K-Swiss and Its Financial Health: Bad Ecomony Not Affecting Brand

Financial ratios give analysts (basically anyone who owns or analyzes businesses) the ability to determine the health, profit, and industrial trends of a business. The data tables below provide the more noteworthy financial ratios of K-Swiss from 2004 to 2008. It is best to keep in mind that K-Swiss is a successful small business unlike Nike and Reebok who are large successful businesses. Large businesses will occasionally enjoy much larger sums of ratio results compared to smaller businesses. Liquidity ratios are best known to calculate a business's ability to compensate temporary debts. The table below shows the liquidity ratios used to measure K-Swiss's overall protection from loans. According to the current ratio for K-Swiss, they would be considered as a stable company due to the fact that their current ratio is over 2.0. Anything below a 2.0 for any business would be unhealthy depending on the industry it is associated with. Unlike current ratios, quick ratios tend to be more traditional since they are less complicated. After analyzing their quick ratio results, K-Swiss still remains healthy and making it a very "liquid" company. The stats for the debt/equity ratio are not incorporated because the financial leverage calculates and provides identical results.

Analysts and businesses use profitability ratios to formulate a company's earnings for a particular amount of time which in this table's case would be annually. K-Swiss's plunging EPS for the years 2005 and 2006 are likely due to the competitiveness from Nike because they are clearly the athletic footwear of choice among all demographics. K-Swiss should not be at fault since they are not a powerhouse business like NIKE. Their EPS increase in both 2007 and 2008 reflects on their push to expand their brand internationally and not just their American consumers.

The return on equity data (ROE) for K-Swiss indicates success even though recent years have shown otherwise. K-Swiss remains in excellent shape regardless, but years 2007 and 2008 show a dramatic decline possibly because of high priced products (management issues). K-Swiss provides high quality products for their consumers, but they may need to design products that are slightly more affordable for those who have lower income. Nike has been known to display such strategic moves against their competitors, but what do you expect from a company that is on top of their game within their industry?

Observations from the return on assets data (ROA) still indicate that K-Swiss still maintains success, but not at the successful rate it had prior to the year 2007. Management may be to blame again for these declining stats. They are no different from the ROE data that was previously analyzed, but still a concern nonetheless. Granted, they are barely trying to attract consumers from around the world, but right now they need to focus on impressing their current consumers which will be discussed in another page. To put it short, K-Swiss needs to focus what they are currently successful with before taking big steps.

Activity ratios are used to calculate a business's sales for every asset account by using at least twelve different formulas, but three will only be used for this analysis. First we observe K-Swiss's asset turnover data which specifies the total number of sales that is created from every single dollar of asset. The last five years has proven that K-Swiss has a very high profit margin due to their very low asset turnover numbers. Their profitability ratio data may have shown some signs of struggle, but their profits soared through the roof. The one noticeable issue K-Swiss had with the activity ratio table was their fixed asset turnover. Their numbers dramatically decreased during the last five years and that may be due to the fact that they were more focused on their expansion rather than their current consumers. Regardless of what the data displays, K-Swiss is a very successful company and has an even brighter future.

Financial Analysis data provided by financial website morningstar.

Investopedia was used to plug in formulas for KSwiss's financial data.