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Ups Case Analysis

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EMBA 810 Financial Statement Analysis
Final Exam
Summer 2014 – EMBA 20
12 July 2014

United Parcel Service Initial Public Offering Case Analysis

Darrell W. Kent, Jr.

1. What are the key success factors and risks for UPS given its business strategy?
United Parcel Service’s (UPS) strategy is to be the market leader within the package delivery industry with operations primarily focused on international air and ground package delivery services and secondary focus on the logistics and supply chain management services. UPS management is now prepared and ready to bring UPS from a privately owned firm to a company that is publicly traded on American and international stock exchange markets.
The key success factors for UPS are as follows: i. Strong financial performance. ii. Low-Risk AAA Rating. iii. Technological leadership. iv. Operational advantage – centralized air and ground operations. v. Employee owned structure, with very strong loyalty and minimal conflicts of interest.
The key risk factors for UPS are as follows: i. Unionized workforce – 58% of UPS employees and these employees are able to maintain flexible work arrangements. ii. Weak presence in the air express market. iii. Between 1998 and 1999, UPS spent more than $1billion dollars per year upgrading its infrastructure. iv. Expansion of the scope of the business with the formation of UPS Logistics Group.

2. Where, if at all, do the financial statements reflect these success and risk factors? i. Asset side of the balance sheet (Exhibit 7) a. The primary line item is PPE. In order to operate effectively, UPS requires trucks, planes, warehouses, and technology upgrades. b. Marketable securities and short term investments demonstrates UPS’s ability to function without taking on a large amount of short term debt. ii. Liability side of the

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