StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Fedex Analysis: Management, Lender, and Competitors Scenarios - Essay Example

Cite this document
Summary
The paper "Fedex Analysis: Management, Lender, and Competitors’ Scenarios" will begin with the statement that accounting, which involves the collection, organization, summary, and analysis of financial information about an entity, is important to diversified stakeholders’ decisions…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.9% of users find it useful
Fedex Analysis: Management, Lender, and Competitors Scenarios
Read Text Preview

Extract of sample "Fedex Analysis: Management, Lender, and Competitors Scenarios"

UPS analysis Accounting, which involves collection, organization, summary, and analysis of financial information about an entity, is important to diversified stakeholders’ decisions. Examples of such stakeholders are an entity’s management that may use accounting information to evaluate its performance and initiate improvements, credit institutions that may use the information to evaluate an entity’s liquidity and leverage position, and stockholders and potential investors who may use the information to forecast returns. This paper offers analysis of UPS accounts with focus on management, lender, and competitors’ scenarios, and comparisons with its main competitor. Management Scenario Shareholders expressed their dissatisfaction, in the latest shareholders meeting, on effectiveness of management of the company’s resources. The shareholders are justified in their opinion because even though the company reported strong profitability ratios, its activity rations are very weak. Activity ratios such as days of sales receivables, days of sales in inventory, accounts receivables turnover, inventory turnover, and asset turnover ratio are too weak to warrant dissent opinion from shareholders. Ratios such as return on assets and profitability ratios are however high and should be appreciated. The company’s management of its resources is worse than that of its main competitor, FedEex, because its ratios are worse than ratios that FedEx posted on activity. In days sales receivables, for example, UPS reported values higher 300 days in its considered periods while FedEex reported 43.31 days. In order to improve the company’s situation, I can ensure implementation of effective marketing strategies for better turnover and introduce new policies for credit sales. Lender Scenario As a loans officer for a commercial lender, I would approve the company’s request for a loan. I would concur with the company’s position that its stock is undervalued because of the unjustified shareholders’ opinion on the company, which may be shared by potentials investors to have adverse effects on the company’s stock prices. In addition, the buyback may improve value of its stock. Taken as a short-term loan, it will reduce strength of the company’s current ratio and quick ratio because of increased value of current liabilities when current assets remain constant. If taken as a long-term loan then it will worsen the company’s debt ratio that is already weak, below 1.0. Debt to equity ratio, which is already weak, will worsen because while the load will increase the company’s debts, it has no effect on equity as it only transfers shares from shareholders to the company. The company should not change its capital structure because the current structure establishes its competitiveness in terms of profitability, which is its primary objective. This is because it has better profitability ratios. In addition, the current capital structure guarantees short-term stability while ploughing profits promise improvements in solvency ratios for long-term stability. Changing the capital structure by buying back shares also offers no remedy to the poor activity ratios that the company is experiencing. I would apply a fixed interest rate to the loan because the company posts consistent profitability ratios. This means consistency in their ability to pay and therefore uniform distribution of risk over the repayment period. Profitability/Investor Ratio Analysis Profitability analysis UPS reports high profitability ratios that are also consistent over time. Its gross profit margin has been constant at 100 percent and while this is an outstanding level of profitability, it promises future consistency. Consequently, long-term profitability, on gross profit, can be inferred on the company. Ability to generate gross profit is also commendable because it compares with the ratio for the company’s main competitor, FedEx, which reported 98.77 percent. Operating profit margin for UPS has been volatile over the past five years, but within a range of higher percentages. The lowest of its operating profit margin has been 65.45 percent and this undermines potential fears of the volatility. The ratios are further outstanding as they are far beyond average ratio of the key competitor that is at 3.73 percent. Difference in the ratio, from gross profit ratio, also means that UPS is efficient in managing its operational costs than FedEx is. Like operating profit margin that reports volatility over accounting periods, net profit margin has been volatile about a value of 60 percent which is however a significantly high value. This is also very high, compared to reported net profit margin by FedEx that is only 3.55 percent. Return on assets and return on equity are other profitability ratios into understanding the company’s performance. There is a significant level of volatility in the company’s Return on Assets ratio with 3.26 percent as the lowest value and 12.66 percent as the highest value. The ratio’s average is however significant and is higher than that of the main competitor. Return on equity reports the same trend and difference from corresponding ratio from FedEx. However, total assets turnover and fixed assets turnover rations are lower for UPS. Unlike FedEx that reports an average total asset turnover ratio of 1.39, the highest ratio for UPS is 0.19. The highest value of UPS’ fixed turnover ratio, over the five-year period, was 0.31, compared to FedEx’s 2.04. The analysis therefore reveals higher and sustainable profitability for UPS. The lower turnover ratios can be attributed to high asset base for the company than asset volume for its competitors such as FedEx. Consequently, investors should have confidence in UPS’s sustainable profitability. Investor ratio analysis UPS also offers better investor ratios. Though volatile, the company’s price to earnings ratio is significantly high, with a minimum ration of 19.06 over the past five accounting periods. The ratio has further reported an increasing trend over the past three years and that can be forecasted. In addition, the company’s price to earnings ratio is better that its competitor’s average, 17.07. Dividends payout ratio, though with a level of volatility, is high for UPS than for its competitor whose average value is 0.03. The lowest value for UPS’ ratio over the past five years is 0.13. The better offer is also evident in dividend yield. Earnings per common share is however lower for UPS, than FedEx, and shows a significant level of consistency in a decreasing trend. Conclusion UPS therefore reports good profitability, liquidity, and investor ratios that are well above its main competitor, FedEx. Even though its activity ratios and solvency ratios are weak, this should not be a concern because the company operates profitably and is able manage its long-term debts. The lower earnings per common share could therefore be the source of shareholders dissent opinion over management’s effectiveness. Though the low activity ratios justify shareholders’ opinion and the company can get a loan to repurchase its shares, increasing earnings per common share is a better alternative (Debarshi 65- 77). Works cited Debarshi, Bhattacharyya. Management accounting. New Delhi: Pearson Education India, 2011. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Fedex Analysis Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Fedex Analysis Essay Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/finance-accounting/1648659-fedex-analysis
(Fedex Analysis Essay Example | Topics and Well Written Essays - 1000 Words)
Fedex Analysis Essay Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/finance-accounting/1648659-fedex-analysis.
“Fedex Analysis Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1648659-fedex-analysis.
  • Cited: 0 times

CHECK THESE SAMPLES OF Fedex Analysis: Management, Lender, and Competitors Scenarios

FedEx International Aviation Policy

In the international arena, there are many competitors of FedEx who are also striving to achieve the leading position in the logistics and shipping market.... ompetitive One of the biggest competitors of FedEx is UPS (United Parcel Service).... Besides UPS the other competitors of FedEx are Japan Post, TNT N.... The paper "fedex International Aviation Policy " discusses that a logistics company such as fedex has a great opportunity to expand its business in China as well as Canada....
13 Pages (3250 words) Research Paper

Globalization and Business IT

The aim of this proposal has been to follow a proper research methodology which includes all the basic techniques of research and analysis for obtaining certain conclusion regarding the future plans, present operations, competitors and market standing of the company.... The paper intends to provide a research proposal for the topic of ‘information technology and globalisation's contribution to business for improving the supply chain cycle in a global scale: an illustration of fedex....
12 Pages (3000 words) Research Paper

Analyzing DHL from the Air - Freight Sector

This paper "Analyzing DHL from the Air - Freight Sector" discusses the performance of the air freight service industry based on the external and internal analysis of an organization.... While conducting the external analysis, PEST analysis and Porter five forces have been considered and in the case of internal analysis, various aspects such as assets, strengths, weaknesses, and customer segmentation, are kept in view.... The analysis highlighted the potential threats and opportunities that the organization can face and it highlights the strengths and weaknesses of the organization....
8 Pages (2000 words) Essay

Building Quality into Services

(INSEAD CEDEP 1988) Carlzon being a sharp and intelligent business leader at once noticed that due to stagnation in the market and over the capacity company was losing its market share against competitors.... Resource-based theories of strategy As discussed earlier the previous management was more interested in acquiring the planes of the latest technology and also of larger size....
13 Pages (3250 words) Case Study

Managers in a More Integrated World Economy

However, on the positive side, competitors are essential to spur companies to strive to do better.... Although competitors have a potential of derailing a business, they are also indispensable learning tools for managers who want to get ahead of the competition-both today and for the future.... Before a manager takes a move, an inventory of competitors should be taken.... Consequently, they gained a larger chunk of the market compared to their competitors....
3 Pages (750 words) Essay

International Strategy of United Parcel Service

UPSs key services include logistics and distribution, transportation and freight, freight forwarding, international trade management, and customs brokerage.... One of the most important and difficult task for the top management is to create effective strategies for the company and more difficult is the creation of an International Strategy.... Basically, UPS was involved only in the movement of goods, but by the time, it understood the new trends of markets and started providing various services including logistics and distribution, international trade management, customs brokerage, consulting, mail, e-commerce, and a variety of financial services....
10 Pages (2500 words) Case Study

TNT Courier Service

ravens (2008) states that courier, logistics, and transportation are a highly competitive industry across the globe – with strong competition from competitors such as UPS, and FedEx.... The paper "TNT Courier Service" highlights developing a marketing strategy plan for TNT Courier Service based on various strategic management tools and techniques that would be applied at various instances in this paper.... The following section is a detailed Situation analysis & SWOT of TNT Courier Services....
11 Pages (2750 words) Business Plan

FedEx Corporations Measurement of Success

The paper 'FedEx Corporation's Measurement of Success" is a great example of a management case study.... The paper 'FedEx Corporation's Measurement of Success" is a great example of a management case study.... This company also offers multiple integrated forms of business applications by carrying operations, competition and management in a collaborative and effective manner (FedEx, 2014a).... The present status of fedex Corporation represents it to be one of the leading courier delivery corporations currently operating in the global market....
17 Pages (4250 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us