About FedEx and UPS and who has better financial health Essay

About FedEx and UPS and who has better financial health - Essay Example Both companies have negligible difference in paying off their creditors in AP turnover. Liquidity is the ability of the company to cover its operation and its obligations. In this aspect UPS fared better in the previous two years compared to FedEx (1.70 to 1.60, 1.96 to 1.70) indicating the financial stability of the company. It is supported by a better financial position with a cash ratio that higher than its liability compared to FedEx (.62 to .39, .57 to .48). This better financial position reflects in UPS higher oeperatoing cash flow ratio compared to FedEx (1.09 to .83 in 2011) indicating its ability to cover its operation and short term debts with its available cash. Ultimately, a company will be valued by its shareholder by its profitability or ability to give returns to its investors. In this aspect, UPS clearly dominated FedEx in all aspects of profitability that includes ROA (Return on Asset), Return on Equity (ROE) and Margin before interest and tax. Of the two companies, UPS is conclusively in a better financial position than FedEx. It is only in the efficiency aspect that FedEx came near UPS in terms of its financial position. With regard to financial vitality and profitability as indicated by liquidity and profitablity ratios, UPS was clearly ahead of FedEx. Its ratio on profitability which is many times over FedEx indicates the company’s ability to profit and give return to its shareholders and is the ultimate indication that it is a better company compared to FedEx . Moreover, UPS profitability is grounded on solid fiscal discipline indicated by its liquidity that it can cover its obligations and supported by its operational efficiency to generate sales with a very competitive (comparable to FedEx) use of its resources thus making it a better company in terms of its financial