Exhibit 7:

ADIDAS COMPANY
Return on invested capital ratios
2015 2016 2017
1. Return on asset 5% 7% 7%
2. Return on common equity 11% 17% 17%
3. Disaggregation of ROCE
RNOA
LEVERAGE
SPREAD
ROCE=RNOA+(LEV*SPREAD)
where
NOA 2,133 2,121 2,354
NFO (NOA – Equity)
Shareholder’s equity 5,666 6,472 6,450
NOPAT 635 895 1,242
NFE (NOPAT – NI) 142
NET INCOME 640 1,020 1,100
6. Disaggregation of RNOA
NOPAT 635 895 1,242
NOA
RNOA= NOPAT/NOA

Return on invested capital:

The return on invested capital ratios for adidas are reported in exhibit 7. These ratios reveal several
insight. The return on assets is stable for year 2016 and 2017. Adidas return on assets (7% for year
2016 and 2017 of exhibit 7) has increased. The return on assets is increase in 2016 and 2017. Year
2015 shows that these years low return are due to divestitures and restructuring charges. Yet we
must keep in mind the marked increase in return for year 2016 and 2017. Restructuring programs
and cost cutting efforts profit margins are higher.
Adidas return on common equity are 11% in 2015 that exceeds in 2016 and 2017 that is 17%. And
adidas improve its performance in 2016 and 2017. The source of improvement is due to a solid
improvement in return on assets and to a lesser extent, an increase in financial leverage coupled
with a positive spread. The overall performance of adidas is improved in 2016 and 2017.

RECOMMENDATIONS:

The adidas company`s current ratio is increased by 1.37 in financial year 2017; however, which
means they have sufficient current asset to cover the current liabilities. Therefore company should
invest that extra current asset in the business to increase profits and to achieve sustainable position
in marketplace.

The company has a good working capital turn over compared to the previous year which means
that the company has been using their current asset in an effective way, however, company
should maintain their effectiveness in future operation, therefore, they need to utilize their asset
in productive manner and also should implement new strategies to reduce waste and increase
profits.

The debts should be reduced because liabilities need to run the company and increase the
profits of shareholders but when debts financing cost surpasses the return, the company may
starved of funds.

The company should control and reduce operation cost that influence the production which will
lead to protecting and increasing present net profit margin.

The product sale should be increased along with their price to acquire more working capital which
will help to fund future operations.

Company should utilize all its asset to increase organization profits and productivity and invest
extra cash and equivalent to increase sale that would help to increase share price and investment
in open market.

Company should issue high equity from shareholders to minimize debt may by planning
new expansions to shareholder interests. Company should reduce stock in their current asset
by increasing sales that would be helpful to increase profits margins and value of shares.
Introduce a new quality assurance practice and procedures for the entire business cycle to increase
sales.