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Thus, FedEx can utilize assets more efficiently.2) Liquidity Analysis11
Current Ratiomeasures the ability of the company to pay off its short-term debt by using current assets whereas Cash from Operation Ratiomeasures the ability to pay off its short-term debt by relying on cash from business. According to the analysis, UPS has higher ability to meet short-term obligation by relying on either cash from operation or current assets.3) Solvency AnalysisDebt to Equity Ratio or D/E Ratiomeasures the company’s financial leverage. This ratio helps to indicate how much debt a company is using to finance its investment. Times Interest Earnedor Interest Coverage Ratiomeasures the company’s ability to pay its outstanding debt by using operating profit from the operation. The higher the better.According to the analysis, even though UPS has higher financial leverage than FedEx, UPS has higher ability to pay its outstanding debt by using operating profit from the operation. On this other hand, FedEx’s Times Interest Earned Ratio has increased due mainly to the lower D/E Ratio.12
4) Profitability AnalysisNet Profit Margin Ratio (NPM)measures a company’s ability to generate profit from business operations after deducting all related expenses.UPS has better performance in generating profit; however, FedEx’s NPM has been increasing at a stable growth.Return on Assets Ratio (ROA)measures the ability of the company to use its invested assets to generate earnings. Whereas, Return on Equity Ratio(ROE) measures the ability of the company to generate profits or earnings from its shareholders investments. According to the analysis, UPS has higher ability utilize assets to generate profits or earnings to both the company and shareholders. 13
5) Growth AnalysisOverall, FedEx has higher growth in terms of sales, book assets and net income, reflecting a positive sign to the investors which could reflect in P/E ratio and stock price of the company.In conclusion, FedEx has outperformed UPS in terms of assets management and growth; whereas, UPS has outperformed FedEx in terms of generating sales and profits, dominating the market.As mentioned earlier that growth measurement could reflect directly to a company stock price. Below is the analysis of the stock price for FedEx and UPS.14
Both FedEx and UPS’Earnings per Share (EPS)continues to increase, reflecting positive performance of the business; whereas, Price to Earnings Ratio (P/E)and Stock Pricehave same positive movement, reflecting positive investor’s expectation.Once UPS stock freely traded in the stock exchange at fair-value, stock price has increased sharply since 1999, exceeding FedEx. In addition, UPS has higher P/E since 1999, implying the positive investor’s confidence level.