FINMNGT 2 - Goals of Financial Management Ups Case Study Assignment

Assignment Task

• Explain the goal of financial management. Refer to the UPS Case Study provided at the end of the assignment to illustrate your answer

• Discuss the purpose of liquidity, and how it can be attained, as a short-term financial goal for a firm

• A shareholder can also be classified as a “stakeholder” of a Is this statement true or false? . Motivate your answer 

Refer to the abstract of an Income Statement for a logistics company provided here and then answer the following questions.

• Write down the formula for the Operating Profit margin (2), calculate the operating profit margin for both years showing your answer to two decimal places (4), and then comment on the result of your calculations for this firm(2).
• Write down the formula for the Net Profit margin (2), calculate the net profit margin for both years showing your answer to two decimal places (4), and then comment on the result of your calculations for this firm (2). 

• Write down the formula for the Net Profit margin (2), calculate the net profit margin for both years showing your answer to two decimal places (4), and then comment on the result of your calculations for this firm (2). 
• Refer to the abstract of the Income Statement provided above and then restate this income statement for the two years by common sizing the values (express them as percentages to two decimal places) (12), and then comment on the items “Compensation and Benefits” (2) and “Fuel” (2).

A logistics company has employed a warehouse manager. His basic annual salary is R390 000 and he is entitled to an annual bonus of R30 000. The company operates a 40-hour week and employees are entitled to four weeks’ annual leave. There are 13 public holidays annually. Idle time is equal to 2% of available productive time.

The company contributes 7,5% and 1% of the basic salary towards the pension fund and UIF, respectively. Assume that there are 52 weeks in the year.

Calculate the following:

• Annual productive hours 

• Total annual labour cost 

• Hourly recovery rate 

CREATE (Pty) Ltd sold 2,880 units during the year for R 3,225,600 and had total variable costs of R1,756,800. Total fixed costs amounted to R916,800.

Calculate the following:

• The total contribution 
• Break even quantity (BEQ) 
• Break even value (BEV) 

• Total contribution if production was increased to 3,500 units 

Case Study

The Atlanta-based company’s management team made presentations based on theme of

“Networked for Growth,” which was comprised of various plans geared towards future revenue and

profitability.

By LM Staff · November 14, 2014

Transportation and logistics bellwether UPS yesterday released its long-term growth strategies and financial outlook from its recent investor conference held in New York.

The Atlanta-based company’s management team made presentations based on theme of

“Networked for Growth,” which was comprised of various plans geared towards future revenue and profitability, including: a heightened focus on industry verticals and international growth markets; efficient capital investment in technologies, capabilities, and footprint; customer solutions that leverage the global UPS network; improving business-to-consumer (B2C) profitability; and delivering long-term UPS shareowner value.

UPS also laid out its financial goals for 2015 to 2019, which include:

• revenue growth of 5 percent to 7 percent average annual
• earnings per share up 9 percent to 13 percent per
• return on invested capital (ROIC) between 25 percent and 30 percent; and
• share repurchases of more than $15 billion and total shareowner distributions totalling $30

“UPS is a strong company that has proven its ability to adapt,” said UPS Chief Executive Officer David Abney in a statement. “The needs of our customers continue to change, and we’re changing with them by offering new and innovative solutions.”

“UPS provides superior customer benefit by connecting a broad portfolio of solutions to the UPS global network. When coupled with efficient investment in technology, UPS generates substantial value for customers and shareowners.”

For 2015, UPS set guidance of annual revenue growth being up 5 percent to 6 percent annually, with earnings per share up 10 percent to 15 percent between $5.45 to $5.70.

Other notable takeaways of the financial outlook included: capital investment plans of 4.5 percent to 5 percent of revenue annually from 2015 to 2019, with plans to invest roughly $2 billion over the next five years to expand its international infrastructure in Europe, Asia, and the Americas; and plans to improve B2C profitability through optimized planning and data analysis, adding that collaboration with shippers to optimize timing of deliveries.

UPS also noted that it expects its On-Road Integrated Optimization and Navigation (ORION) system to reduce an average of seven to eight miles travelled from daily driver routes, and when it is fully implemented in 2017 UPS said ORION is expected to generate $300 million to $400 million in cost savings.

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