June, 24, 2014
Broadly speaking, FedEx Corporation operates in the shipping and delivery market, the NAICS (North American Industry Classification System) under Couriers. FedEx began its operations in the domestic express delivery services but over time has expanded into ground, freight, LTL shipping both domestically and internationally. With annual revenues of $45 billion, FedEx consistently ranks among the world’s most admired employers, with more than 300,000 employees. Regardless of few competitors, logistic industry still remain a competitive sector due to large number of consumers, low cost of changing providers and poor separation among competitors. The industry is typically credited to have minimal threat of new entrants due to high costs to operate and capital equipment. FedEx’s major risks include global fuel prices, erratic economic and sometimes political conditions and client retention. FedEx like any other company must adopt strategies that will give them a chance to remain in the market. One way FedEx can manage this is to keep focus on solvency and profitability and also those of its competitors.
Let us start with the solvency and liquidity ratios and see how FedEx compares to the industry.
FDX Financial Company Industry
Quick Ratio .73 .76
Current Ratio 1.99 1.86
Long-Term Debt to Equity .18 .57
Total Debt to Equity .19 .64
Interest Coverage 44.56 32.12
Debt Coverage 1.64 .98
At first glance both the industry and FedEx look somewhat similar in there liquidity ratios but the solvency ratios are significantly different. We do know that liquidity ratios are the short-term debt that the company has incurred and the solvency typically tracks the long-term debt. FedEx has a great Long-term debt to equity ratio compared to the industry. The debt to equity ratio measures how much money a company should be able to borrow safely over long periods, and is the percentage of the company that is indebted or what they call...