly lower than the industry average which sits at 1.59. Because of this lower than average current ratio many short-term creditors would be hesitant to lend to Dick’s Sporting Goods for fear of them being unable to pay them back. Though Dick’s falls only slightly below average when it comes to current ratios that is not the case for quick ratios. Dick’s quick ratio comes equates to .12 mean while industry average is .87 and Nike’s sits at 1.80. This means incredibly low quick ratio means that most of

The first two ratios that help analyze a company’s profitability are asset turnover, how effectively a company uses its assets, and return on total assets, profitability of total assets regardless of how they are financed. For Dick’s Sporting Goods asset turnover is 2.18 and return on total assets is 8.41%; for comparison Nike’s assets turnover is 1.56 and return on total assets is 19.58%. The reason why Dick’s can have a better asset turnover but a drastically worse return on total assets is because asset turnover excludes long-term investments but return on total assets includes them. This means that Nike has many more profitable long-term investments than Dick’s. For investors or potential investors, it is important to measure the rate of income earned on the stockholder’s investments and the next two ratios address that. The first, return on stockholders’ equity, addresses the income earned rate for all stockholders’ equity while the second, return on common stockholders’ equity, focuses specifically on the profits earned by the common stockholders. For Dick’s the first ratio came out to 17.14% while the second was only 16.44%. For Nike the first ratio is 34.04% and the second is only 15.38%. This would mean that on average common stockholder’s only make a slightly lower percentage on their