Free Essay On Finance
Financial Analysis: FedEx Corporation
Long-Term Notes Payables:
Referring to the Balance Sheet of the company, we witnessed that over the year, FedEx has increased the long-term debt proportion from $ 2739 Million to $4736 Million. Furthermore, as noted from ‘Note 6: Long-term debt and other financing agreements’ , the increased amount of debt has been sourced at high rate of interest between the range of 4% to 5.10%, that will subsequently result in increased interest expenses, and eventually a pressure on the profit figures of the company. Below is the description of additional debt funds sourced during the year:
Thus, management needs to ensure that the additional funds are employed in the avenue where returns should be above the cost of capital of debt funds, else the whole new funding process might introduce financial risk in the company.
Current Ratio is one primary liquidity ratio that measures the ability of the company to honor its short-term obligations as and when they are due. Calculated as ratio of current assets and current liabilities, it is always desirable to have a higher ratio multiple, as it indicates strong working capital position of the company.
Below discussed is the trend in the current ratio multiple for FedEx over the period of past two years:
Current Ratio: Current Assets/ Current Liabilities
2013: 11274/5750= 1.96
2014: 9853/5312= 1.85
As witnessed from the calculations above, over the year the current ratio of the company has declined from 1.96 to 1.85, amid 12.10% fall in the current assets of the company. This surely is a sign that the liquidity roots of the company has gone weak, and with the major decline in the current assets being sourced from the cash position that plummeted by 40.85%, the overall situation is more troublesome. Thus, management needs to work on their working capital position, and should focus on increasing its cash reserves through its operating activities.
Fedex Corporation. "Annual Report 2014." Annual Filing. 2014. Web Document.
Most Important Financial Ratios. n.d. 10 April 2015. <http://www.readyratios.com/reference/analysis/most_important_financial_ratios.html>.