Oxford Brookes University

[Link]. Project

ACCA Registration No: XXXX

Period: XX

Word Count: 7,491

Contents
Part-One......................................................................................................................................................X
Conversation of Selection of [Link]. from OBU.......................................................................................X
Conversation of selection of subject.......................................................................................................X
Conversation of selection of industry and company...............................................................................X
Research Points and Questionnaires......................................................................................................X
Approach for research project................................................................................................................X
Part-Two.....................................................................................................................................................X
Primary data...........................................................................................................................................X
Secondary data.......................................................................................................................................X
Different sources of secondary data.......................................................................................................X
Limited sources.......................................................................................................................................X
Legitimacy of Information...................................................................................................................X
Obsolete data.....................................................................................................................................X
Prejudiced Data and information........................................................................................................X
Theoretical knowledge.......................................................................................................................X
SWOT Analysis........................................................................................................................................X
Limitations of SWOT-Analysis.............................................................................................................X
PESTLE Analysis.......................................................................................................................................X
Limitations of PESTLE Analysis............................................................................................................X
Ratio Analysis..........................................................................................................................................X
Profitability Ratios..................................................................................................................................X
Liquidity Ratios.......................................................................................................................................X
Solvency Ratio........................................................................................................................................X
Investor Ratio:........................................................................................................................................X
Ethical issues...........................................................................................................................................X
Part-Three..................................................................................................................................................X
SWOT ANALYSIS:.....................................................................................................................................X
PESTEL Analysis:......................................................................................................................................X
Ratio Analysis..........................................................................................................................................X
Conclusions and Recommendations.......................................................................................................X
Part-One

1.1 REASONS FOR CHOOSING THE TOPIC

Sample 1
The analysis and evaluation of the business provides an individual
continuous growth and establishes a strength to evaluate company’s
performance. I have personal interest in pursuing a future career as an
investment analyst, which has led me to choose this topic as analyzing, and
evaluating business performance is one of the core jobs of an investment
analyst. As an ACCA Affiliate my qualifying exam was SBL (Strategic Business
leader), which gave me a brief overview on using business and financial tools
to assess performance and position of the business. I believe that this topic
would allow me to exploit capabilities that I have gained from my studies and
prove as an opportunity to work on a practical company. Moreover, the
information to be used in this topic is gained from secondary source which
are easily accessible therefore this topic would allow me to research and
conclude in best possible way.
Sample 2
By choosing topic 8 it will help an individual to assess core aspects of the
dynamic business world which has a crucial impact on company’s
functioning. Further, by conducting research on this topic it will help analyze
changes which take place in the ever-changing market environment and also
will help in tackling those changes. Since my school life I have always been
keen regarding accounting. During my ACCA studies I have been able to
develop technical knowledge and skills further makes me eligible to prepare
and interpret financial statements on the basis of both financial and non-
financial factors. While conducting research analysis on this topic it will make
me eligible to develop better communication skills, better presentation skills,
will help in conducting better analysis and interpretation of both quantitative
and qualitative factors of the business. Further, a better assessment of
overall business strategy and performance can be done.
Sample 3
The topic I have chosen for my research report is topic 5 “Analyze and
evaluate the business and financial performance of an organization which
has performed exceptionally well over a three-year period with a critical
analysis of the reasons for its success”. I chose this topic for my research
because it has a wide range of potential applications and provides layers of
explanation for various organizational stakeholders. I believe that the
organization has both internal and external stakeholders, and the
opportunity to conduct an in-depth ratio analysis on this subject is crucial to
the success of both the project and the organization's performance. I'm
interested in learning more about business analysis because it involves
assessing and evaluating a company's external environment as well as
internal and external aspects that determine how well the organization
performs.

1.2 REASONS FOR CHOOSING THE COMPANY

Sample 1
For the purpose of topic 8, I have selected Continental Corporation
(Continental) as my Principle Company and Bridgestone Corporation
(Bridgestone) as My Competitor Company. Continental corporation is a
German based entity with a head quarter in Hanover. (Henn, n.d.)
Continental is been listed on German stock exchanges as a public limited
company since its founding in 1871. (Continental Corporation, n.d.)
Continental currently have manufacturing plants in
12 countries.

(Continental Tires, n.d.)

Continental Corporation is a renowned Company in its sector and has been

ranked at 3rd as the top regarded company of 2018 with having a rating of
AA+ (Brand Directory, 2018) Continental has also been ranked 4th largest
tire manufacturer globally ([Link], 2018). Researching on top most
companies would enable me to understand strategies and eventually could
help me to accommodate to have better strategic skills for my career
development.

Furthermore, since Continental is a listed entity, it is easy to find out

financial and non-financial information of the corporation. Today Continental
is ranked in top five automotive supplier worldwide (Continental Corporation,
n.d.).

Sample 2
For the purpose of conducting my research analysis I have opted for FED EX
Corporation (FEDEX) as my principle company and UPS (United Parcel
Service) as the rival company. FED EX is a USA based company found in
1971 by Frederick W. Smith and its headquarters located in Memphis
Tennessee, USA. (FED EX corpoartion, n.d). Further, FED EX is listed on
NASDAQ stock exchange (Nasdaq, n.d).
FED EX is among the globally recognized logistic company (FED EX
corpoartion, n.d). FED EX operates in almost 220 countries across the globe
with more the 650 airports functioning as its service ground worldwide (FED
EX corpoartion, n.d).
I myself had some impressive experiences with FED EX, service is
remarkable and their concern about customer satisfaction aspires me to opt
for FED EX as my principle company because it will not only allow me to
conduct an informative research project but also help me learn better
business strategic skills and ways how to maximize profits at the same time
maintain good customer goodwill.

Sample 3
General Motors declared record full-year 2022 revenue of $156.7 billion, net
profits of $9.9 billion attributable to investors, and EBIT-adjusted gains of
$14.5 billion. (Cain et al., 2023) General Motors anticipates robust cash flows
from its automotive operations for the calendar year, including adjusted
automotive free cash flow of $5.0 billion to $7.0 billion and net automotive
cash supplied by operating activities of $16.0 billion to 20.0 billion. (Cain et
al., 2023) General Motors was chosen as my main company primarily
because of these reasons and how well they have performed over the past
three years, with exceptional revenues and profitability. What further piqued
my interest in the company was the fact that, while other players in the
same sector were struggling as a result of the pandemic, General Motors still
managed to perform admirably.

1.3 About the Company

Sample 1

Continental found in Hanover in 1871 named as “continental-caoutchouc-

und-gutta-percha-compagnie”. (Refernce for business, n.d.)They started
manufacturing at their main factory in Hanover, which included soft rubber
products, rubberized fabrics and solid tires for carriage and bicycles.
(Continental Corporation, n.d.).The success began from 1898, when
Continental made pneumatic tires with plain tread and in late 1920; The
Company performed some mergers in the rubber industry to form
continental gummi-Werke AG”. (Continental Corporation, n.d.)

The Continental corporation comprises of 527 companies, including non-

controlled companies, in addition to the parent company Continental Ag. In
2018, Continental generated sales up to 44.4 billion euros and currently
employee around 243000 people in 60 countries. (Forbes , n.d.)

Continental shares have a listed status on German stock exchanges in

Frankfurt, Hamburg, Hanover and Stuttgart. (Continental Corporation, n.d.).
Along with having a listed status in European stock exchanges Continental
also, have trading shares in another continent (USA) as company is part of
ADR program. (Continental Corporation, 2018, p. 11).

Continental corporation have divided its structure in two major groups,

automotive group and Rubber group, which have 5 different divisions. Out of
those five divisions, Tire division contributes most to the company, which is
contributing 25.65% of revenue. (Continental Corporation, 2018, p. 39).

Sample 2
Under the brand name of FED EX many other businesses are integrated and
are operating such as FED EX express, TNT express, FED EX ground and FED
EX freight (macro trends, n.d.). Market capitalization or market value of FED
EX currently is $41.48 Billion in 2019. (macro trends, n.d.).
Recently FED EX is facing difficulties due to downturn in global trade during
2018, in many economies a significant number of population is facing
reduced disposable incomes, lower economic growth also there is a
significant rise in the level of unemployment which restricts people from
spending on such services in addition investors are reluctant to invest in
economies during downturn because profits become unlikely because of
lower spending of consumers this eventually is causing adverse impacts on
the performance of the company (Kelly, 2019). Therefore, FED EX is now
aiming to reduce costs also are taking steps to ensure customer satisfaction
(FED EX Annual Report, 2019).
Fed EX has performed several takeovers like TNT Express, GENCO and etc.
Lately this year FED EX has announced takeover agreement with Flying
Cargo group in Israel (Fed ex, n.d.).

1.4 Industry Analysis

Sample-1
Tire industry comprises of number of competitors, which are stable in the
market. The tire industry output in 2016 have reached almost to 17 million
tons, which is highest from the prior years. (Lee, sept 2018). Further, its’
estimated that tire output is going to grow at a rate of 4 % annually until
2022. (Lee, sept 2018).China represents the biggest market in the world for
tires, thanks to tremendous growth in automotive industry. In addition, the
other leading tire market industries are Europe, Japan and United States
(Lee, sept 2018).
The increase in tire market is also proven by Allied Market Research which
stated that the global automotive market size is projected to reach to $306
billion by 2022, which reflects the growth at CAGR of 7.6% from 2016 to
2022 (Sharma, Jan 17). The tire industry is also going to face an intense
competition to produce highly sustainable, durable and affordable tires as
well as advanced technology to propel the growth in this market. (Sharma,
Jan 17).
In addition, the different tire companies are becoming environment friendly
and focusing to make their products flexible with environment that is
because of increasing awareness among consumers has become a key driver
in growth of global green tire markets. (Market watch, 2018)

This pie chart below gives a break up of a tire industry based on (revenue in
$) among the top manufacturers in 2018. (Statista, 2019) (Tire review,
2019).
Continental revenue from the tire division amounted to 13 billion USD

Sample 2
From the past few years, courier industry has been strengthening and also is an experiencing
strong growth as the sector adapts to the dynamic business world changes (Thorpe, 2016).
Courier industry seems to have a variety of scope for investors in future as it is expected that
the number of parcels delivered each year is estimated to grow by 40% by the end of 2019
(Thorpe, 2016). Many of the companies are exploring different delivering models to encounter
changing market norms and growing customer demands (Thorpe, 2016). Therefore, investing in
this sector for investors can be proven as a profitable option.

In courier industry sector both international and domestic companies enjoy the benefits of high
skilled workforce and substantial low costs (Select USA, n.d.). Investing in this sector is
considered a profitable option by analysts in today’s world as companies stand in a better
position to supply their goods throughout the world’s largest customer market (Select USA,
n.d.).
In order to remain competitive it’s highly essential for companies in this sector to cope with
changes in technology also on the other hand technology advancement has opened a variety of
options for companies to grow (Shapiro, n.d.).

Every industry operating is

bound to follow certain regulation
set by their respective regulators.
Courier industry uses a range of
shipping techniques such as ocean, air and ground transportation (fed ex, n.d.). Shipping
through ocean is mainly controlled by International Maritime Organization (IMO) located in
London which is a United Nation based agency their job is to ensure that marine life is protected
by the harmful activities for the shipping industry (International Chamber of Shipping, n.d.).

From the past few years courier industry is experiencing major growth rates leading to
significant rise in the level of revenues also massively contributing into employment worldwide.
According to the future predications made courier industry is about to touch almost $400 billion
by 2024 (mordor intelligence, n.d.).

Above is the chart which illustrates the top 5 companies where FEDEX and UPS hold the
highest market share in the logistics industry.

Sample 3
In 2023, the US market for the production of cars and automobiles will be worth $104.1
billion with manufacturing of motor cars and its components employs 923,000
Americans, while auto dealers employ 1,251,600 and In 2021, the US produced 9.2
million automobiles, up 4.5% from the previous year. (Ariella, 2023) Over 76 percent of
Americans reported having access to an automobile as of 2022, and an additional 19
percent said they had access to a company or family car, whereas road vehicle and part
retail sales generates more than US$1.5 trillion annually, and the industry has quickly
bounced back from the COVID-19 pandemic. (Alda, 2023) In terms of worldwide
automotive production in 2020, the United States came in second with 8.8 million
vehicles produced. The US automotive industry contributed 3.0% of the country's GDP
in 2020. With a market share of roughly 16.5% as of April 2021, General Motors was the
largest automobile manufacturer in the country. (Gitnux, 2023)
([Link], 2023)

1.5 Overall research Objectives

Sample 1
My primary objective for this project is to conduct financial and business analysis of a company
along with the comparison with its competitors

In order to perform Financial analysis I will be using vertical analysis i.e. ratio analysis and
horizontal analysis i.e. trend analysis

I will be conducting the business analysis by using SWOT and PEST models. These models are
applied to assess the overall environment in which the entity is operated and the company’s
market position.

The research shall be further comprise of the conclusion on the findings and recommendation (If
applicable).

Sample 2

 Prime objective of this research is to perform financial and business analysis on FED EX
corporation in comparison to its rival UPS (United Parcel Service) over a three years period.
 For the purpose of assessing the financial performance of the company vertical analysis
will be used further to assess the trend of revenue over the 3 years period horizontal analysis
will be under taken.
 In order to assess the business environment of the company SWOT model will be used
to analyze the internal and external factors of the company further to understand the factors
which effect the functioning of the company Porter’s five forces model will be used.
 Research conducted shall further consist of conclusions on the findings made and
recommendations if needed or applicable.

1.6-----RAP_Framework:
Sample-1
Objectives stated above require such organization, which should be sizeable. In order to
evaluate the organization’s current position in an unbiased manner, analytical measures among
others are used. This evaluation would involve ratios and its year on year changes. It also
includes trend analysis of revenue year on year. In addition, two business models have used to
evaluate external and internal macro-economic factors. Conclusion and recommendations will
be provided for the company’s performance and further improvements required for business.

Sample-2
Mentioned objectives above require an experienced and sizeable company. Company should
be regarded as a competitive service provider. Honeywell will be evaluated concerning its
position on a fair basis, for which analytical measures would be performed for financial
evaluation. Evaluation process would include proper calculations of ratio and year on year
changes. Business models SWOT and Porter’s five forces model will be performed to evaluate
company’s internal and external and macro-economic factors present while assessing the
standard of the business. Conclusions and recommendations will be provided related to
performance and improvements needed.
 Section 2: Information Gathering,
Accounting and Business
Techniques

Word Count: XX
2.1 What is Information
Information prescribes as one or more statements that’s’ received by human and have some
worth to the receiver (loose, 1998) .Knowledge communicated or received belonging to fact can
be regarded as information. (loose, 1998)

2.2 Sources of Information

Sample-1
Primary Source:
Primary Source is a first formal appearance of original research. (UNSW Sydney, n.d.)

E.g. Questionnaires, interviews Biographies, surveys etc. (UNSW Sydney, n.d.)

Secondary Source:
A secondary source is an information, created by someone who did not, experienced the
firsthand Information. (University of Illinois, n.d.). Secondary sources are interpretation or
restatement of primary sources (UNSW Sydney, n.d.)
E.g. Magazines, books, encyclopedias etc. (American University, n.d.)
For working on this research report and topic 8, I am primarily going to use secondary source of
information, due to time constraint, as they are already published and easily accessible. Further,
secondary sources are less costly as another researcher has already collected data and only
needs to analyze to source own research benefit.
2.3 Sources of information used:
Websites:
In order to perform industry analysis to acquire certain articles for my principle company I will be
using number of websites such as [Link], [Link], [Link],
etc. For my research report. I have also used Company’s own website to know about their
product portfolio and key business segments.
Annual reports:
In order to gather financial and business related data for the company for three years period,
and conducting comparison of performance of the competitors I will be using annual reports for
Continental Corporation and Bridgestone Corporation for the year ending 2016, 2017 and 2018.
In order to have alike comparison I will translate financials of Bridgestone Corporation in Euro,
as its presentation currency was yen and dollar.
Analyst reports:
In order to get current affairs data, I will be using analyst report. It will also help me to have an
external perspective on performance of selected Companies, which will help me to form an
effective conclusion.
Study texts:

To clarify various concepts and to acquire definitions of business models and ratios in particular,
I have used various academic textbooks including ACCA Strategic Business leader (SBL) exam
study text.

Sample 2

Sources which have been referred during this research project are as follows: -
(1) Annual Reports

These reports will be used to gather information of company’s three years period in comparison
to its rival company in order to determine company’s position in the market. Annual Reports will
be used for this research will be of FED EX corporation i.e. the principle company and UPS the
competitor company for a period of 2018, 2017 and 2016.

(2) Websites
To acquire in depth information of the company I’ll be using internet as one of my sources to
gather information to have detailed overview of the company. Websites which I’ll be using are
[Link], [Link] etc. these websites will help me gather strategic
information of the company.

2.4 Limitations of the sources of information used

Sample-1
Annual reports
Biased
Annual reports usually contains management views, these views from Executives may not
reflect market trend rather then it may be suggesting their belief about the company’s viability
(Ray, n.d.).

Historical data
The data present in annual reports presents historical picture of entity. It is difficult to predict
future of the company or to evaluate future strategies of company through annual report.
(Accounting Tools, 2018). For research perspective, it would be difficult for a researcher to
conclude on future strategies by reviewing historical achievements

Analyst report
Costly:
There are different types of report, which can use for research, but research providers charge a
substantial amount. (Krantz, n.d.). While researching I found many analyst reports, which could
help me in better manner to evaluate performance of the selected company; however, I was not
able to use those reports due to cost benefit analysis. Some reports were free, but I found them
lesser useful, however some reports were attracting but they carry significant cost.
Study Text
Old Edition:
One of the major limitations of study texts is they became outdated or old. Therefore, they
cannot use regularly (Teacher Vision, n.d.).
Websites:
Biased
Company’s website can present biased facts or may not present facts on the company’s
performance. The information published could be false and misleading. (Competition Bureau,
n.d.). The Accuracy of information used was checked from multiple sites to avoid using
misleading or fake facts.
Sample-2

Annual Report are biased

Mostly annual reports are biased that is they are portrayed in company’s favor. As annual
reports are generally based on director’s perspective it will act as a constraint for me to draw
meaning full conclusions for my research (Collins, n.d.).

Websites
Too much information is available at a time which can lead to information overload (UK Essays,
2016). As a researcher it will become difficult to assess which information is essential for
research purpose, sometimes important information is over seen due to a lot of availability of
sources and information which will have an impact on my research work.

2.5 Business Techniques:

Sample-1

For conducting business analysis in this research and analysis project in topic 8, I have chosen
SWOT model and PEST analysis, which I had studied in my ACCA SBL Examination
2.5.1 SWOT:
SWOT analysis is a tool used by workers and companies, which enables them to optimize
performance, increases potential, highlights competition and manages risk. This model enables
an entity to take better decisions (Justin Gomer, n.d.). A management consultant named Albert
Humphry discovered SWOT analysis. (Lucid Chart, n.d.).
Strengths’
Strengths are resources that organization have which are used for achieving its objectives.
(Institute for Manufacturing, n.d.). It also highlights the factors, which distinguishes organization
from its competitors. (harness, 2019)
Weaknesses
Weakness are attributes in which organization is underperforming or do not do well.
Weaknesses prevents organization in achieving its mission (Bush, 2016)
Opportunities:
Opportunities are external factors that usually arises due to nature of changes in external
environment (KAPLAN Publishing, n.d.) . Opportunities are good suggestions to capitalize and
gain competitive advantage. (harness, 2019)
Threats:
Threat are also external factors for which organization should take care of. However, one thing
to be noted that organization could not change the threat; they can only protect themselves from
the threat by using appropriate strategies (parsons, 2018)
2.5.2 Limitations of SWOT Model:
Does not priorities and does not provide solutions:
One of the major limitations of SWOT is that it does not priorities issues or does not offer
alternative decisions. (Business Queensland, 2016). As the tool does not prioritize, it can be
difficult for a user that which factor to address first, as all could not handle at one time.
([Link], n.d.).
Opportunity or threat:
Organization might face difficulty in deterring a factor as Opportunity or Threat. Since the SWOT
model has not suggested any criteria to distinguish between them, it can lead to different
judgements. (hall, 2019).
2.5.3 PEST Analysis
PEST analysis is a framework used to monitor the macro environmental factors that can affect
organization performance (Business To You, 2016). PEST is a tool to analyses the factors faced
by organization from external sources. (Oxford College of Marketing, 2016).

Political
The political environment includes government policies and regulations imposed on a product or
industry. (The Economic times , n.d.). The political environment could add further risk or could
lead to a major loss therefore, company should be ready to deal with the outcomes of Politics.
(Pestle Analysis, 2015).
Economic
Economic factors are external market factors, which are constantly changing; these variables
include inflation rates, interest rates etc. Interpretation and analysis of these factors can pay a
vital role in the success of an entity, as they are crucial tool to assess the viability of company’s
performance. (Post, 2018)
Social
Social factors are shared beliefs and attitudes of population. These factors enable marketers to
understand their customers therefore these factors are of interest. (Visual Paradigm, n.d.). As
per Kaplan’s study text Social factors includes population, income distribution, level of education
etc. (KAPLAN, n.d.)

Technological:
Technology is one of the most challenging aspects to deal with. Technology is very influential
these days on both, market products manufactured and services provided. (Post, 2018).
2.5.4 Limitations of PEST analysis
Outdated Information:
The information required in PEST analysis is dynamic in nature and changes very quickly. A
company when required to update its data, they must do a new PEST analysis as data changes
frequently. (harness, 2019).
Does Not Incorporate External Factors
PEST analysis requires four factors to be identified and incorporated but there are number of
other factors, which affects the organization, such as competition etc. (frue, 2018)
Accounting Techniques:
The accounting techniques used in research report are Horizontal analysis (Trend analysis) and
Vertical analysis (Ratio analysis)

Sample 2

3 PORTER’S FIVE FORCE MODEL

Five forces model was invented by Michael Porter in 1979 ([Link],

2013). By the help of this tool company will be able to execute its strategic decisions further it
will also reveal entity’s key powerful aspects in the industry where it operates
([Link], n.d.). Porter’s five force model accompanied by SWOT analysis will give
a detailed presentation of the company’s image in the report.

Threat of new entrants

Competition is always a threat to an entity so potential entrants can sometimes be proven a
major rival in future ([Link], n.d.).
Power of Suppliers
Suppliers can use their bargaining power to threaten companies to lower their quality or charge
higher prices ([Link], 2013).

Power of buyers
Customers can influence prices and quality significantly so in this head motive is to examine the
power of buyers over sellers in a particular industry (Martin, 2018). Power of customers will
affect profitability but can also affect investor confidence so this factor is considered crucial
([Link], n.d.).

Threat of substitutes-
If substitute products are available it can have adverse effects on the business because if the
rival is selling those products at a more reasonable price then they do then customers will tend
to switch to substitutes of those products hence business’s profitability and brand image can get
damaged ([Link], n.d.).

Rivalry among existing competitors-

Intensity of rivalry in an industry where business operates needs to be assessed. When there is
existence of fierce rivalry in the industry businesses have to drop down their price which may
sacrifice on profits ([Link], n.d.).

-LIMITATION OF PORTER’S FIVE FORCES

This model is a great tool but comes with limitations as well that are as follows-

Assumption of Static market

This model suggests that market is assumed to be static so the factors determined will also
remain static this is highly unlikely in today’s dynamic moving market (Samson, 2017).

Problem of operations in Single Industry vs Multiple Industries

Many entities tend to operate in multiple industries rather just single industry. In this case
porter’s five forces model is not suitable for the entity as findings will not fit every industry in fact
it will be specific to one particular industry ([Link], n.d.).

Needs to be paired with other models for evaluation

There are many other factors which can have a crucial impact on company’s functioning in order
to have a better evaluation of business’s performance this model needs to be paired with any
other model like SWOT, PEST, value chain model etc. (Parikh, 2018)

Sample-1

2.6 Horizontal analysis:

Horizontal analysis is a technique used to evaluate changes in the items of financial statements
over a period of time, (Accounting For Management, n.d.).

2.6.1 Limitation of Horizontal Analysis

Less Accurate in Inflationary Situation:
The data taken for comparison may have an affected of inflation and may provide misleading
result. (Subho, n.d.).
Ignores Qualitative factors:
One of the major limitations of financial statement analysis is that it does not consider qualitative
factors, which help organization in achieving its strategic goals. For e.g. employee morale,
customer relationship etc. (WallstreetMojo, n.d.).

2.7 Vertical Analysis:

Vertical analysis is another tool used by entities in which each line item of financial statement,
calculated as a percentage comparing with another base item. (WallstreetMojo, n.d.)

2.7.1 Categories of Vertical Analysis:

Profitability Ratios
Profitability ratios enables investor to evaluate companies’ ability to generate profit over its
expenses for a particular period. (Clear Tax, 2018).

Gearing Ratios
Gearing ratio is a tool used to risk associated with in the entity. It is a financial ratio, which
assess how much debt has the company taken against its total equity. (Peavler, n.d.).

Liquidity Ratios
Liquidity ratios suggest firms’ ability to pay off its current and non-current liabilities. (My
Accounting Course, n.d.)

Working Capital Ratios:

Working capital ratio relates to working capital, which is arrived by deducting current liabilities
from current assets. (WallstreetMojo, n.d.). This is an important ratio for creditors, as they would
be highly interested in working capital management of a company, therefore effective working
capital policies could help in making the ratios better.

Investor ratios:
These ratios are important for the investor who are eventually shareholders of the company.
This ratio is a tool to measure the company’s performance in market, These ratios will make
potential investors confident regarding the profitability of the company. (Financial dictionary,
n.d.)

-Limitations of Vertical analysis:

Accounting policies:
Different companies have different policies regarding different transactions. This means
comparing ratios of different companies cannot be regarded as like with like comparison.
(Accounting Tools, 2018). The limitation I would be facing as my Principle and Competitor
Company can have different policies, or both can be of different size, so analyzing performance
based on ratios affected by the policies will be less likely comparison.
Need to Use judgement:
The key issue is to determine whether the ratio is in reasonable range. Although there are
number of financial ratio to assess growth, but they cannot be used alone. (Elaine henry, n.d.).
Ethical Consideration:
The project has been prepared by taking into account ethical considerations. I have made best
efforts in order to gather details form reliable and valid sources to have an unbiased conclusion.
The results I researched from third parties have cited by using Harvard referencing method in
order to avoid plagiarism. This project is for academic purposes.

Sample-2
HORIZONTAL ANALYSIS

2.4.2 Limitations of Horizontal Analysis

Changes in Accounting Policies and Inflation

Factors such as inflation, interest rates, changes in accounting policies can highly affect the
results of the trend analysis if changes in these factors are not taken account then the results
are totally misleading and not comparable (Anastasia, 2015).

Historic data used

Financial statements consist of data which is generated by past performance of the company.
Therefore, the analysis carried out will become more like of an assumptions and assumptions
vary from person to person thus there is an element of subjectivity here ([Link],
n.d.).

2.4.3 VERTICAL ANALYSIS

Vertical analysis also referred to as ratio analysis is a tool where each line item of the financial
statements is expressed in terms of percentage of another item. The most likely use of this
technique is to observe proportions of accounting balances in a single reporting period
(accounting [Link], 2019).

PROFITABILITY RATIOS

Every organization’s ultimate aim is to earn profit. Profit is regarded as a sign of improvement
for that purpose, we calculate profitability ratios to evaluate whether the company is utilizing its
assets in a useful manner to earn (corporate finance [Link], n.d.).

GEARING RATIOS

These ratios are calculated in order to measure the proportion of company’s borrowings in
contrast to its capital. This ratio is used to indicate financial risk of the company, also it helps in
assessment of company’s ability to repay debts as excessive debts can lead to financial
difficulties and will also lead to loss in investor confidence (accounting [Link], 2019).
LIQUIDITY RATIOS

Liquidity ratio is a tool to analyze the ability of company to repay its short term liabilities and how
easily current assets can be converted into cash because cash is the most liquid form of current
assets ([Link], n.d.).

WORKING CAPITAL RATIOS

Working capital ratios are calculated to assess the how much capital is available for performing
day to day operations in an organization. It’s important for both encountering the risk of
insolvency and also ensuring the returns on current assets are maximized (kapan study text,
n.d.).

INVESTOR RATIOS

Objective of these ratios is to assess the overall performance of the company’s shares and also
to divert interest of ordinary shareholder moreover these ratios act a great tool of interest for
potential investors, competitors and analysts (financial [Link], n.d).

2.4.4 LIMITATIONS OF USING VERTICAL ANALYSIS-

CONSISTENCY
These ratios may lack consistency because of changes in accounting policies which might affect
the quality of results produced by ratios, hence are not essential for analysis of financial
statements (corporate finance [Link], n.d.). Maintaining consistency with competitor
seems difficult because both the companies might follow different accounting techniques.

SEASONAL EFFECTS
Seasonal variations can have an impact on the values of ratios so this acts a barrier of this
technique due to the inability of adjusting this factor. (corporate finance [Link], n.d.) These
changes don’t take place often that’s why aren’t easily adjustable but unadjusted figures can
cause a less meaningful conclusion drawn up by this analysis in the research.

2.5 ETHICAL CONSIDERATION

This project has been prepared taking into account the ethical considerations. Best possible
efforts have been made to gather information from a pool of reliable and reputable sources
which are completely free from biasness. All facts and figures mentioned are in their true and
original form, free from any manipulation and alterations. All results acquired from external
sources have been cited using Harvard Referencing style to avoid any plagiarism. This project
is wholly prepared for academic purpose.
 SECTION 3: Result, Analysis,
Conclusion and Recommendation

Word Count: XX
3.1 Financial analysis
Sample 1

Horizontal Analysis

(Annexure 1)
In 2016, Continental corporation enjoyed an increase in revenue of 3.4% 2015 (PY €: 39232.0
million). The increase in revenue was because of increased manufactures of cars and heavy
vehicles. The growth was majorly in Asia. (Continental Corporation, 2016, p. 77).Further, the
reason that primarily led revenue above € 40 billion first time in history is couple of acquisitions,
which the Company had made in the years 2015 and 2016, which resulted in an increase in
revenue. (Mark Lines, n.d.).Continental acquired Hornsuchuch group in October 2016 and
acquired a majority stake Zonar systems Inc. that contributed in the revenue. (Mark Lines, n.d.)

The 2017 was a successful year for Continental as revenue touched to € 44 billion, mainly
because of the fourth quarter having high sales and earnings (Sloat, 2018). Again, Asia and
specifically China majorly contributed in revenue as in 2017 car sales in million units were the
highest among the previous 10 years, which is 24.72 million units. (Statista, n.d.)

The revenue in 2018, increased was marginal to the increase in 2017. Some severe
environmental regulations for China based plants had negative effect on tire business in 2018,
(WeiBOld, 2018).
Due to the trade conflict in between CHINA and USA, Chinese market saw a decline in
production of passenger cars; however, that reduction was offset by increase in production of
passenger cars in South American region, which showed a growth of 4 % in 2018. The growth
was because of contribution by Brazil and Argentina market. (Mordor Inteligence, n.d.)

Bridgestone, the Japanese entity that mainly operates in Tire manufacturing as its revenue from
tire’s accounts for 83% of consolidated sales, have also seen growth year on year. One of the
customer of Bridgestone is Mining Market, which is observing increased demand for mining tire
therefore helping them to carry growth (Market Watch, 2019). It has anticipated that by 2021 tire
market japan is going to cross $ 32 billion, which is also going to benefit Bridgestone and other
tire manufacturers, which have a presence in japan. (TechSci Research, n.d.).

In 2017, Bridgestone retained first position of tire maker, which was over Michelin by 800
million. Bridgestone revenue in 2017 had grown by 9.5%, which helped them to retain its
position (Davis, 2018). The major reason for increase in 2017 was depreciation of yen, which
resulted in gains, which increased revenue of tires and different products. (Cove, n.d.)

The Automotive group of Continental comprises of three divisions namely Chassis and Safety,
Power train and Interior. As evidenced from the graph above, it can be clearly observed that
Continental automotive division has shown an increasing revenue in three years where the high
performer was Interior division.

Demand for Chassis and safety division was on peak in 2017, due to growing automobile
industry, which led to an increase demand in automotive break systems. However the division
has seen decline in 2018 as number of brake systems sold were lower than previous year
(Continental Corporation, 2018, p. 75)

Continental has decided to make powertrain division as separate group so that the opportunity
created by Power Train can be capitalized independently. (Cornell, 2018). Further the change in
emission legislation has contributed in growth in particular division as the change has led to
increased sales of gas sensors and has motivated the user to buy fuel economic Car.
(Cartelligent, n.d.)

Tire division has achieved 0.2% increase in revenue despite being a victim of a war conflict,
which made it difficult to export Vehicles. (Behsudi, 2019)
As evidenced from the graph, the higher performing region for Continental was European
countries, along with the Germany; other European countries have also helped Continental to
achieve this success.

It has expected that a decline in demand of global vehicle production due to tariffs and updated
legislation, in order to achieve desired volumes continental did cost cutting measures to balance
out the falling sales in Europe North America and china. (Reutors, 2019). The revenue from
Asia’s remains same over three years and increasing slightly, Although Continental is busy in
expediting their revenue in Asia, to mark their presence and to achieve global economies, in
2017 they have announced a joint venture with operator China Unicom to be focused on
transport system. (Russell, 2017).

The Revenue in North America have shown an increase of 1.2% in 2018 (Continental
Corporation, 2018, p. 125). However, the circumstances in the northern region could be
considered as poor as Continental have decided to execute a closure of couple of plants which
will lead to redundancies. The major reason to closure was that the plant were not able to award
customer projects in recent year (Rauwald, 2019).
3.3 Vertical Analysis/Ratio Analysis
3.3.1 Profitability Ratio

Gross Profit Margin (GP Margin)

(Annexure 1)
Automotive sectors process a wide range of raw materials. The Automotive group uses primarily
steel, Aluminum, copper and plastics. (George, n.d.). Continental’s GP margin shows a decline
year on year which hints that Continental’s production cost is been increasing yearly. Steel, one
of the major part of production process shows an increase in price because of the steel tariffs by
more than 5 %. (General Steel , n.d.).

While in Rubber group, production of tires requires various types of Rubber such as synthetic
rubber for the production of tires. It also uses materials like Crude oil, Butadiene and styrene.
(Bridgestone, n.d.). Prices for the crude oil is been swinging in 2018, at the start of the year
prices were around $67 per barrel, (Continental Corporation, 2018, p. 60). However, in mid-
September the price went on $81.20 per barrel because of the supply shortages by the US
government. (Amadeo, 2019) Another factor, which contributed in significant increase, was
fluctuating value of dollar. (Amadeo, 2019). Apparently, due to unstable economic environment
the prices in later years fluctuated. (Macro trends, n.d.).

Bridgestone GP margin has also shown a declining trend, because of the decrease in unit sales
of tires of cars trucks and busses in Asia. (Modern Tire Dealer, 2019). In 2018, demand was
much lower than 2017, which caused a decline in Revenue and GP. (Modern Tire Dealer,
2019). In addition, the cost incurred in manufacturing Tire such as price for crude oil was much
higher than previous year, which led to increased production cost and lower margins (Amadeo,
2019). In addition, in fourth quarter of 2018, Bridgestone diversified product segment net sales
also decreased nearly by 5% (Carmichael, 2019)

Net Profit Margin: (NP Margin)

(Annexure 1)
Continental’s R&D expense has been continuously increasing; in 2018, it was around 7.2% of
sales while in 2017 it was just below by 0.1%. This is a material expenditure, which Continental
charges yearly due to which NP in 2018 and 2017 declined. (Wagner, 2019). Continental
Research and development expense have increased by 37% in 2018 and 10.2% in 2017. Also,
as part of their restructuring Continental is considering to shut plants in powertrain division
which would involve costs such as redundancy. Along with this, the profitability also declined as
continental reported 41 % fall in second quarter. Which was because of lower auto demand in
china. (Schwartz, 2019) .
Being recognized as a best employer by Forbes and most admired company by fortune
magazine multiple times, Continental has been attractive employer for employees. (Continental
Corporation, 2018). Continental wages expense have increased by 4.7% from 2017 to 2018.
Despite having a tough economic environment, Continental average employees increased by
over 12000 and total of 243200 people in 2018, which also effected NP margin. (Wagner,
2019). In addition, Company exposed to impairment charge of € 23.5 million and € 23.1 million
in 2018 and 2017 respectively. (Continental corporation, 2018, p. 154). Currency exchange
losses were also significant in 2018, which amounted to € 86.7 million, which was far above
then previous year losses, it usually happened due to bad market environment. (Continental
corporation, 2018, p. 154).

However, Bridgestone NP margin is greater than Continentals’ that seems to be having a slight
decrease in 2018 as evidenced from the graph. One reason could be decline in interest and
dividend income. In 2018, interest and dividend income declined by 18%. (Bridgestone, 2018, p.
14). In addition, in the first nine months of 2018 Bridgestone Corporation faced a decline in its
operating income by 3% and expected that the sales will be flat for the full year thereby reducing
margins (Rubber News, 2018) . In 2017, Bridgestone faced an increase in impairment loss by
5.6%, of sales. (Bridgestone , 2017, p. 12)
Return on Capital Employed (ROCE)

(Annexure 1)
Continental’s ROCE in 2018 was almost 17%, which was below from previous year but was
exceeding its weighted average cost of capital. (Continental Corporation, 2018, p. 43). The
benchmark of entity is to keep the ROCE above from 20% but they have not achieved this
target in 2018. The major factor was that in second half of 2018 demand for tires in China faced
decrease. (Global News Wire, 2019). This negative growth in China was marked first time after
28 consecutive years, which depressed Chinese automobile and different markets. (Global
News Wire, 2019). In addition, the tough market of Germany also contributed in this decline as
demand for the tire and car parts is effecting number of carmakers such as BMW Ag and
Daimler Ag and to Continental Ag. (Chris Bryant, 2019). However, in 2016 the global automobile
market was increased which resulted in higher demand therefore higher business for
Continental (Business Insider, 2017)

Continental’s capital expenditure has also increased by 9.5% in 2018 and 10.1% in 2017,
(Continental Corporation, 2018, p. 62). Which have resulted in increase in denominator.
Although Continentals’ net income is also increasing year on year (Wagner, n.d.) However,
capital employed is increased more than income thereby ROCE has declined.

In Comparison with Bridgestone, currently have a lower ROCE then Continental due to being
heavily relied on one particular segment i.e. Tires. Adverse economic consequences such as
increased inflation (Plecher, 2019) led to reduction in sales of tires, which resulted in lower
ROCE. In 2017 ROCE declined by approximately 2%, which is because of decline in operating
income by more than 7.2% (Bridgestone , 2017, p. 4). Further, the capital expenditure also
increased by more than 17%, which again contributes towards the lower ROCE (Bridgestone ,
2017, p. 4). Despite being in tough economic environment in current year both of the companies
have maintained steady ROCE and other profitability ratios which itself is an evidence of their
stability.
3.3.2 Liquidity Ratios
Current Ratio

(Annexure 1)
Continental’s liquidity ratio is declined year on year but not significantly. The most evident cause
of that decrease in 2017 from 2016 could be acquisition of Advanced Imagine technologies, in
Nov 2017, which resulted in an outflow of liquid assets thereby effecting current ratio
(Crunchbase, n.d.). In addition, in 2017, there was an increase in current liabilities which
increased by 4.4%. Mainly the increase was due to increase in payables (Continental
Corporation, 2017, p. 123). Although, in 2018, current ratio also shown a minor decline but that
was because of the dividends paid, as in 2018 the amount of dividend payments by Continental
was 900 Million Euro, (Moody's, 2018) which affected Liquidity.

However, as per article published by Moody’s the liquidity of Continental position to be good as
continental reported a sizable cash balance of 2 billion Euro’s (Moody's, 2018).

The graph above indicates that Bridgestone currently have strong liquidity position. One of the
reason for strong liquidity of Bridgestone is that it prefers to have higher current assets then its
current liabilities as in its financial position current assets mentioned are much greater than its
current liabilities, which undoubtedly strengthens liquidity of Bridgestone Corporation.
(Bridgestone , 2018, p. 13).

3.3.3 Gearing Ratios:

Financial Gearing:

(Annexure 1)
Continental has been very inclined in improving its financial gearing. The company has
sometimes done early redemptions (Automative world, 2015) and sometimes they have issued
shares.

Continental’s policy is to strive gearing below 20% and ensure that it does not exceed more
than 60 % (Continental Corporation, n.d.). Following the goal of decreased gearing, in 2018
Continental redeemed its’ one of the bond, which was due to be redeemed in July 2018. The
bond was worth 750 million euros and because of its redemption the net indebtedness and
particularly gearing improved in 2018 (Continental Corporation, n.d.).

In contrast, Bridgestone carries a lower gearing then Continental. In 2017 Gearing was quiet
higher than Bridgestone normally have due to interest bearing debt which was increased by
34% compared with 2016 as Bridgestone to take advantages of low rates and decided to issue
a debt of around 1.4 billion dollars which eventually increased the gearing in 2017 (Nikkie Asian
Review, 2017). However, to bring up control on financial gearing total interest bearing debt
reduced by 11% in 2018. (Bridgestone, 2018, p. 3)

Interest Cover
 (Annexure 1)

Continental’s debt reduction program and lower gearing had made the interest coverage ratio
more than 14 times in 2017 and 2018 which is far above the industry averages which were 7.07
and 6.85 in 2017 and 2018 respectively (CSI Market, n.d.).

One of the reason of decline in interest cover in 2018 from 2017 could be the tough economic
conditions and challenging environment of 2018, (Dan Shingler, 2019). Further, slowing demand
of tires along with higher cost of material and technology led to the forecast not being met
thereby the estimated profits not achieved, and in order to retain the market share continental
reduced the margins from 8.5% to 7%. (CampBell, 2018). However, the interest cover is far
above the industry averages. (CSI Market, n.d.). The reason for increase in 2017 interest cover
was mainly due to decrease in interest expense, which observed reduction by 9.6% from 2016
because of some notes redemption, which increased the cover. (Annual report, 2018 and 2017,
pp. 115,120).

However, Bridgestone interest cover shows a decreasing trend. The prime reason for higher
interest coverage ratio is that company seeks to have a diversified financing portfolio in order to
minimize the risk associated with it and to have lower interest cost. (Bridgestone, 2017, p. 6).
Further, the reason for decline in interest cover of 2018 is the fall of operating income by 3.9%,
which was $3.66 Billion lower than previous year that declined the operating ratio (Tire
Business, 2019)
3.3.4 Investor Ratio

Earnings per Share

(Annexure 1)
Continental’s EPS is fallen by 2.9% in 2018. The power train division’s change of products and
systems for electric vehicle led to increase costs, and lower sales, and earning less than
expectation (Continental Corporation, 2018, p. 4). Further Continental have decided to shift its
powertrain division in a new group in 2019. This restructuring will increase further cost, which
will have an impact on EPS in 2019. (Cornell, 2018). In addition, Continental was below from the
targets so in order to adopt changes Continental would cut cost to regain its footings. (Irish
Times, 2018)

In comparison, Bridgestone has low EPS then continental but its EPS is on steady growth route
because of the strong results made by corporation in its first quarter of 2018. Although there
was a weaker demand for tires in North America and Europe but this reduction did not effected
much, as demand was inclining in Middle East and America (Jamias, 2018). Bridgestone
recently have also missed the consensus for EPS by Wall street’s Consensus in which
expectation was that EPS will rose by 3% in 2018 however it only grew by 2%, the major reason
for missing the consensus was decline in 4 th quarter of 2018 in which operating profit declined
by over 6%. (Carmichael, 2019)
Price Earnings Ratio (P/E Ratio)

(Annexure 1)
The PE ratio has declined by 40.1% from 2017 to 2018 and it increased by 31% from 2016 to
2017. The root cause for decline in 2018 appears to be decrease in market price, which
declined by 41.8%. (Annexure: six). The declining PE ratio indicates that investor is paying less
for the stock, as they do not have confident on Continental’s stability for future. The average PE
ratio in the 4th quarter was 8.47 Times (CSI Market, n.d.).

In contrast, Bridgestone PE ratio has also declined in 2018 due to decline in market prices. The
shares of the tire makers were trading weak because of the rise in raw material cost, in
particular rubber (Business Standard, 2019). Another fact, which reduced the PE ratio, was
earnings. Bridgestone operating income declined in 2018 by 3.9% mainly because of increase
administrative cost. (Tire Business, 2019)
Dividend Yield

(Annexure 1)
Continental dividend yield has increased in 2018 from 2017 because of the increased dividend
announced by the entity. Continental announced dividend of € 4.75 per share, which was the
highest dividend paid by continental (Investing, 2018) which amounts to 950 million euros. The
dividend per share increased by 5.5% in 2018, which increased the yield. In 2017, the dividend
per share amounts to 4.50 Euro and the increase in 2018 by 25-euro cents because of the net
turnover, which increased by almost 0.9%. (Xequan, 2019). Although in 2017, the yield declined
from previous year because of the EPS, which increased by almost 6.4% and reduced the yield.

Continental’s dividend payout ratio was 32.8%. (Continental Corporation, 2018). However,
Continental had paid dividend of 101% of its free cash flow. Which could be concerning if the
cash flows are not increased in future. (Finance yahoo, n.d.).

As evidenced from the graph Bridgestone dividend yield is comparatively higher from
continental. The reason behind the higher dividend yield is lower stock price per share in
comparison with Continental. (Annexure: six). In addition, the dividend yield in 2018 has
increased mainly due to higher dividend payments made as Bridgestone has an inclining
dividend per share year on year (Bridgestone, n.d.). In the 2018, Bridgestone announced 160
Yen / share which is higher than previous year thereby increasing the yield. (Bridgestone, 2018,
p. 4)
3.3.5 Working Capital ratio

Cash operating cycle

(Annexure 1)
Ideally Cash operating cycle should be negative (Jaiswal, 2016). That company must have
sufficient funds before paying to supplier but in case of Continental and Bridgestone, the cycle is
positive which suggest they both pay early then receiving payments creating shortage of funds
for particular time.

Continental’s Cash Operating Cycle has improved in tenure of 3 years, which indicates good
working capital management. The major reason for this efficiency is decrease in debtor days
and increase in payable days from previous years. The reason for decreasing debtor days were
because of decline in receivables that alternatively led to improved cash operating cycle.
(Continental Corporation, 2018, p. 68).

Although Graph indicates, Bridgestone have lower operating cycle days then Continental which
is a positive sign, however its increasing trend is concerning. Although the increasing working
capital is identified as an industry top challenge, which Bridgestone needs to reduce (Every
Angle, 2011). The major reason for an increase in operating cycle is increase in debtor and
inventory days from 2017, which made the cash shortages for Bridgestone. (Annexure one)

Sample 2
(HORIZONTAL ANALYSIS)

(Annexure 2&3)

Revenue earned by FED EX in 2016 in comparison to last year is 6.14% higher than previous
year (2015 revenue- USD 47,453). This increase was followed by a number of reason during the
fiscal year 2016 company had replaced it’s 25 fleet aircrafts and ordered 50 new Boeing
advanced B767 aircrafts for offering better and efficient distribution services to its customers this
actually led to a boast in entity’s revenue (Bhasin, 2018). In addition FED EX performed an
acquisition with TNT Express, the deal was worth $4.8 billon this acquisition was planned to
broaden their brand portfolio and also to expand into major European countries and they were
successful in accomplishing their mission (Bray, 2015).

FY 2017 was relatively regarded as a successful year for FEDEX as earnings during this year
boasted sharply by 19.76% than in 2016. Main strategic aim was to increase prices up to level
where volumes don’t suffer a negative impact due to price increase and fortunately company
was successful in doing this resulted in revenue per package to increase (Samaha,
2017).Further, by the end of 2017 UPS was the only competition faced by FEDEX outside the
US which means there was limited competition for the company apart from UPS which gave
FEDEX an advantage in capturing international market easily ([Link], 2017). During the
year 2017 company made several significant capital expenditures of worth $5.1B and they had
plans to increase this figure up till $5.9B in 2018 (Samaha, 2017). These expenditures were
undertaken to ensure that the distribution channels involved are very efficient, also improved
facilities provided so that customers are satisfied and can feel the price charged for the service
by entity is actually worth it. This expenditure gave a boast in revenue up to 6% ([Link],
2017).

FY 2018 also experienced an increase in revenue earned, but the growth was not that
significant as compared to 2017. There was an increase by 8.51% as compared to 2017 in
revenue. Main reason for increase in revenue during the year was 2 major acquisitions made by
FED EX. FED EX acquired P2P Mailing limited ([Link], n.d.). Also, FEDEX
acquired Northwest research INC one of the top leading in inventory research and management
([Link], n.d.)This virus mainly spread in Ukraine where fed ex has it’s Dutch
subsidiary TNT Express, this attack caused encrypted files and damage to computers
(Shoorbajee, 2017). Due to this virus almost company’s 79% of profit margin was reduced
(Johnson, 2018).

As it’s been demonstrated through the graph above, UPS has relatively earned higher revenues
as compared to FED EX over the 3 years period. In 2016 UPS slightly improved its revenue by
performing and adopting strategies such it started attracting international business by
competitive pricing and offering improved services this steadily resulted in volume growth (Cary,
2016). In years 2017 and 2018 UPS experienced a massive boom in its revenues earned. In
2017, revenue earned by international packages had a sharp increase of about 13%, volumes
sold also increased by 8.3% (Ashe, 2018).
FEDEX has 3 main reportable segments. FEDEX express is regarded as main revenue earning
segment out of all 3 segments. All the segments performed well. FEDEX express’s revenue
went up by 7% in 2017 as compared to 2016 due to 5% increase in international shipments and
higher prices charged per shipment ([Link], 2017). Shipment volumes in USA per quarter
accredited by 4% over the year ([Link], 2017). 2018 was yet another year where revenue
of express segment boasted but wasn’t as massive as earnings were in 2017
([Link], 2019).

FEDEX Ground performed consistently in all the three years with slight progress. In 2017
average daily package volume rose by 3% as compared to 2016 and yield per package
excluding fuel surcharges increased by 6% in the 4th quarter of 2017 ([Link], 2017). Prices
charged rose by 4.9% over the year 2017 (Maple, 2017).

FEDEX Freight appears to contribute less in revenue and it has remained almost the same
during 2016 and 2017. During the year 2017, attempts were made the improve volumes and
maintain a balance between prices, capacity and volumes ([Link], 2017). During the 4th
quarter in 2018 revenue per shipment increased by 8% (Straight, 2018).
RATIO ANALYSIS

3.2.1 RETURN ON CAPITAL EMPLOYEED (ROCE)

(Annexure 1)

FED EX’s ROCE boasted sharply from 8% in 2016 to 12.40% in 2017 During the year FEDEX
bought back its shares of 25 million of worth $8.8B which resulted in lower capital employed
([Link], n.d.). PBIT was accredited due to increase in revenue prime reason for
this increase was due to strong growth in e-commerce sector and also revenue on per package
delivered, shipments increased during the year by 21% ([Link], 2017). FEDEX acquired
TNT in 2016. Company’s acquisition contributed additional $1.9B to revenues earned
([Link], 2017).

As illustrated above in the graph, ROCE in 2018 fell by 8.06% as compared to 2017. Revenues
didn’t increase much as previous year due to global economic conditions (Franck, 2018). Due to
weaker economic conditions in China it’s hindered the entity to perform well in China which is
one of the important markets for the company (Rocco, 2019). FED Ex aimed to cut its operating
expenses but wasn’t successful in doing so (Franck, 2018).

For UPS ROCE accelerated from 2016 to 2017 due to increase in revenue earned from
international shipments this increase was marked up till 11% (Yuk, 2017). During the year 2018,
ROCE dropped sharply than previous year as UPS invested $7 billion in upgrading its delivery
channels to excel further in e-commerce sector for that purpose huge debts were taken which
increased debt of the company (Black, 2018).

3.2.2 OPERATING PROFIT MARGIN

(Annexure 1)

The rise in FEDEX’s operating profit margin from 6.11% in 2016 to 8.35% in 2017 largely
consists of improvement in revenue earned i.e. an increase of 19.8%. During the year company
incurred $458 million on advertisement and promotional expenses which was 10% more as
compared to 2016 (FEDEX, pg- 53, 2017). Advertisement costs were rising substantially due to
increased competition in US and other major countries like China, Europe and etc. ([Link],
2019).The rise in expenses accounted for 17% (FEDEX, pg- 49, 2017). As e-commerce sector
has become very competitive companies have started investing heavily in improved technology
better distribution and handling facilities this have led to a substantial rise in the expenses
incurred by the entity during the 3rd quarter (Broadhurst, 2018).

In 2018, revenue rose by 8.51% but still there was a drop in operating profit margin. Factors
which mainly contributed were fluctuating exchange rates of various countries. Due to China
and USA war Chinese yuan became unstable this had an impact on the trade of FEDEX within
China which is entity’s key market (Tan, 2018). Further, foreign currency such euro, British
pound, Mexican peso all were subject to fluctuations which effected entity’s sale price and
foreign trade (FEDEX, pg- 42, 2018). Inflation was playing an important during 2018 as inflation
rates were rising worldwide and was leading to low economic growth in major countries like UK,
US and etc. ([Link], 2018). Moreover, operating costs continued to rise.

UPS on the other hand has performed well in all consecutive years as compared to FEDEX.
Revenue rise in 2017 was by 8.07%. UPS expanded in several other countries like Korea,
Taiwan, Middle east and etc. which gave a chance for UPS to earn higher profits
([Link], 2018). Further the hike continued in 2018 but it wasn’t as significant
as previous even though there was a rise in the figure of revenue earned, but operating
expenses also were shooting high thereby offsetting the effect of higher profits (UPS Annual
Report, 2018). Although prices were set high due to inflation but volumes start to decline and
further, company invested around $7 billion for labor saving technology (bloomberg news,
2018).

3.3 LIQUIDITY RATIOS

3.3.1 CURRENT RATIO

(Annexure 1)

FEDEX’s current ratio improved slightly by 6.6% in 2017 i.e. 1.51 in 2016 to 1.61 in 2017. This
figure is certainly above the average industry rates which around 1.27-1.30 ([Link],
2017). The prime reason of the increase is a rise in the level of cash and cash equivalents by
12.3% mainly due to gain made on sale of investments further it made disposals of number of
aircrafts which resulted in cash proceeds (FEDEX, pg- 49, 2017). There was a slight
enhancement in current assets by 5.33% as compared to last year also current liabilities
dropped slightly by 1.12% during the year, this was mainly due to decrease in employee
benefits, and trade payables (FEDEX, pg- 49, 2017). During the year, FEDEX contributed
$24.93 billion into US pension plan assets (Kozlowski, 2018).

In FY 2018, current ratio dropped by 13.7% than last year. Investments worth $1.5B were made
in order to extend the FEDEX express Indianapolis hub for the next seven years (Nichols,
2018). Current liabilities for the year hiked by 21.6% which also contributed in lower current
ratio for the year (FEDEX, 2018, p. 46).

UPS’s current ratio is lower than FEDEX in all the 3 years. In 2017 there was an increase in
current ratio by 3.39% as compared to 2016. There was an increase in current assets by
12.67% (UPS, 2017, p. 63). UPS announced to increase its capital expenditure up till $4 million
in 2017 (Samaha, 2017). There was a drop in current ratio of UPS in 2018 by 5.74%. there was
a significant rise in the level of trade payables by 31.89% in 2018 (UPS Annual Report, 2018, p.
66).

3.4 GEARING RATIOS

3.4.1 FINANCIAL GEARING RATIO

(Annexure 1)

It’s observed that FEDEX’s gearing is on a declining trend over the 3 years period. In 2016,
company was highly geared the root cause of this was debt taken for TNT acquisition in 2016,
deal was announced in cash terms and worth of acquiring was $4.8 billion which was mainly
financed by long term debt ([Link], 2015).

In 2017 gearing % improved gradually. In USA companies borrowing debt became a serious
concern for investors because the figure started touching peaks, that’s why many companies in
the USA started repaying their loans in 2017 to avoid liquidation (Danner, 2017). Further, 3.0
million treasury shares were purchased and 3.5 million shares were issued which generated
proceeds $154 million which increased the level equity and attributed in lowering gearing ratio
(FEDEX, 2017, p. 51). In 2018 gearing further decreased to 44%, this was primarily because
FEDEX sold one of its non-core subsidiaries during the year for worth $123 million proceeds
were in cash (FED EX, 2018, p. 49). Company sold 1B euro ($1.12B) euro-dominated bonds
([Link], 2019). FEDEX’s debt levels have increased from US$ 13.76B to $US
14.93B over the last year ([Link], 2018).

In contrast, UPS has a lot more higher gearing ratio although it has a declining trend. According
industry averages both FEDEX and UPS are far above the average rate which is 40%
([Link], 2017).UPS has made several capital expenditures and acquisition during
the 3 years period and has mainly used debt as its source of finance because now a days in US
debt is a cheaper source of finance as compared to bonds but it does increase risk levels
([Link], 2019).

3.4.2 INTEREST COVER

(Annexure 1)
During the year 2016 and 2017 interest rates within the US started to rise due to increased
borrowings in the economy (Irwin, 2018). There was a significant increase in the interest
expense of the entity from 2016 to 2017 of 52.4% this was accredited by Not Petya cyber-attack
in 2017 caused a lot of destruction for FEDEX for the purpose of recovery company had to
finance itself by taking debts ([Link], 2018). Despite of increase in interest expense, interest
cover still rose by 7.5% the prime reason for this increase was boast in revenue over the year
due to higher shipments because of which company earned 20% more revenue in 2017 than
previous year ([Link], 2017). Interest expense during the year hiked by 52.4% than last
year (FEDEX, 2017, p. 49). During the year, FEDEX issued $1.2B new bonds also it issued
debts of $450 million and $750 million according to LCD news (Stone, 2017).

In FY 2018, interest cover depleted by 17.6%. Interest expense continued to rise by 9%

(FEDEX, 2018, p. 47). In 2018, company issued $1 million bonds with a yield of 3.1%
([Link], 2019). PBIT in FY 2018 fell by 3.43% which is the root cause of lower
interest cover (FEDEX, 2018, p. 47).

In comparison to FEDEX, UPS has a declining trend for interest cover. As finance cost was
rising over the years. Debt in 2017 was $20.278B an increase of 63.61% from 2016
([Link], n.d.) In FY 2018, debt levels declined by 1.71% ([Link], n.d.).
 3.5 INVESTOR RATIOS

3.5.1 EARNINGS PER SHARE (EPS)

(Annexure 1)

There was an increase in EPS in 2017 by 70.56% as compared to previous year. Change was
seen due to buyback of its 25 million shares in 2017 (Weinberg, 2016).

Further increase of 52% was observed in 2018. FEDEX sold one of its non-core’s subsidiaries
during the year for a gain of $85 million (FED EX, 2018, p. 52). Moreover, FEDEX acquired P2P
mailing limited by buying all its shares for worth 92 million Euros this also stimulated the hike in
EPS (Statt Times, 2018). EPS in 3rd quarter of 2018 was expected to be $3.11 but in reality, it
crossed the projected EPS and $3.72 is the actual EPS recorded for the quarter (Zhao, 2018).

On the other hand, UPS suffers a lower EPS than FEDEX. EPS rose by 45.10% in 2017. PBIT
during the year accelerated due to rise in revenue by higher packages delivered during the
holiday season ([Link], 2017). But there was a drop in EPS during 2018 by 1.78%. Also, the
weighted average number of shares weren’t same for the 3 years period (UPS Annual Report,
2018, p. 127).
3.5.2 PRICE EARNING RATIO (P/E RATIO)-

(Annexure 1)
P/E ratio has dropped over the 3 years period. In 2016-2017 it fell by 31.6% and further by
14.5% in 2018. Reduction in P/E ratio was considerably due to increased EPS over the years.
Further, FEDEX P/E ratio is below the industry average of logistics sector. Investors are not
confident enough about the company that’s why aren’t willing to pay higher value per share
([Link], 2019).

On the other hand, UPS has a higher P/E ratio in comparison to FEDEX. During the year 2017,
UPS shares traded at a premium as compared to FEDEX ([Link], 2018). Although UPS
has a better P/E ratio than FEDEX but it has a declining trend over the years and P/E ratio for
UPS is also below the industry average of the sector ([Link], 2019).
3.5.3 DIVIDEND YIELD RATIO

(Annexure 1)

Dividend has grown by 6.19% from 2016-2017. FEDEX decided on to increase its dividend yield
by 30% 2016 onwards (Piplovic, 2018). Share prices of the company are also hiking over the
years which is one of the reasons dividend yield is not increasing by a higher margin (Piplovic,
2018). One of the reasons of lower yield is because of asset appreciation of the company.

In 2018, dividend yield ratio remained the same although there was a change a in dividend paid
yearly in 2018 from $2 per share in 2017 to $2.6 per share in 2018 (FED EX Annual Report, Pg-
56, 2018). The root cause of no change in the yield is surging of share price in 2018, closing
price in 2018 was 27% higher than previous year (Piplovic, 2018).

On the other hand, UPS has inclining trend for dividend yield ratio. Dividends per share kept on
rising over the three years period (UPS Annual Report, 2018). But the prime reason which
attributed in this increase was declining share prices over the years of UPS which gave a
greater dividend yield (Nasdaq, n.d).
 3.6 WORKING CAPITAL MANAGEMENT

(Annexure 1)
FEDEX has an uneven trend and UPS has negative days for cash cycle for 3 years. This
suggest UPS has a good working capital management as compared to FEDEX. UPS has a
surplus cash free of interest which can be used to perform their day to day operations. The get
payments from their customers early than paying their suppliers whereas FEDEX has shortage
of cash as in 2018 it pays earlier to its payable than it receives from its customers
([Link], n.d.).

FEDEX’S cash operating cycle has an uneven trend over the 3 years period. Within these
years, FEDEX has potentially reduced its credit risk by better credit evaluation process, effective
and shorter collection terms and by offering discounts on prompt payment (FEDEX, 2018, p.
51). In 2017, receivable days are equal to payable days which means cash is immediately paid
as its received. Over the 3 years period receivable days have declined by 10%.

Whereas UPS, has a better cash operating cycle and has an inclining trend. The core reason for
this increase is attributed by sharp increase in the trade payable days awarded to UPS the
increase has been noted up till 24% in the 3 years period (UPS Annual Report, 2018).
Sample 3

Sales growth of Audi was 1.37% which was happened as deliveries were reached to 1,878,100
units with 0.6% growth while remaining increase was happened by inflationary effect. Major
impact was put by its model Q2 which shared 10.8% growth especially in Europe, UK and Italy.
(Audi MediaCenter, 2018) Sales of Audi brands in USA also contributed towards overall sales
growth in US market grew by 7.8% with record-breaking deliveries of 226,511. Main contribution
was made by Q5, Q7 SUVs and A5 models. (BusinessWire, 2018) Adverse impact was put by
unfavorable currency exchange rate on revenue of Audi as well but could not cancel the positive
growth. (Audi-AR, 2017, p. 130)
Sales growth of Audi was negative in 2018 with -1.46% which was resulted of various factors.
Audi cars deliveries were dropped by about 65,000 units resulting decline in revenue. This
decline was caused by WLTP implementation on which Audi was not prepared. (Felix-Page,
2019) Another reason for decline in revenue was adverse movement of foreign exchange rates
and part of revenue was cancelled off by positive growth of Audi A8 model. (Audi-MediaCenter,
2019) Further, part of positive impact was its Lamborghini brand whose revenue was enhanced
to €4,728 million. (Audi-AR, 2018, p. 118)
Revenue growth of Audi was again negative with higher percentage of 6.02% with primary
reason was deconsolidation of multi-brand importers, otherwise revenue was increased if this
affect is ignored. (Automotive World, 2019) The deliveries of car units have improved by 1.8%
and reached about 1,845,550 units and major growth was recorded in China by 4.1% and in
Germany 4.3%. (Audi-MediaCenter, 2019) Further, Lamborghini brand was sold with growth
rate of 43% with deliveries of 8,205 cars while in previous year, figure was 5,750 cars. (Frank,
2020) All factors put positive impact on revenue except deconsolidation affect as discussed
above.
BMW revenue in 2019 was positive and closed at 6.90% which was significantly higher than
negative decline in revenue of 6.02% in same year. Record breaking deliveries made by BMW
in 2019 put upward growth in revenue with total of 2,520,307 cars of three major brands i.e.
BMW, MINI and Rolls-Royce. It was sixteenth consecutive year of making high deliveries of cars
with setting new record each year. (SG Carmart, 2020) Significant growth was looked at regions
of Asia by 5.6%; China 13.1% and Germany 3.8% which was caused by higher demand of
luxury premium cars. In addition, overall Europe performance was not attractive, as deliveries
were declined by 1.5% due to political instability of different countries. (Bekker, 2020)
While comparing the results of both companies, it was obvious that BMW had performed better
than Audi in 2019.

COS of Audi in 2017 was increased by 0.85% while revenue growth was 2.34% and GP ratio
was declined. Revenue has been analyzed in above ratio while COS was expanded on
happening of higher prices of one of major raw-material of cars. The prices were mainly
increased by higher tariffs put on steel by US and Europe. (News, 2018) Likely, prices of other
main raw-material Aluminum were at hike when it showed average price of $2,022 in 2017 while
average was $1,706 in last year. (Statistica, 2020) COS was also hiked by including special
item relating to diesel issue as huge provision was created. Audi was declared guilty in showing
wrong reading about emission of carbon-dioxide by installed software and expected to pay fine
of $930 million. (Ferris, 2018) However, positive factor was cut-down its research &
development cost with the aim of shifting towards electric car after being badly hit by emission.
(Cremer, 2017) But overall impact was increase in COS and decrease in GP ratio.
GPM of Audi was dropped in 2018 because of higher drop in revenue discussed above while
COS while declined with less ratio of 0.85% from YoY basis. COS was affected by huge cost
incurred in implementation of new WLTP regulations. It is also estimated that in future the
increase in cost shall be about €1 billion, threating to shrink profits. (Backwith, 2019) In addition
to above, the provision relating to diesel issue further enhance the COS of Audi. (Audi-AR,
2018, p. 119) The combination of all factors put direct impact on COS and in turn GPM was
dropped with marginal percentage.
GPM of Audi was further dropped to 14.52% in 2019 caused by 6.02% decline in revenue as
discussed in above ratio. COS was also dropped by 5.03% directly put impact on GPM. Main
effect was again deconsolidation of multi-brand importers. On other hand, research and
development cost was enhanced in connection with Audi Transformation Plan. Audi has
planned to invest €12 billion in five-year span to get benefit of electric cars. (McCann, 2019)
Personnel cost was also increased which was caused by [Link] proram putting adverse
impact on GPM. (Bloomberg, 2019) With combination of all factors including decline in revenue
put adverse impact on GPM of Audi in 2019.
GPM of BMW was declined in 2019 to 17.33% as result of higher increase of 9.15% in COS as
against 6.90% increase in revenue discussed above. COS was increased due to multiple factors
and higher production cost due to strict legal requirements relating to low emission of CO2.
(Marklines, 2019) Further reason of increase in COS was currency exchange adverse effects
along with higher material cost. (BMW-AR, 2019, p. 69) In continuation to attaining target of
launching 25 electrified cars by 2025, the spending on research and development was highest
ever with new record reaching to €7 billion and it put direct impact on increase in COS in 2019
as well. (Taylor, 2018) The extended features of warranty provision were another reason for
increase in COS in which structured offer was made to clients with flexibility to get competitive
advantage in market. (Collins, 2019)
GPM of both companies showed likely trend of declining in 2019 but if we compare both
companies result; it looked obvious that BMW was in better state of profitability.

OPM of Audi was significantly improved in 2017 causing lot of factors. Distribution cost was
reduced by 8.78% as it achieved efficiency in operations for improvements and reduction in cost
through SPEED UP! Program launched in 2016 but successfully completed in 2017. (Audi
MediaCenter, 2020) Administration cost was increased by 3.32% slightly more than its revenue
growth. Other operating results put drastic impact for improvement of OPM. One reason was
low burden from legal risk as was in last year and further Audi had reduced currency hedging
risk with start of local production in China. (Dunbar, 2018) In combination of above factors, OPM
of Audi showed improvement.
OPM of Audi was declined to 5.96% in 2018 causing positive and negative factors. Distribution
cost was reduced putting positive impact as result of implementation of IFRS-15 whereby the
selling cost was recorded as sales allowance being contra for revenue. In fact, it was recorded
in 2017 as distribution cost. (Audi-AR, 2018, p. 119) Administrative expenses put marginal
impact as increased by 1.61%. Operating income and expenses otherwise put major impact
because of various factors. One factor was inclusion of €800 million fine imposed by Munich II
through administrative order, resulting by V6 and V8 diesel issue. (UK-MediaSite, 2018)
Increase in net operating income was caused by implementation of IFRS-9 whereby derivative
positive results were added in operating income, whereas in previous year it was in finance
cost. (Audi-AR, 2018, p. 120) After combining all factors, it was obvious that OPM of Audi was
declined.
OPM of Audi was shown tremendous improvement when it surged upwards to 8.10% despite of
decline in GPM. Distribution cost was declined by 17.74% mainly caused by deconsolidation of
multi-brand companies. (Audi-China, 2019) Administrative cost was not significantly declined
and caused by decline in revenue. Other operating expenses were significantly declined in 2019
by 27.44% because no provision was created against diesel issue raised in previous years while
in previous year it was included in operating expense. (Audi-AR, 2019, p. 37) As result of all
factors, the net impact was increase in operating profit of 27.80% and in turn OPM was
improved with significant value.
OPM of BMW was dropped to 7.11% in 2019 while it was 9.36% in 2018 and primarily effect of
decline was caused by GPM drop of BMW. 2% decline in distribution and administrative cost
was positive factor for BMW’s OPM which was superseded by higher effect of increase in other
operating expenses. The reason for such increase was initiation taken by EU to open in-depth
investigation on account of breach of EU antitrust rules relating to adverse impact of technology
on environment with emissions of diesel cars. (European Union, 2018) As a result, BMW has
decided to create huge provision of €1 billion for antitrust proceedings which put declining
impact on OPM of BMW. (BMW-Press, 2019) Other operating income was also put positive
impact on OPM as it was increased by 33.20% mainly due to reversal of provisions and sundry
income. (BMW-AR, 2019, p. 134)
While making comparison of both companies, it was obvious that OPM of Audi was improved in
2019 from YoY basis but BMW OPM was declined as mentioned above. In comparison, Audi
figure of OPM was marginally higher in 2019 which showed better performance in this ratio.

Liquidity ratios of Audi increased because CA were increased by 5.30% more than higher trend
in CL of 2.01% in 2017. Significant increase was looked at inventories by 9.12% mainly caused
by launching five new models with name of A6 premium, A4 premium, Q5 premium, Q7
premium and S6 premium plus. Further higher prices of new models put inclining impact on
inventories. (Sanford, 2017) AR were also increased by 13.38% causing CA to increase
because of launching products to new regions by providing more credits to customers. (Audi-
MediaCenter, 2020) Mixed insignificant changes were looked into financial statements except
other financial liabilities which increased by 26.59% resulting CL to increase by 2.01%. As result
of above factors, liquidity ratios of Audi were increased.
In 2018, liquidity ratios of Audi declined because CA was declined by 2.94% and CL was
increased by 0.67% both put declining impact. Major impact was caused by enhancement of
inventories by 19.17% which was offset by 17.42% in cash funds. Inventories were increased by
introduction of new models of Audi; fully electric model E-tron sportback and China-one Q2 E-
tron. To cater the market demand the higher inventory was maintained by Audi. (Padeanu,
2019) The era of paying penalties continued in 2019 when Audi paid €90 million in connection
with mega diesel scandal, putting adverse impact on cash funds. (DW, 2019) CL was mainly
increased by 17.12% in trade payable whereas all other liabilities declined after offsetting major
impact. As consequence, liquidity ratios were declined.
Liquidity ratios of Audi continued to decline and showed values of 1.47 for current ratio and 1.12
for quick ratio as represented in above chart. CA was declined by 1.62% but CL were moved at
higher side by 4.31% and both put declining impact on liquidity ratios. Inventories were
decreased by 16.87% despite of introduction of various models in 2019, which indicates better
management of inventory. (JDPower, 2019) On the other hand, cash fund was increased by
26.02% which showed strong cash position of Audi in 2019. Main cause for increase in CL was
66.93% increase in other financial liabilities. (Audi-AR, 2019) After combining all factors, it was
obvious that Audi liquidity ratios were declined but strong cash position was created in order to
get future benefits.
Liquidity ratios of BMW in 2019 was declined as both CA and CL were increased by 8.49% and
9.12% respectively. There are multiple causes for increase in CA of BMW but main reason was
increase in inventories by 21.80%. Inventories were increased by holding high-value models of
BMW including X5 and X7. In addition, high raw material inventory put increasing impact on
total inventories. (BMW-AR, 2019, p. 60) High raw material was further caused by increasing
trend of one of its main raw material palladium prices showed extremely higher trend. The price
of palladium was started from $1,254 in January and reached $1,610 points in March and at end
of December, it had reached near to $2,000. (Williams, 2019) Financial and other liabilities put
increasing trend and as result CL was increased. The increase in financial and other liabilities
was caused by pension provision and EU antitrust proceeding provisions as discussed above.
While making comparison, both company’s liquidity ratios declined from YoY basis but Audi
showed higher results than BMW in 2019.

D/E ratio of Audi slightly declined from 0.59 in 2016 to 0.51 in 2017 as result of two factors
including decline in NCL by 4.53% and increase in equity by 11.26%. Significant part of NCL
was provisions which were declined by 1.29% in pension provisions due to change in discount
rate and 0.43% in other provisions caused by settlement process started relating to diesel issue.
(Preisinger, 2017) Equity was jumped up by 11.26% only because of 68.26% increase in profit
after tax as specified and discussed in profitability ratios. Overall, the solvency position was
improved.
Slight decline in D/E ratio was noticed in 2018 as result of 1.74% increase in CL but equity was
largely increased by 5.42%. Marginal changes in items of NCL were noticed in financial
statements of Audi and equity was increased primarily increase in net profits transferred to
retained earnings as discussed in profitability ratios. (Audi-AR, 2018, p. 123) Overall, solvency
ratio was improved in 2018.
Again D/E of Audi moved upwards and closed at 0.57 showing increase in financial risk. NCL
were moved upwards by 11.42% because of 29.38% increase in pension provision put major
impact. The low discount rate put pressure on increase in pension provision. Another reason
was increase in financial liabilities caused by first time implementation of IFRS-16. (Audi-AR,
2019, p. 39) Equity was declined by 4.38% with major decline in retained earnings because
higher amount of dividends paid at €6.50 per share even though increased by 13.89% increase
in net profit after tax. ([Link], 2020)
D/E ratio of BMW was increased in 2019 as NCL was increased at higher percentage of 6.90%
than equity of 3.13%. Major impact was resulted by financial liabilities due to first time
implementation of lease liabilities under IFRS-16. Equity was exclusively increased by profits
enhancement in 2019. (Audi-AR, 2019) Overall, D/E ratio was increased at higher level.
While comparison it was clear that D/E ratio of both companies increased from YoY basis but
Audi showed better performance than BMW.

Significant improvement in IC ratio of Audi in 2017 as consequence of 53.01% increase in

operating profit as discussed in profitability section and 63.13% decline in interest expenses.
Reason for Interest expense decline was less interest cost in defined benefit plan caused by
0.5% change in rate due to change in actuarial assumptions. (Audi-AR, 2017, p. 223) Both
factors put improved impact on IC ratio in 2017.
Significant decline in IC ratio of Audi in 2018 was caused by 24.43% reduction noticed in
operating profits as already discussed in profitability section. Interest expense was also declined
by 8.00% but less than operating profit decline. Interest expense was mainly affected by
introduction of IFRS-9 whereby exchange gain or loss was included in operating income, rather
than in finance cost as it was included in 2017 results. (Audi-AR, 2018, p. 210)
IC ratio of Audi in 2019 was significantly dropped to 18.71 times as operating profit was
increased by 27.80% but interest expense was increased at higher percentage of 109.57%. The
reasons for increase in operating profit have been enumerated in detail in above profitability
section. While interest expenses were increased because of finance cost on lease liability and
employees defined benefit plan. (Audi-AR, 2019, p. 147) In conclusion, the above factors put
declining impact on Audi IC ratio in 2019.
IC ratio of BMW was declined from 23.63 in 2018 to 14.85 in 2019 as operating profit was
increased by 9.36% as analyzed in profitability section but interest was increased by 29.27%.
Interest expense was pushed at higher side by interest impact on other long-term provisions.
(BMW-AR, 2019) Overall, higher interest cost put pressure on IC ratio of BMW to decline.
Significant decline in IC ratio of both companies from YoY basis, but Audi looked better.

EPS of Audi was significantly improved in 2017 with higher profits as specified in above ratios.
Subscribed share capital remained at its level with no changes. (Audi-AR, 2017) Further,
68.26% increase in profit after taxes, the DPS was almost double in 2017.
Drop in EPS of Audi was seen in above chart when it was €78.64 per share in 2018; again no
change in subscribed share capital was there and the sole impact was decline in profit after tax
by 0.46%. Audi continued to pay higher dividends to its shareholders when it was €4.80 per
share despite of decline in net profits (Audi-AR, 2018)
Again surge was seen in EPS of Audi in 2019 when it pointed at €89.53 per share. Likely no
change in subscribed paid-up capital but NP after tax was surged upwards by 13.89% (Audi-AR,
2019) which was discussed in above profitability section. Audi transferred higher amount of
dividends of €6.50 per share after increased profits after tax. ([Link], 2020)
EPS of BMW was declined in 2019 to €7.47 per share whereas it was €10.82 per share, which
was due to decline in profitability of BMW as discussed in-depth in profitability section. The
change in subscribed share capital had put negligible impact on EPS. The impact was put on
dividend per share which was also declined to €2.50 per share while it was €3.50 per share.
([Link], 2020)
If comparison is made between two companies, it was clearly evident that EPS of Audi was
improved in 2019 whereas of BMW it was dropped. Even Audi paid higher dividend than
previous year and also paid more dividend as compared to BMW. Overall, investor position of
Audi was more attractive than BMW.
Conclusions and Recommendations
Audi had faced basic challenges of highlighting its major scams like airbag and diesel issue in
addition to challenges regarding to implementation of new emission regulations. Despite of
these challenges, Audi business performance looked attractive as it had showed growth in new
markets and timely launching new models with continuous improvement on electrified cars.
Profitability of Audi showed mixed trend in relation to different ratios. The profitability of Audi
showed improvement in 2018 but declined in 2019 and the major impact was caused by decline
in revenue growth as discussed in profitability ratios. The payment of huge fines and provisions
put direct impact on profitability. Further, implementation of different IFRS put impact on
profitability ratios on YoY basis.

3.4 Business Analysis

Sample-1

3.4.1 SWOT Analysis

Strengths
High Research and Development
Continental focuses toward modernization, digitalization and innovation. They incur significant
cost on research and development. In 2018, Continental incurred R&D expenses, which
amounted to 7.2% of sales. (I wagner, 2019).Through the means of research and development
they have been launching Number of modern products Such As Barum Tires that was sporty
and economic. (Barum, 2009).

Investments

In 2018, Continental invested around 250 million euro’s and launched a growth strategy named
as Vision 2025, which comprises a Green Field tire manufacturing plant in Thailand to provide
highest quality tires to Asian consumers. (Continental Corporation, 2018) This will enhance the
market share all over Asia.

Weaknesses
Low margins and lower demands
Continental have faced immense competition mainly in tires, which explicitly has led to lower
margins been earned. (Hitesh bhasin, 2019).Also in automotive business, German entity have
decided to close some plants in Europe and US as production slows down
(Sigal, 2019).
Share Prices
Continental’s Shares are down by more than 28% since the start of 2018. This reduction in
share price is because of the lower margins and weak demand of tire. (Reed, 2018). In addition,
the PE ratio of Continental have declined which indicates lower trust by shareholder. This could
limit their investing power (Annexure: one)
Opportunities
High growth potential in Asia
Continental have existence in Asia but mainly in Middle Eastern countries and Kazakhstan.
Continental have limited existence in China, India and other Asian countries which if removed
could lead to increased revenue. In fact, Research indicates that only in India the tire market,
predicted to grow at a CAGR of 9% between the years 2015 to 2021. (Hitesh bhasin, 2019).
Asia pacific, projected to account for 53.6% of total market share by 2025 owing to increase
vehicle production. (Dirjesh, 2017). If Continental makes a space in Asia and particularly in
India, it could be an excellent opportunity to mark presence in India.
New Environmental Regulation
The environmental impacts of tire productions include noise, waste, dust, emissions etc.
(Nokian Tires, n.d.). Although it is evident that tire dealers are, facing adverse regulation for
production of tires (Moore, 2011) which on one hand could be a weakness. However, this
weakness is an opportunity, should be capitalized as if Continental enhances its production
capabilities and achieved the target set by those regulations. It would be a great step towards
sustainability and would eventually lead to attraction of other market participants.
Growth in Hybrid and electrical Vehicle wheels’
The demand of hybrid and electrical vehicle is constantly growing which can be an opportunity
for Continental. (Freedonia, n.d.) In order to take advantage of this increased demand
Continental should try to capture the maximum market of Hybrid vehicle wheels. Company has
designed the new wheel concept (Continental Corporation, n.d.) To capitalize on the present
opportunity however it must make sure, that this design should be preferable by the consumer

Threats
Economic Downturn
The reaction that we have seen from American government had led to trade war between
America and China, which have caused Continental huge decline in sales in Asia and
particularly in China. (Noble, 2019). The threat here is that if trend continuous and same
isolationism is going to be played by other countries it would lead to huge reduction in
international sales, which can be significant, for Continental.
Restructuring Power Train division
Continental Ag have decided to restructure by making its powertrain an independent legal entity.
The restructuring is subject to approval of Supervisory board. The decision taken was
due to lower demand of powertrain division but the entity have decided to retain the controlling
state. The restructuring cost is almost 350Million Euros. (Cornell, 2018). A significant outflow is
been made and if restructuring is not gone right then Continental may have to face adverse
results along with the operational costs.

3.4.2 PEST Analysis

Political
Being a German entity Continental AG may find difficult market condition for operating in US as
the new policies affects the foreign companies and affects the global trade. (Swot And Pest,
2018). The political development such as BREXIT could also affect Continental, as there is a
risk of higher tariffs, which can cause demand to decrease and cost to increase (Continental
Corporation, 2018, p. 97). In addition, it was expected early by LMC automotive, that BREXIT
might cause a decline in sales around 15%, which makes approx. 2.55 million vehicles. (The
Star, 2016).

Economic
So far the growth in tire markets has been slightly above world GDP due to rising population
and this is to be continue further. (Smithers, n.d.). In addition, the fuel prices if remained low it
will also affect demand for replacement tires. (Smithers, n.d.). The major thing, which effected
continental, was economic environment of major economies such as US and China. Due to the
conflict between both nations, Continental witnessed declining sales. (Continental Corporation,
2018, p. 4)

Social
the consumers’ behavior of automotive agency have changed significantly. Its’ observed that
consumer are buying less. Normally, a car t=. (Nathan, 2018). Also in 2018, the new
passenger’s cars market, decreased by 0.04% from previous year, (bekker, 2019) which
indicates that people leading to lesser demand have changed less cars. (bekker, 2019).

Technological
today in a modern world, an entity, which is superior in technology, will rule. Similarly, in
automotive industry technological developments have changed industry on a whole Such as use
of robots for manufacturing cars, making of self-driven vehicles for road safety, Electric cars etc.
(SkyeTech, 2018). The change in legislation have led to technologically oriented cars such as
electric vehicles and combustion engines are given lower priorities similarly Tire manufacturers
have to focus on increased load demands and rolling resistance therefore they tire testing
programs which emphasis on these factors. (Popio, 2019).

4. Conclusion
Overall, Continental corporation performance has been satisfactory. Revenue seem to be
inclining and in 2016, they first time achieved the benchmark of €40 billion euro’s. The reasons
for increase were increase in prices and couple of acquisitions. Apart from that, Continental
marks a strong performance in 2017 and 2018, but the concern here would be the restructuring
of powertrain division, this restructuring will result in significant cost to be incurred, which should
be taken care of.
Continentals’ GP margin have declined due to rise in prices of material such as oil, steel and
rubber. Company’s NP margin was highly effected due to increase in wages and research
expenses. Continentals’ liquidity have also declined but this does not affect much as company
was regarded Good by number of credit ranking sites such as moody. Continental’s gearing
have been strengthen in 2018 due to redemption of notes although it is still above the policy of
20% but much lower than industry averages. Continental is increasing its dividend year on year
by 0.25 euro, which could be attractive for investor but declining PE ratio suggest the lower
trust. In 2018, PE ratio was declined due to unstable economic environment, which limits
investors. 8.

SWOT model highlighted that Continental highly emphasize on innovation therefore, they bear
significant cost of research, which enables them to launch new products and satisfy the
environmental legislation. Continental presence in Europe a strength but along with that
Continental must have focus on other growing markets such as Asia and Argentina etc.

PEST analysis highlighted tough political and economic situations and these factors should
carefully considered in future thereby avoiding Future losses due to these factors. However
technologically continental have performed well and its focus on environment is considerable.
Considering the trade conflict and difficult environment and new legislation, Continental still
manages to retain its market share and profitability, which is remarkable.

5. Recommendations
Continental Corporation should consider marking their presence strong in Asian countries along
with the presence in Europe where growth predicted is high.

Continental PE ratio have declined which could have direct impact on continental stocks. This
decline needs to cop up shortly to avoid losing investors and their Confidence.

During Restructuring of Power train division, Continental must ensure that restructuring does not
damages the brand image of Continental.

As growth in electric cars wheel is highly growing, Continental should be focusing on this
particular segment and through launching new type of wheels for such cars to enjoy the growing
demand

Sample-2

3.7.1 SWOT ANALYSIS

STRENGHTS
Economies of Scale
FEDEX has got massive economies of scale due to its huge brand name, advancement in
technology and shipping significant number of packages per day which leads to reduction in
fixed cost. This is one of the core reasons why small companies aren’t able to earn profits at
higher margin because they don’t benefit from economies of scale (Bhasin, 2019).

Time Management

Since FEDEX has started operating it has performed its operations timely. This is one of the
major advantages for FEDEX as they are known to deliver packages on time to the customers
to their door steps. This has led customers to build a strong brand loyalty towards the entity
(Bhasin, 2019).

Diversified Service Portfolio

Now a days every other customer segment has different needs which are to be fulfilled. For this
FEDEX has a wide range of services for its customers which satisfy needs of small and large
business and also individual customers. FEDEX has a number of segments which operate
collectively to offer services of transportation, e-commerce and etc. Due to diversified portfolio
FEDEX is exposed to less risk of failure, as if one segment collapses there are other segments
which keep on functioning and satisfy customer needs (Pratap, 2019).

4- Brand value-

FEDEX is a globally recognized brand which operates in more than 220 countries and has a
strong customer base its advanced global network provides shipping smoothly to consumer
within US and internationally (Pratap, 2019). According to Forbes, FEDEX is ranked 83th
according to brand value of approx. $7.5B and customer base, company invests heavily in
advertisement for creating brand awareness (Bhasin, 2019).

WEAKNESSES

1-Being largely dependent on US economy-

US is FEDEX’s large market where it has acquired its strong customer base and earns majority
of its revenue. It can be dangerous for FEDEX if at a point US economy collapses or consumer
trend changes then FEDEX will suffer massively and will have problems of survival
([Link], 2019).

2- Less scope of variation-

Now a days, logistics sector is facing intense competition. This limits the scope of creating
variations further. Many competitive companies are trying improve their services day by day so
that higher market share can be captured. Nevertheless, all competitive companies are
providing similar pattern services ([Link], 2019).

OPPORTUNITIES-

1-Further penetration in developing countries-

FEDEX should start penetrating into developing economies because now a days there is a rapid
boom in the e commerce sector with these economies. Countries like China and India can offer
major opportunities to FEDEX in expanding its market and securing a higher market share. This
option will however reduce FEDEX’s dependence on US economy making the brand more
competitive (Bhasin, 2019).

2- Merger and acquisitions with competitors-

As FEDEX is a huge brand and is financially strong it should try doing acquisition in the logistics
field which will allow FEDEX to have higher dominance in the industry over its rivals also
competition in the industry will start getting lower. TNT Express merger in Europe was a
massive success for FEDEX, similar to this merger FEDEX must approach companies like TNT
in other countries to capture more market share ([Link], 2018)

THREATS
1-Intense competition

In logistics sector there is intense level of competition in today’s world. Top companies in this
sector include UPS, FEDEX, DHL etc. Every company is engaged in the battle of securing
higher market share. All the top leading companies are heavily investing in new technologies to
make their services efficient. UPS has the highest market share till date. FEDEX is trying to
overcome these pressures but there is a risk if these competitive pressures become ball strong
then this will become the biggest threat for FEDEX in terms of growth and survival
([Link], 2019).

3- New emerging competitors-

FEDEX initially didn’t consider Amazon among one of its competitors and used to have ground
deliveries with Amazon, but recently it’s has changed its tone and announced Amazon one of its
biggest potential competitors as Amazon has expanded its delivery networks on a massive
during these recent years also FEDEX has ended its contract with Amazon for ground services
(Kim, 2019).

3.7.2 PORTER’S FIVE FORCES MODEL

1-Competition Rivalry Amongst Existing Competitors

Now a days, logistics sector consists of immense amount of competition among the entities. The
increased enhancement in e-commerce has led to growth in companies. Also, to be competitive
every company is adopting features like better use of online facilities, better management and
quick delivery channels moreover all the top companies almost offer the same prices this has
made rivalry too intense ([Link], 2019).

2- Threat of new Entrants

For new companies to enter into market they will need to invest substantially in order to match
existing entities status and can compete with them (Kumar, 2017). However, there is a risk that
suppliers of logistics industry can enter into the industry using advanced technology and better
warehouse facilities. They can become of the key players to the industry and FEDEX can have
adverse effects due to their entry ([Link], 2019). Therefore, power of this force is said to be
low to moderate.
3- Threat of Substitutes

Due to vast use of E-commerce there are a lot of substitutes available in the industry. In the era
of digitalized world, customer have perfect knowledge of prices, products and services available
in the market. Many entities are operating in the industry and customers will easily get attracted
to company’s which offer reasonable price with efficient services, now a days switching cost for
customers is really low, due to a lot of information available for free. Thus, FEDEX faces a high
treat of Substitutes ([Link], 2017).

4- Bargaining power of customers

Now a days, logistics sector is facing intense competition. Especially in US there are a number
of companies in the logistics industry where Amazon is becoming the biggest leading company
causing other businesses to crash down (Black, 2019). Consumers have a wide range of
options available, further due to availability of information switching costs aren’t very significant
also there is an e-commerce boom in many countries especially in US so customer bargaining
power is observed to be high for FEDEX ([Link], 2019).

5- Bargaining power of suppliers

Mainly FEDEX has suppliers who provide them with fuel. They generally have moderate
bargaining power as the fuel availability and price both are unpredictable and are not in control
of both suppliers and the company ([Link], 2019).

4.1 CONCLUSION
Over the years, the primary reason of better revenue earned is the strategic decisions made of
acquisition to capture international market further to expand its brand portfolio number of
packages delivered increased marginally further FEDEX express performed really well over the
period.

Overall, profitability looks appealing due to the use of cost-efficient ways to deliver packages to
improve operating margins, also they bought back number of shares to improve their ROCE.

Moreover, due to huge investments in technology they did face high levels of increase in
financial gearing due to significant injection of debt finance but this showed a great improvement
in their operations which increased their revenue earned per package and resulted in better
profitability. Interest cover on the other hand was unstable due to increased interest expenses
over the years and decreased PBIT in FY 2018.

Liquidity overall has an uneven trend due to increase in short term liabilities and sale of non-
core subsidiary generated cash proceeds

EPS fairly increased over the 3 years period and exceeded the projected value by analyst in
2018 from $3.11 to $3.72, but P/E ratio showed a decline over the years, due to loss in investor
confidence. Working capital management was fairly good due to strict credit policies.

By conducting SWOT Analysis, it is evident that FEDEX has a number of strengths and
opportunities but there are weakness and threats which needs to be tackled so that there are no
constraints in future profits and survival further if future opportunities are not availed this can
outweigh the strengths of the company.

Porter’s five forces models analyzed the key factors which effect the functioning of the
company. Fierce competition is faced by FEDEX. Threat of substitutes and power of customers
is high and all these factors need to be carefully analyzed and decisions must be made that
gives company the best possible outcome.

5.1 RECOMMENDATION

- Company should take steps to improve to re gain confidence of its investors so that they
can have better P/E ratio.
- Company should avail the opportunity of entering into different geographical locations
like expand in developing economies in order to expand its market share and reduce
dependency over the US market.
- Company should perform strategic mergers and acquisitions like its competitors have
done previously so that entity’s portfolio gets widen further risks will also get mitigated.
- FEDEX should start developing in house technologies like the use of Delivery Robot in
future to gain competitive edge over its rivals.

Sample-3
SWOT ANALYSIS OF GENERAL MOTORS (GM)
STRENGTHS:
General Motors has a strong brand portfolio and General Motors is proud of its
extensive portfolio of brands, which are all tailored to meet specific mobility needs which
includes highly acknowledged brands like Chevrolet, Buick, GMC and Cadillac.
(General Motors, 2023) There is also a Vehicle Intelligence Platform from GM that
promises future technologies adoptable and a system powered by technology can
manage up to 4.5 gigabytes of data processing power per hour, which is a fivefold
improvement over GM's prior electrical design and another important aspect of the new
design is cyber security with additional safeguards are included in the DNA of the
system. (General Motors, 2023)
General Motors supports communities all throughout the United States with hundreds of
millions of dollars in economic activity thanks to its 93,922 workers, 496,000 retirees in
the US, $36.8 billion invested in different facilities in the United States and $10.9 billion
in taxable wages. (General Motors, 2023) The company has delivered an astonishing
number in the US with 2,274,088 vehicles delivered, 5709 suppliers with a spending of
$39 billion with them, working under 120 facilities in the states and also donated $60
million to non-profit organizations. (General Motors, 2023) These figures shows that
General Motors has a firm grip on the US automotive market.
In order to build configurable, scalable manufacturing systems, GM uses advanced, off-
the-shelf technology, such as vision systems, robotics, and reconfigurable tooling. By
combining existing technologies in a model that specifically addresses the needs, GM is
able to eliminate hard fixtures from its plants. (Abell, 2022) About ten years ago, GM
started working on ultrasonic welding and at the time, one obstacle they faced was the
dearth of scientific literature on the subject, however, by presenting their work at
conferences, they were able to stimulate focus and discourse on the topic, which
sparked a flood of academic papers and early-stage research that is still ongoing today.
(Abell, 2022)
Robonaut 2, was developed by GM and NASA using advancements in controls,
sensors, and vision technology is currently stationed on the International Space Station
and its technologies have applications to space travel, safe manufacturing, and
advanced vehicle safety systems. (Tsien, 2023) Through the development of cutting-
edge technologies, such as the sector's first driver monitoring system, the driver is able
to briefly take their hands off the steering wheel in order to handle other tasks, Super
Cruise1 is the industry's first truly hands-free driving technology for highways. (Tsien,
2023) These technological advancements give GM competitive edge in the market.
With a variety of technological advancements, GM is enhancing and accelerating back-
end operations like the engineering department of the carmaker has increased its high-
performance computer capacity to enhance combustion, crash, wind tunnel, and other
simulations. (Preston, 2023) The team uses around 3,000 teraflops of computing power
to execute more than 150,000 of these mathematical simulations a month to assist the
business meet stricter standards for safety, fuel efficiency, and CO2 emissions while
also reducing costs and accelerating the release of new vehicles. (Preston, 2023)
By formally modeling all the interfaces between operations, including IT interfaces, OT
(operational technology) tools, equipment, and OT interfaces, GM focuses on model-
based system engineering with an operation-centric approach which gives them the
context required to analyze data transmitted from IOT (internet of things) devices. (Rao,
2023) In order to evaluate every manufacturing process variation required to support
build-to-order manufacturing, as well as every possible combination of results from each
operation, GM created a Virtual Factory Test bed. (Rao, 2023) Because of their superior
manufacturing and information technology capabilities, General Motors dominates the
automotive business.
WEAKNESSES
Supply chain problems will put pressure on General Motors' second quarter 2022
profitability, and the company is still dealing with production concerns that will persist
into next year. As of June 30, it had around 95,000 built vehicles in its inventory that
were missing some components. (Hur, 2022) Although the Hummer EV pickup vehicle
is currently on the market, a large number of reservations implies that new orders won't
likely be filled until 2024, as a result, shares of GM dropped slightly to settle at $31.59,
much below their 52-week high of $67.21. (Hur, 2022) This is an internal weakness of
GM and it needs to be addressed as soon as possible.
Driver complaints about the GM Enclave range from timing chain and transmission
problems to power steering problems with a subpar cabin and poor value for money,
including electrical system failure that results in abrupt deceleration. (Yusuf, 2022) The
window regulators on GM's Buick LeSabre, Rendezvous, and Verano are defective,
while the intake manifold on the Verano leaks and the Cadillac CTS's transfer case and
transmission failed. (Yusuf, 2022) Customers' most aggravating complaint about the
Chevrolet Cavalier is that the dashboard instruments, particularly the speedometer,
would malfunction and quit working entirely with over 500 complaints about problems
with the gauge cluster in this automobile have been posted on the automobile
Complaints website. (Yusuf, 2022)
General Motors' dealer-centric business model appears to be out of date in some ways;
for example, the current order tracking process at GM is complicated and time-
consuming, frequently failing to provide customers with the information they need, while
today's customers expect on-demand information and clarity (Brown, 2022) If
customer choose to order a new vehicle from GM rather than choosing one off the lot
from a dealer's inventory, when the customer pays a down payment, obtains an order
number, and is then essentially tossed into darkness with regard to the progress of their
order. (Brown, 2022)
A video purports to show a Cadillac CT6-V. Broken 4.2L Black wing V8 is not what one
wants from a nearly new, close to $100,000 automobile, to put it mildly. The CT6-V in
question encountered some sort of unidentified engine trouble and now needs to have
its 4.2L V8 replaced with a new one. (Mceachern, 2020)
OPPORTUNITIES
China's SAIC-GM and CATL form a new battery collaboration to support GM's
upcoming battery technology for electric vehicles. (Manthey, 2018) General Motors
China President Julian Blisset stated that the carmaker is already closely collaborating
with CATL and disclosed that moving forward, only local Chinese vendors will be used
to obtain EV components. In China, the largest market for electric vehicles, CATL
already has supply agreements with some of GM's main competitors, including
Volkswagen and Tesla. (Mceachern, 2020) In collaboration with the South Korean
battery manufacturer LG Chem, the automaker is now constructing a sizable new
battery plant outside of Lords town, Ohio, which will manufacture its newest Ultium
range of batteries. (Mceachern, 2020)
As the company ushers in a new era of safety, GM's OnStar unveils a new brand
identity and expands its services where Members can speak hands-free to OnStar
Emergency Certified Advisors by saying, "Alexa, call for help" and perfect timing and
support during challenges at home. (General Motors, 2023) OnStar actively supports
Next Generation 911 and new technologies through its work with startups like Rapid
Deploy, adding an extra layer of customer protection. The diversification of GM
products, like the OnStar Guardian mobile app, also adds opportunities to support
everyone and their safety needs. (General Motors, 2023)
GM's strategy is to dominate the U.S. EV market while increasing its profits from ICE
vehicles. This growth will be fueled by Ultium, a modular EV platform that the company
created to introduce a wide range of highly desirable EVs using standard, scalable
components. (General Motors, 2023) A Chevrolet crossover priced at $30,000 will be
among the high-volume Ultium-powered EVs available, and GM will use its dual
platform Ultium + Ultifi strategy to aggressively extend its digital services and raise the
lifetime value of its vehicles. (General Motors, 2023) This will open further opportunities
for GM to increase its sales as customers prefers technology in today’s era more than
ever.
The automaker is investing more than $35 billion in electric and autonomous vehicle
technologies to shape the future of transportation while forming worldwide alliances to
broaden the market appeal of its expanding line of EVs, which come in a variety of body
types and price points. (Centeno, 2022) GM has already disclosed intentions to launch
EVs based on Ultium battery technology and Ultium Drive motors in countries like South
Korea, the Middle East, and South America in addition to introducing the new electric
powertrain in North America and China. (Centeno, 2022) By entering these additional
areas, the company will be able to compete with the leading producers of electric
vehicles on a global scale.
In the first four months of 2022, SUVs and pickups set a new market share record,
accounting for a combined 72.9 percent of all passenger car sales between January
and April. This equates to 3.32 million units out of a total of 4.56 million, and of the two
segments, SUVs are by far the dominant force, accounting for 53.5 percent of the share
to trucks' 19.4 percent. (Munoz, 2022) GM invests about $20 million a year in energy
efficiency and power demand projects, and in 2022 the company released a pledge
inviting suppliers from around the world to join us in our commitment to carbon
neutrality, the creation of social responsibility initiatives, and the adoption of sustainable
procurement methods throughout supply chain operations. (General Motors, 2023)
THREATS
The global chip shortage is continuing causing supply chain problems for General
Motors, which have resulted in manufacturing delays and component shortages, which
have generated lost sales and higher expenses. (Farooque, 2022) General Motors has
also been severely impacted by the rising cost of raw materials, which has reduced
margins and caused the business to increase car pricing in order to remain competitive
in the years to come, General Motors will need to find a solution to solve these
difficulties. (Farooque, 2022) This the threat that is external to organization and needs
to be taken care of as early as possible.
Across all charger types, there are less than 47,000 EV charging stations in the US,
whereas there are more than three times as many gas stations and this is a result of the
fact that many consumers cannot afford EVs at their current prices, which is apparent in
budget markets where customers frequently buy used cars for a portion of their new
market price. (Marsh, 2022) Although EVs have lower lifetime emissions than gasoline-
powered vehicles, the production of EVs has its own carbon impact, and the batteries
themselves are environmentally problematic. (Marsh, 2022) Therefore, to be
successful, GM must address both the significant drawbacks of EVs in the US.
Automobile industry observers are concerned about the potential impact of an
unprecedented level of inflation and price hikes for gas on the auto industry due to
which automobiles were forced it to frequently cut production, casting a shadow over its
full-year production goals and a worldwide chip shortage and supply chain disruptions
hit production and left nearly 100,000 vehicles holding off for more parts.
(Ganapavaram, 2022) The current shortage of cars and trucks across the sector
appears to be a significant barrier to rising auto sales, which has caused experts to
lower their full-year sales projections. (Ganapavaram, 2022)

6. References
Sample-1

Accounting For Management, n.d. Horizontal or trend Analysis of Financial Statement. [Online]
Available at: [Link]
[Accessed 23 Septemeber 2019].
Accounting Tools, 2018. Limitation of financial statements. [Online]
Available at: [Link]
[Accessed 9 september 2019].

Accounting Tools, 2018. Limitations of ratio Analysis. [Online]

Available at: [Link]
[Accessed 24 September 2019].

Accounting Tools, 2019. vertical analysis. [Online]

Available at: [Link]
[Accessed 23 septemeber 2019].

Amadeo, K., 2019. Oil Price Forecast. [Online]

Available at: [Link]
[Accessed 17 october 2019].

American University, n.d. Primary vs Secondary Sources. [Online]

Available at: [Link]
[Accessed 15 september 2019].

Annual Report, 2017. Continental Corporation, s.l.: Continental Corporation.

Annual report, 2018 and 2017. Continental Corporation, s.l.: s.n.

Automative world, 2015. Continental Redeems Bond Early. [Online]

Available at: [Link]
[Accessed 22 october 2019].

Sample-2

accounting [Link], 2019. [Link]

accounting [Link], 2019. [Link]

accounting [Link], 2019. horizontal analysis.

[Link]

[Link], n.d.. current ratio. s.l.:[Link]

[Link], n.d.. horizontal analysis. s.l.:accouting for [Link].

[Link], 2018. s.l.:s.n.

Anastasia, 2015. limitations of horizontal analysis. [Link]

analysis-introduction/.
Ashe, A., 2018. ups revenue. [Link]
streets-view-deliveries-climb.

Berman, J., 2018. revenue.

s.l.:[Link]
al_e_commerce_po.

Bhasin, H., 2018. section 3 revenue horizontal analysis. [Link]

strategy-fedex/.

7. Annexures

Sample-1
Annexure 1:

Continental Corporation Bridgestone

2016 2017 2018 2016 2017 2018

Profitability Profitability
Gp Margin 26.55 25.85 25.01 Gp Margin 40.89 37.90 37.84

Np margin 7.11 6.93 6.66 Np margin 8.25 8.16 8.21

ROCE 18.11 19.62 16.29 ROCE 12.63 10.19 10.61

Gearing Gearing
ratios ratios

Gearing 34.86 29.94 25.87 Gearing 18.27 21.18 18.05

Interest Interest
Cover 13.26 16.20 14.58 Cover 41.46 34.73 33.39

Liquidity Liquidity
Ratios Ratios

Current Current
Ratio 1.10 1.09 1.07 Ratio 2.14 2.18 2.21

Investor Investor
ratios ratios
 P/E ratio 11.74 15.38 9.20 P/E ratio 5.80 6.94 5.38

Dividend Dividend
Yield 2.58 1.96 3.56 Yield 7.10 5.77 7.65

Working Working
capital capital
ratio ratio

Debtor days 66.54 63.61 62.73 Debtor days 57.91 68.29 81.58

Payable Payable
days 76.57 76.04 79.94 days 78.17 87.57 90.60

Inventory Inventory
days 46.00 46.17 49.56 days 32.65 35.32 36.90

COC 35.97 33.74 32.35 COC 12.40 16.03 27.89

Annexure 2:

Consolidated Statement of Profit or Loss

Continental Tires In millions of Euros
2016 2017 2018
Sales 40,550 44,010 44,404
- - -
Cost of sales 29,783 32,635 33,300
Gross margin on sales 10,767 11,375 11,105
Research and development expenses -2,812 -3,104 -4,280
Selling and logistics expenses -2,251 -2,430 -2,494
Administrative expenses -1,013 -1,144 -1,149
Other income 316 585 1,803
Other expenses -982 -797 -1,028
Income from at-equity accounted investees 70 77 70
Other income from investments 1 1 1
Earnings before interest and tax 4,096 4,562 4,028
Interest income 101 94 123
Interest expense -309 -282 -276
Effects from currency translation 157 -139 -30
Effects from changes in the fair value of derivative instruments, and other
valuation effects -67 40 6
Financial result -117 -286 -178
Earnings before tax 3,979 4,276 3,850
 Income tax expense -1,097 -1,228 -892
Net income 2,882 3,048 2,958
Non-controlling interests -80 -64 -61
Net income attributable to the shareholders of the parent 2,803 2,985 2,897

Annexure 3:

In millions of Euro's

Consolidated Statement of Profit or Loss

Bridgestone
2016 2017 2018
Net sales 25,899 28,590 27,869
cost of sales 15,309 17,754 17,322
gross profit 10,590 10,835 10,547
selling, general and admin expense 7,101 7,547 7,472
operating income 3,489 3,288 3,075

Other income/ Expense

interest and dividend income 102 111 91
settlement received 29
interest expense -79 -95 -98
foreign currency exchange gain/loss -61 -54
gain on sales of investment securities 86 224 124
gain of sales of shares of subsidiaries and associates 83
gain on establishment in jointly controlled entity 232
impairment loss -34 -79
expense related to relocation of head office of America’s
operations 37
loss related to civil litigation in America -35
Loss related to R&d and manufacturing base -137
other net -95 -94 -133
total -217 11 191
Income before income and taxes and non-controlling
interest 3,272 3,299 3,266
income taxes
current 881 979 843
deferred 253 -13 134
total 1,134 965 977
Income before non-controlling interest 2,138 2,334 2,289
Profit attributable to Non-controlling interest -77 -72 -62
profit attributable to owners of parent 2,061 2,262 2,227

Annexure 4:

In Millions of
Euros

Consolidated Statement of Financial Position As At 31 Dec

Continental Tires
2016 2017 2018
Assets

Goodwill 6,857 7,010 7,233

Other intangible assets 1,514 1,607 1,566
Property, plant and equipment 10,538 11,202 12,376
Investment property 10 11 12
Investments in equity-accounted investees 385 415 645
Other investments 43 51 193
Deferred tax assets 1,836 1,517 1,464
Defined benefit assets 24 16 28
Long-term contract assets - - 0
Long-term derivative instruments and interest-bearing investments 20 113 32
Long-term other financial assets 66 69 81
Long-term other assets 27 27 28

Non-current assets 21,321 22,038 23,659

Inventories 3,753 4,128 4,521

Trade accounts receivable 7,393 7,669 7,632
Short-term contract assets - - 67
Short-term other financial assets - 297 321
Short-term other assets 456 1,187 1,124
Income tax receivables 124 178 208
Short-term derivative instruments and interest-bearing investments 28 48 152
Cash and cash equivalents 2,107 1,882 2,761
Assets held for sale 4 14 -

Current assets 14,853 15,402 16,787

Total Assets 36,175 37,441 40,445

Equity and liabilities

Subscribed capital 512 512 512

Capital reserves 4,156 4,156 4,156
Retained earnings 11,535 13,669 15,697
– – –
Other comprehensive income 1,932.3 2,508.5 2,514.4
Equity attributable to the shareholders of the parent 14,270 15,828 17,850
Non-controlling interests 465 462 483

Total equity 14,735 16,290 18,333

Long-term employee benefits 4,392 4,394 4,407

Deferred tax liabilities 372 349 316
Long-term provisions for other risks and obligations 204 140 164
Long-term indebtedness 2,804 2,018 1,449
Long-term other financial liabilities 97 36 38
Long-term contract liabilities - - 11
Long-term other liabilities 17 25 13

Non-current liabilities 7,886 6,962 6,398

Short-term employee benefits 1,314 1,491 1,454

Trade accounts payable 6,248 6,799 7,293
Short-term contract liabilities - - 150
Income tax payables 784 890 751
Short-term provisions for other risks and obligations 1,146 943 1,066
Short-term indebtedness 2,149 2,072 1,066
Short-term other financial liabilities 1,187 1,277 1,275

Short-term other liabilities 726 718 567

Current liabilities 13,554 14,189 15,714

Total equity and liabilities 36,175 37,441 40,445

Annexure 5:

in millions of Euro's

Consolidated Statement of Financial Position As At 31 Dec

Bridgestone
2016 2017 2018
Assets

Cash and Cash equivalent 4259 5331 4494

Marketable securities 1424 2249 1490
Notes and accounts receivables 4109 5349 6229
inventories 4999 6271 6393
defer tax assets 628 636 580
other current assets 1158 1457 1427
Allowance for doubtful accounts -146 -181 -225

Total Current Assets 16430 21112 20386

Property plant and equipment

land 1521 1737 1737
building and structures 9734 12109 11952
Machinery and equipment 23703 29133 28356
Construction in progress 1451 1553 1781
Total 36408 44531 43826
Accumulated Dep -23277 -28880 -28619
Net property plant and equipment 13132 15651 15208

Investment in securities 2251 2786 1783

Investment in and advances to affiliated companies 130 179 497
long term loan receivables 43 63 118
Defer tax assets 334 431 343
Goodwill 0 465 429
other assets 1279 1394 1268
allowance for doubtful accounts -16 -17 -16
total investment and other assets 4022 5301 4421

Total assets 33584 42064 40015

liability and equity

Current liability
short term deb 497 875 1008
current portion of long term debt 1089 812 994
notes and accounts payable 3279 4260 4299
income taxes payable 205 706 156
accrued expenses 1993 22908 2183
deferred tax liabilities 19 51 40
provision of sales return 31 38 37
provision of reorganization of R&D and manufacturing base 0 0 45
Other current liabilities 555 555 466
Provision for recall 8 0 0
Total current liabilities 7677 9674 9228

Long term liabilities

long term debt 1508 3191 2229
net defined benefit liability 1936 2155 2030
defer tax liability 451 567 490
provision for environmental remediation 18 18 16
provision for reorganization of R&D and manufacturing base 126 88 0
other liabilities 694 842 793

Total long term liability 4733 6861 5557

total Liability 12411 16535 14785

Contingent liabilities and commitments

Common stock : Authorized - 1450000000 1309 142 1309
capital surplus 1110 1307 1264
stock acquisition rights 27 39 36
Retain earnings 19593 24892 24470
treasury stock -507 -2213 -338
accumulated Other comprehensive income
Net unrealized gain / ( Loss ) on available for sale securities 1573 1877 1128
deferred gain / loss on derivative instrument -16 -1 18
foreign currency translation adjustment -1037 -993 -1811
remeasurement of defined benefit plans -1244 -1351 -1405
total 20640 24084 24669
Non-controlling interest 533 605 561
total equity 21173 25529 25231

Total liabilities and equities 33584 42064 40015

Annexure 6: Continental Bridgestone

Capital
Employed 22,621 23,252 24,732 25907 32390 30787

Basic EPS 14.01 14.92 14.49 2.63 2.94 2.97

Closing Market Price per share 164.53 229.49 133.38 15.27 20.44 15.96

Dividend per share 4.25 4.50 4.75 1.08 1.18 1.22

Annexure 7:

Continental Corporation
 2016 2017 2018

Profitability

Gp Margin =('Statement of Profit =('Statement of Profit =('Statement of Profit

and Loss'! and Loss'!F9/'Statement and Loss'!G9/'Statement
E9/'Statement of Profit of Profit and Loss'! of Profit and Loss'!
and Loss'!E7)*100 F7)*100 G7)*100

Np margin =('Statement of Profit =('Statement of Profit =('Statement of Profit

and Loss'! and Loss'! and Loss'!
E25/'Statement of F25/'Statement of Profit G25/'Statement of Profit
Profit and Loss'! and Loss'!F7)*100 and Loss'!G7)*100
E7)*100

ROCE =('Statement of Profit =('Statement of Profit =('Statement of Profit

and Loss'! and Loss'! and Loss'!
E17/'Statement of F17/'Statement of Profit G17/'Statement of Profit
Profit and Loss'! and Loss'!F36)*100 and Loss'!G36)*100
E36)*100

Gearing ratios

Gearing =('Statement of =('Statement of Financial =('Statement of Financial

Financial Position'! Position'!N57/('Statemen Position'!O57/('Statemen
M57/('Statement of t of Financial Position'! t of Financial Position'!
Financial Position'! N57+'Statement of O57+'Statement of
M57+'Statement of Financial Position'! Financial Position'!
Financial Position'! N47))*100 O47))*100
M47))*100

Interest Cover =('Statement of Profit =('Statement of Profit =('Statement of Profit

and Loss'! and Loss'! and Loss'!
E17/-'Statement of F17/-'Statement of Profit G17/-'Statement of Profit
Profit and Loss'!E19) and Loss'!F19) and Loss'!G19)
Liquidity
Ratios

Current Ratio =('Statement of =('Statement of Financial =('Statement of Financial

Financial Position'! Position'!N33/'Statement Position'!O33/'Statement
M33/'Statement of of Financial Position'! of Financial Position'!
Financial Position'! N68) O68)
M68)

Investor ratios

P/E ratio =('Statement of Profit =('Statement of Profit =('Statement of Profit

and Loss'! and Loss'! and Loss'!
E40/'Statement of F40/'Statement of Profit G40/'Statement of Profit
Profit and Loss'!E38) and Loss'!F38) and Loss'!G38)

Dividend Yield =('Statement of Profit =('Statement of Profit =('Statement of Profit

and Loss'! and Loss'! and Loss'!
E42/'Statement of F42/'Statement of Profit G42/'Statement of Profit
Profit and Loss'! and Loss'!F40)*100 and Loss'!G40)*100
E40)*100

Working
capital ratio

Debtor days =('Statement of =('Statement of Financial =('Statement of Financial

Financial Position'! Position'!N24/'Statement Position'!O24/'Statement
M24/'Statement of of Profit and Loss'! of Profit and Loss'!
Profit and Loss'! F7)*365 G7)*365
E7)*365

Payable days =('Statement of =('Statement of Financial =('Statement of Financial

Financial Position'! Position'! Position'!
M60/-'Statement of N60/-'Statement of Profit O60/-'Statement of Profit
Profit and Loss'! and Loss'!F8)*365 and Loss'!G8)*365
E8)*365
Inventary days =('Statement of =('Statement of Financial =('Statement of Financial
Financial Position'! Position'! Position'!
M23/-'Statement of N23/-'Statement of Profit O23/-'Statement of Profit
Profit and Loss'! and Loss'!F8)*365 and Loss'!G8)*365
E8)*365

COC =E36+E40-E38 =F36+F40-F38 =G36+G40-G38

Annexure 8:

Bridgestone

2016 2017 2018

Profitability

Gp Margin =('Statement of Profit and =('Statement of Profit and =('Statement of Profit and
Loss'!Q9/'Statement of Loss'!R9/'Statement of Loss'!S9/'Statement of
Profit and Loss'!Q7)*100 Profit and Loss'!R7)*100 Profit and Loss'!S7)*100

Np margin =('Statement of Profit and =('Statement of Profit and =('Statement of Profit and
Loss'!Q32/'Statement of Loss'!R32/'Statement of Loss'!S32/'Statement of
Profit and Loss'!Q7)*100 Profit and Loss'!R7)*100 Profit and Loss'!S7)*100

ROCE =('Statement of Profit and =('Statement of Profit and =('Statement of Profit and
Loss'!Q27/'Statement of Loss'!R27/'Statement of Loss'!S27/'Statement of
Profit and Loss'!Q36)*100 Profit and Loss'!R36)*100 Profit and Loss'!S36)*100

Gearing
ratios

Gearing =('Statement of Financial =('Statement of Financial =('Statement of Financial

 Position'!AO61/('Statemen Position'!AP61/('Statemen Position'!AQ61/('Statemen
t of Financial Position'! t of Financial Position'! t of Financial Position'!
AO61+'Statement of AP61+'Statement of AQ61+'Statement of
Financial Position'! Financial Position'! Financial Position'!
AO78))*100 AP78))*100 AQ78))*100

Interest =('Statement of Profit and =('Statement of Profit and =('Statement of Profit and
Cover Loss'!Q27/-'Statement of Loss'!R27/-'Statement of Loss'!S27/-'Statement of
Profit and Loss'!Q16) Profit and Loss'!R16) Profit and Loss'!S16)

Liquidity
Ratios

Current =('Statement of Financial =('Statement of Financial =('Statement of Financial

Ratio Position'!AO16/'Statement Position'!AP16/'Statement Position'!AQ16/'Statement
of Financial Position'! of Financial Position'! of Financial Position'!
AO51) AP51) AQ51)

Investor
ratios

P/E ratio =('Statement of Profit and =('Statement of Profit and =('Statement of Profit and
Loss'!Q40/'Statement of Loss'!R40/'Statement of Loss'!S40/'Statement of
Profit and Loss'!Q38) Profit and Loss'!R38) Profit and Loss'!S38)

Dividend =('Statement of Profit and =('Statement of Profit and =('Statement of Profit and
Yield Loss'!Q42/'Statement of Loss'!R42/'Statement of Loss'!S42/'Statement of
Profit and Loss'!Q40)*100 Profit and Loss'!R40)*100 Profit and Loss'!S40)*100

Working
capital ratio

Debtor days =('Statement of Financial =('Statement of Financial =('Statement of Financial

Position'!AO10/'Statement Position'!AP10/'Statement Position'!AQ10/'Statement
of Profit and Loss'! of Profit and Loss'! of Profit and Loss'!S7)*365
Q7)*365 R7)*365
 Payable =('Statement of Financial =('Statement of Financial =('Statement of Financial
days Position'!AO43/'Statement Position'!AP43/'Statement Position'!AQ43/'Statement
of Profit and Loss'! of Profit and Loss'! of Profit and Loss'!S8)*365
Q8)*365 R8)*365

Inventary =('Statement of Financial =('Statement of Financial =('Statement of Financial

days Position'!AO11/'Statement Position'!AP11/'Statement Position'!AQ11/'Statement
of Profit and Loss'! of Profit and Loss'! of Profit and Loss'!S8)*100
Q8)*100 R8)*100

COC =T36+T40-T38 =U36+U40-U38 =V36+V40-V38

Sample-2

7. ANNEXURES

Annexure: 1 Ratio
Analysis
FEDEX UPS
2018 2017 2016
2018 2017 2016
Profitability Profitability
ROCE 11.40 12.40 8.09 ROCE 19.55 23.03 26.84
Net profit margin 7.44 8.35 6.11 Net Profit margin 9.77 11.31 12.48
Liquidity Liquidity ratio
Current ratio 1.39 1.59 1.50 Current ratio 1.15 1.22 1.18
Gearing Ratio Gearing ratios
Financial gearing 30.80 33.59 23.10 Financial Gearing 87.55 95.57 25.22
Interest cover 8.73 9.84 9.16 interest cover 17.56 16.62 20.18
Investor Ratio Investor ratios
Earnings per share 17.08 11.24 6.59 Earnings per share 5.53 5.63 3.88
P/E ratio 14.82 17.25 24.94 P/E ratio 16.25 21.15 29.93
 Dividend yield per
Dividend Yield ratio 1.03 1.03 0.97 share 4.05 2.79 2.69

Receivable days 47.30 45.98 52.56 Receivable days 45.50 48.09 45.59
Payable days 44.43 45.62 60.49 Payable days 94.80 83.77 76.34
Cash operating Cash operating -
cycle 2.87 0.36 -7.93 cycle 49.30 -35.67 -30.75

Annexure 2:

Consolidated Statement of Profit and Loss for 31st May

FED EX in millions, $

2018 2017 2016

Revenues 65450 60,319 50,365

Operating Expenses

Salaries and employee benefits 23,207 21,542 18,581

Purchased transportation 15,101 13,630 9,966

Rentals and landing fees 3,361 3,240 2,854

Depreciation and amortization 3,095 2,995 2,631

Fuel 3,374 2,773 2,399

Maintenance and repairs 2,622 2,374 2,108

Goodwill and other asset
impairment charges 380 – –
Retirement plans mark-to-market
adjustment -10 -24 1,498

Other 9,450 8,752 7,251

60,580 55,282 47,288

Operating Income 4,870 5,037 3,077

Other Income (Expense):

Interest expense -558 -512 -336

Interest income 48 33 21

Other, net -7 21 -22

-517 -458 -337

Income Before Income Taxes 4,353 4,579 2,740

Provision For Income Taxes
(Benefit) -219 1,582 920

Net Income 4,572 2,997 1,820

Basic Earnings Per Common
Share 17.08 11.24 6.59
Diluted Earnings Per Common
Share 16.79 11 6.51
Annexure 3:

Consolidated Statement of Profit and Loss for 31st

Dec
UPS

2018 2017 2016

Revenue 71,861 66,585 61,610

Operating Expenses:
Compensation and
benefits 37,235 34,577 32,534
Repairs and
maintenance 1,732 1,601 1,542
Depreciation and amortization 2,207 2,282 2,224
Purchased
transportation 13,409 11,696 9,848
Fuel 3,427 2,690 2,118
Other occupancy 1,362 1,155 1,037
Other expenses 5,465 5,055 4,619
Total Operating
Expenses 64,837 59,056 53,922
Operating Profit 7,024 7,529 7,688
 Other Income-
-
Investment income (expense) and other -400 61 2,186
Interest expense -605 -453 -381
- -
Total Other Income and (Expense) 1,005 -392 2,567
Income Before Income
Taxes 6,019 7,137 5,121
Income Tax Expense 1,228 2,232 1,699
Net Income 4,791 4,905 3,422
Basic Earnings Per
Share 5.53 5.63 3.88
Diluted Earnings Per
Share 5.51 5.61 3.86

Annexure 4:

FED EX Dollars $ 000

2018 2017 2016
Assets
Current Assets
Cash and cash equivalents 3,265 3,969 3,534
Receivables, less allowances of $401 and $252 8,481 7,599 7,252
Spare parts, supplies and fuel, less allowances of $268 and $237 525 514 1,203
Prepaid expenses and other 1,070 546 -
Total current assets 13,341 12,628 11,989

Property and Equipment, at Cost 47,018

Aircraft and related equipment 20,749 18,833
Package handling and ground support equipment 9,727 8,989
Information technology 5,794 5,396
Vehicles 7,708 6,961
Facilities and other 11,143 10,447
55,121 50,626
Less accumulated depreciation and amortization 26,967 24,645 22,734
Net property and equipment 28,154 25,981 24,284
Other Long-Term Assets
Goodwill 6,973 7,154 6,747
Other assets 3,862 2,789 3,044
Total other long-term assets 10,835 9,943
$52,330 48,552 46,064
Liabilities and Stockholders’ Investment
Current Liabilities
Current portion of long-term debt 1,342 22 29
Accrued salaries and employee benefits 2,177 1,914 1,972
Accounts payable 2,977 2,752 2,944
Accrued expenses 3,131 3,230 3,063
Total current liabilities 9,627 7,918 8,008
Long-Term Debt, Less Current Portion 15,243 14,909 13,838
Other Long-Term Liabilities
Deferred income taxes 2,867 2,485 1,567
Pension, postretirement healthcare and other benefit obligations 2,187 4,487
Self-insurance accruals 1,784 1,494
Deferred lease obligations 551 531
Deferred gains, principally related to aircraft transactions 121 137
Other liabilities 534 518 8,867
Total other long-term liabilities 8,044 9,652
Commitments and Contingencies
Common Stockholders’ Investment 13,784

Common stock, $0.10 par value; 800 million shares authorized;

318 million shares issued as of May 31, 2018 and 2017 32 32
Additional paid-in capital 3,117 3,005
Retained earnings 24,823 20,833
Accumulated other comprehensive loss -578 -415
Treasury stock, at cost -7,978 -7,382
Total common stockholders’ investment 19,416 16,073
52,330 48,552 46,064
Annexure: 5

Consolidated Statement of Financial Position as at 31st Dec

 UPS in millions $

2018 2017 2016

ASSETS
Current Assets:
Cash and cash equivalents 4,225 3,320 3,476
Marketable securities 810 749 1,091
Accounts receivable, net 8,958 8,773 7,695
Current income taxes receivable 940 1,573 633
Other current assets 1,277 1,303 954
Total Current Assets 16,210 15,718 13,849
Property, Plant and Equipment, Net 26,576 22,118 18,800
Goodwill 3,811 3,872 3,757
Intangible Assets, Net 2,075 1,964 1,758
Investments and Restricted Cash 170 483 476
Deferred Income Tax Assets 141 266 591
Other Non-Current Assets 1,033 1,153 1,146
Total Assets 50,016 45,574 40,377
LIABILITIES AND SHAREOWNERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt and commercial paper 2,805 4,011 3,681
Accounts payable 5,188 3,934 3,042
Accrued wages and withholdings 3,047 2,608 2,317
Hedge margin liabilities 17 575
Self-insurance reserves 810 705 670
Accrued group welfare and retirement plan contributions 715 677 598
Other current liabilities 1,522 951 847
Total Current Liabilities 14,087 12,886 11,730
Long-Term Debt 19,931 20,278 12,394
Pension and Postretirement Benefit Obligations 8,347 7,061 12,694
Deferred Income Tax Liabilities 1,619 756 112
Self-Insurance Reserves 1,571 1,765 1,794
Other Non-Current Liabilities 1,424 1,804 1,224
Shareowners’ Equity:
Class A common stock (163 and 173 shares issued in 2018 and 2017) 2 2 2
Class B common stock (696 and 687 shares issued in 2018 and 2017) 7 7 7
Additional paid-in capital - - -
Retained earnings 8,006 5,852 4,879
Accumulated other comprehensive loss -4,994 -4,867 -4,483
Deferred compensation obligations 32 37 45
Less: Treasury stock (1 share in 2018 and 2017) -32 -37 -45
Total Equity for Controlling Interests 3,021 994 405
Noncontrolling Interests 16 30 24
Total Shareowners’ Equity 3,037 1,024 429
Total Liabilities and Shareowners’ Equity 50,016 45,574 40,377

Annexure 6:

FEDEX
 2018
Profitability
ROCE =(Pnl!H18/('Balance sheet'!P26-'Balance sheet'!P33)*100)
Net profit margin =(Pnl!H18/Pnl!H5)*100
Liquidity
Current ratio ='Balance sheet'!P11/'Balance sheet'!P33
Gearing Ratio
=('Balance sheet'!P34+'Balance sheet'!P42)/('Balance sheet'!P34+'Balance sheet'!P42+'B
Financial gearing P51)*100
Interest cover =Pnl!H18/-Pnl!H20
Investor Ratio
Earnings per share =Pnl!H27
P/E ratio =253.08/Pnl!H27
Dividend Yield ratio =(2.6/253.08)*100

Receivable days =('Balance sheet'!P8/Pnl!H5)*365

Payable days =('Balance sheet'!P31/24458)*365
Cash operating cycle =C34-C35

Annexure 7:
 UPS
2018

Profitability
ROCE =Pnl!Y16/('Balance sheet'!AH21-'Balance sheet'!AH31)*100
Net Profit margin =(Pnl!Y16/Pnl!Y6)*100
Liquidity ratio
Current ratio ='Balance sheet'!AH14/'Balance sheet'!AH31
Gearing ratios
=('Balance sheet'!AH32+'Balance sheet'!AH36)/('Balance sheet'!AH47+
Financial Gearing AH36+'Balance sheet'!AH32)*100
interest cover =Pnl!Y16/-Pnl!Y18
Investor ratios
Earnings per share =Pnl!Y24
P/E ratio =89.89/Pnl!Y24
Dividend yield per share =(3.64/89.89)*100

Receivable days =('Balance sheet'!AH11/Pnl!Y6)*365

Payable days =('Balance sheet'!AH25/19975)*365
Cash operating cycle =H34-H35