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Ups Financial Analysis Paper

1337 Words6 Pages

Introduction
What started in 1907 as a small, foot, bike, and streetcar messenger service in Seattle has grown to become the mammoth package delivery company we know today as United Parcel Service (UPS). Shifting to retail delivery in the 1920’s, pioneering both the consolidated delivery process and the first mechanical sorter and conveyor belt, and fighting legal battles for the right to operate delivery vehicles within each state have all been important factors in the incredible growth of UPS, which now produces 6% of the United States’ GDP and delivers 13 million packages to addresses in over 200 countries each day.
Amidst fierce competition from FedEx and the United States Postal Service (USPS), UPS has continued to stay relevant and profitable …show more content…

In fact, the ROE percentages of UPS are almost triple FedEx percentages in 1997. As Return on Equity is an overall measure of how efficiently a company uses their equity to generate profits, and ROA, how well it uses its assets to produce profits, it seems that UPS’s successful focus on efficiency flows to their financial outputs as well. ROE is also one of the foremost measurements investors use in their investment decisions.
Net margin, measuring how much of each dollar of revenue a company brings in results in profit is, in a way, another measure of efficiency. Lower net margins can still be very profitable if the company also has very large revenues. However, in this case, UPS has larger revenues and a higher net margin than FedEx, making them a more profitable company.
Due to UPS consistently outperforming FedEx in ROE, ROA, and net margin percentages, it would be wise to use other “Best of Breed” companies as benchmarks to value UPS stock rather than FedEx. UPS’s strong financial ratios discussed above, along with UPS slowly taking market share from FedEx in the overnight mail delivery method and maintaining dominance in the ground delivery method (despite FedEx acquiring RPS), UPS’s sustainability of their current strong performance looks …show more content…

Instead, it was an opportunity to grow and separate themselves from competition even further. In doing so, they set themselves up to have accountability in the future. Public traded companies convey a positive image and shows that the company is growth oriented. Growth initiatives was the main idea of going public. UPS did not have to borrow money from traditional sources in order to grow the business. They were able to have new capital, even though UPS strapped for cash, to put into multiple areas if they wished to do so. “New capital may be spent on marketing and advertising, hiring more experienced personnel who require lucrative compensation packages, research and development of new products and or services, renovation of physical plant or new construction and dozens of other programs to expand the business and improve profitability.”

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