United Parcel Services Case Study Solution
Industry Analysis
To make the customers service effective and efficient, many multinational and domestic companies provide logistics and transportation services to confirm a synchronized movement of goods from its origin to the potential consumer through various networks. The US logistics markets is the leader among different logistics markets.
The logistic industry of U.S is highly integrated which links the producers and the consumers through different channels of transportation. For instance; freight rail, Air and express delivery services, maritime, trucking etc. UPS is the leading logistic company in the U.S logistic industry.
The international logistic market enjoys a significant growth with the growing demand of different type of goods around the world. With the growth of efficient business environment, the use of high-tech machines has increased which also impacts the logistics industry in a positive manner. Further, the demand for logistics companies has increased as the consumers are now more advanced and encourages online platforms more as compared to the physical stores. Due to the increase in demand of online shopping and other deals, the logistic industry achieved an enormous growth.
The significant increase in the international trade and businesses of developing and developed economies, the rapid increase in the information technologies and transportation worldwide, are the major factors of the increasing trend in logistics industry.
The following key factors had huge impact in the growth of the logistics industry:
Increasing Trade Agreements:
The development of international market is an important factor in fueling the growth of logistic industry. With the increased trade agreement, the services of logistic industries are become vital for the customer who need on time delivery of their desired products. Thus, increase in the trading activities enhanced the growth of logistics industry.
Technological Advancements:
The rapid growth and advancement in the IT and technology influences the growth of logistics industry to a greater extent. The upgraded logistics infrastructure with the use of high-technologies and IT enhances the growth of Logistics Company, eventually logistic industry. The up graded technologies used for the delivery of goods encouraged the demand of timely deliveries among the consumer which fuel the growth of logistic industry.
Advancement of E-Commerce Industry:
The advancement in the E-commerce industry greatly influence the growth of logistics industry. As the online selling and buying of goods through internet is increasing enormously the demand for the advanced logistic companies is also increasing which in turn increase the growth of logistics industry.
Financial Data Assembling
Financial data, including balance sheet and consolidate income statement for the analysis has been gathered from the financial report of fiscal year 2016 and fiscal year 2018 of the company. During analysis, it is observed that the net income of the fiscal year 2016 was a little bit change in the financial report of the fiscal year 2018. The reason of this could be that, might be company has changed its accounting rules or policies due to which it has to make some changes in the 2016’s financial report. Beta, risk free rate and market risk premium has been taken from Yahoo finance and Bloomberg because it was not available in the financial reports of the company neither on the company’s website.
Adjusting Accounting Information
The adjustment of marketable securities has been done on the basis of information provided in the annual report of the company. Marketable securities are break down in different securities. Total trading marketable securities are comprises of corporate debt securities, non-U.S. government debt securities and carbon credit investments. The company did not purchase non-U.S. government debt securities since 2016. The total marketable securities value is decreasing each year. In the fiscal year 2015, total marketable securities were amounting $1429 million but in fiscal year 2018 it reduces to $139 million. The current available for sale marketable securities are comprises of U.S. government and agency debt securities, mortgage and asset-backed debt securities, corporate debt securities, U.S. state and local municipal debt securities, equity securities and non-U.S. government debt securities. The total available for sale marketable securities are increasing each year. In the fiscal year 2015, available for sale marketable securities were amounting $567 million and it raises to $671 million in 2018. The sum of both the trading and available for sale marketable securities is $1996, $1091, $749 and $810 in the fiscal year 2015, 2016, 2017 and 2018 respectively.
Reformulation of Income Statement and Balance Sheet
The reason behind reformulating the income statement and balance sheet is to separate each activity such as operating, financing and other activities. Operating activities include the operating assets and liabilities which helps to generate the operating income and expenses to which business manages cash flows and by using it, they expand their business for future growth. Financial activities include the financial assets and liabilities that helps to generate the financial income and expenses (other than the operating income and expenses). Financial activities include those activities to whom business raises and stores cash. These resources do not add any value to the business until and unless they will be utilized wisely in profitable activities such as investing and generating interest income from them or to expand globally.
The criteria to define and classify each head and accounts are different among different industries such as the reformulating method for an industrial company like retailer, manufacturer, service provider, mining company, technological business, agricultural activists are opposite to the method of classification that financial firms like banks, investment companies, insurance companies, portfolio makers and much more. Industrial companies classify bank loans, deposits, lending, borrowing as financial items but the bank classify all of these as their operating items because the lending, funding, and deposits are their core business functions which surely classify in its operating activities.
Financial statements include the income statements, balance sheets, statement of changes in stock holder’s equity, cash flow statement, and notes to the financial statements. These financial statements provide information about business operations and their financing options. The company uses these financing options to make many effective operational decisions. Against it, investors use this information to examine the businesses and industries for determining its future growth and opportunities………….
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