Fluent Essays

Company name: UPS Please use the same numbers mentioned in the attached document wherever required for the new work. The purpose of the third part of the comprehensive project is to use resources available to obtain industry averages for commonly used ratios. Additionally, you will compare company ratio results to industry averages. Obtain the four-digit primary SIC (Standard Industrial Classification) Code and industry title for your company. Record the primary SIC code and industry title at the top of the Ratio Analysis Worksheet. Obtain industry averages for commonly used ratios in the current period. Industry average information is reported by industry title or SIC code. Look up the following industry-average ratios: Current ratio Debt ratio Gross profit margin Times interest earned Accounts receivable turnover Inventory turnover Return on Sales Asset Turnover Return on Assets Financial Leverage Return on Equity ANSWER AND COVER ALL THE POINTS MENTIONED. Write a 4 page report comparing the above ratios to industry averages. Discuss whether your company's profitability, efficiency, liquidity, and solvency are better than, or worse than, its peers. The report should be well written with a cover page, introduction, the body of the paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font. 1 7 Financial Ratio Analysis of United Parcel Service BA 620 – Managerial Finance Group Project (Part II) Group J With Dr. Sunny Onyiri Campbellsville University Praneeth Kolar 574526 John Milton Thota 581459 Thirupathireddy Badikela 581190 Sandeep Bathoju 578592 Venkat Gogu 574345 Financial Ratio Analysis of UPS Company United Parcel Services (UPS) Company Ratio Formula 2019 2018 Debt ratio Total Liabilities/Total Assets 54564/57,857= 0.943 46,979/50,016= 0.939 Gross profit margin Revenue-COG/Revenue (74,094-66,296)/74,094= 0.105 (71,861-64,837)/ 71,861= 0.098  Free cash flow Operating cash flow - capital expenditure 7,798 -(6,380) = 14,178 7,024 -(6,283) = 741 Times interest earned EBIT/Interest Expenses 7,798/ (653) = -11.94 7,024/ (605) = -11.61 Accounts receivable turnover Total Turnover/ Avg Receivables Inventory turnover COGS/Avg Inventory 66,296/ 64,837/ B.    Prepare a DuPont Analysis of ROE for two years, including computations of United Parcel Services (UPS) Company Ratio Formula 2019 2018 Return on Sales Operating Profit/Net Sales 7,798 / 74,094= 10.52% 7,024 /71,861 = 9.8%  Asset Turnover Sales/Assets 74,094/57,857= 1.28 71,861/50,016= 1.44  Return on Assets Net income/Average Assets 4,440/ 57,857= 0.077= 7.7% 4,791/ 50,016= 0.096=9.6% Financial Leverage Debt/Equity 54564/ 3,283= 16.62 46,979/ 3,037= 15.47 Return on Equity net income/ shareholders' equity 4,440/3,283= 1.35 4,791/3,037= 1.58 DuPont Return on sales*Asset turnover*Financial leverage 0.1052*1.28*16.62= 2.24 0.098*1.44* 15.47= 2.18 Report Introduction Financial management and planning are critical to the existence of any organization; a company's financial performance must be assessed on a regular basis in order to ensure that it is in good shape. Companies' financial strength and weaknesses are determined by using ratios, and policies to improve financial efficiency are developed in response to this information. This type of ratio can also be used by stakeholders to measure the financial performance of an organization and to analyze the effectiveness of the management team in charge of the business's financial operations. This report gives an evaluation of United Parcel Services' financial ratio analysis, which is based on financial ratios (UPS). Also discussed is whether the profitability, efficiency, liquidity, and solvency of the company are increasing or degrading over the period under review. Finally, the report will make recommendations to the organization on how to improve the ratios that are showing signs of trouble. Data Analysis and Discussion The information gathered from United Parcel Services (UPS Company) income statement and balance sheet was studied in order to determine the company's profitability, efficiency, liquidity, and solvency. On the income statement, it can be seen that some profits have been earned. When comparing the balance sheet from 2018 to 2019, the total liabilities are less than the total assets, indicating that there are no significant difficulties with the company's solvency. Company's profitability, efficiency, liquidity, and solvency Profitability This is a measure of a company's overall success in the industry, according to Forbes. It is possible to estimate the profitability of a corporation by utilizing the profitability ratio. The profitability ratio examines how much profit is produced in relation to sales, net assets, and net worth, among other things. Approximately 74,094 million dollars in revenue was generated by United Parcel Services (UPS) in 2019, while 71,861 million dollars was generated in 2018. In 2018, the company's gross profit margin was 9.8 percent, and it will be 10.5 percent in 2019. In 2018, the total assets of the company were 57,857, and in 2019, they were 50,016. Considering revenue vs gross profit and total assets for the year 2018, UPS was a profitable company (Coulon, 2020). Efficiency The inventories and receivables of a firm are used to judge whether or not a company is a worthwhile investment or not. Keeping inventory levels low will help the company remain efficient because it signifies that the inventory is in line with the company's revenues. Both in 2018 and 2019, there is no information available on the UPS company's inventory. Because of a lack of this information, it is difficult to assess the effectiveness of the company. Liquidity: Defining liquidity as the ability to meet short-term financial obligations is a difficult task. The liquidity ratio measures the company's capacity to meet its debt repayment obligations. When comparing a company's liquid assets, which are assets that can be converted into cash, this is calculated. Unilever's short-term debt stood at 15,413 million dollars in 2019, up to 14,087 million dollars in 2018. Due to the fact that short debt amounts are less than revenue, the company has the ability to satisfy its short-term debt obligations, indicating that its liquidity levels are adequate. This also demonstrates an improvement in the company's liquidity (Coulon, 2020). Solvency: The ability of a corporation to make long-term debt payments, including interest, is referred to as its solvency. The long-term debt of the UPS company was 54,574 dollars in 2019, compared to 46979 dollars in 2018. Taking into consideration that net worth equals assets minus liabilities. In 2018, the company's net worth was 3,021 dollars, and in 2019, it was 3,283 dollars. Because the long-term debt levels are smaller than the company's net value, the ability of the company to satisfy its long-term debt obligations suggests that the company is economically solvent. The company's solvency is also improving, as can be seen in the financial statements (Coulon, 2020). Financial Performance An activity ratio is calculated in order to measure the financial success of a company as well as the use of the assets that the organization possesses. The Activity ratio can be used to determine the rate at which a company's asset and liabilities accounts are converted into sales revenue. As a result, the activity ratio is a method of evaluating the financial performance of a company or organization (Simon, 2018). A ratio of inventory turnover, receivable turnover, and total asset turnover is used to determine how much activity is occurring in inventory, accounts receivable, and accounts payable, respectively. Furthermore, activity ratios can be used to determine the efficiency of a corporation in several areas such as expenditures and inventory management. It is possible to evaluate the efficiency with which a corporation manages its entire assets by examining these ratios. Conclusion This study has offered an examination of the financial ratios of United Parcel Services, which has been evaluated (UPS). The goal was to establish whether the company's profitability, efficiency, liquidity, and solvency were improving or deteriorating, and to make recommendations for improvement. When comparing the financial results of 2018 and 2019, it appears that the company's profitability, efficiency, liquidity, and solvency are all improving. References Coulon, Y. (2020). Key liquidity and solvency ratios. Rational Investing with Ratios, 47-62. doi:10.1007/978-3-030-34265-4_3 Coulon, Y. (2020). Profitability and performance ratios. Rational Investing with Ratios, 85-104. doi:10.1007/978-3-030-34265-4_5 Simon, G. (2018). Part V liquidity and leverage, 23 the leverage ratio. Gleeson on the International Regulation of Banking. doi:10.1093/law/9780198793410.003.0023