Key Financial Relationships: FedEx and UPS

Essay by pennladyUniversity, Bachelor'sA+, January 2009

download word file, 4 pages 4.5

The review of the financial statements of FedEx and UPS showed that each company has built a healthy financial empire. This paper will discuss the key financial relationships that exist between the two companies. The inter-relationships that the data illustrates in each company's financial statements will be examined. The key components of the basic accounting equation will be located for each company, as illustrated in their respective financials. Finally, the control techniques and any issues that are discussed in the companies' financial statements will be described. This process will use the data from the two most recent fiscal years and build on the review to help the board better understand the benefits of a merger between these two giants.

Inter-relationshipsThe first step in preparing the financial statement is the preparation of the income statement. This statement shows how much revenue a company earned and the sales and expenses, which results in either profit or loss, the net income for the period.

The net income then flows to the balance sheet as a component of retained earnings. The balance sheet shows the company assets, liabilities and stockholders equity. Each company has assets that can either be sold or used to provide services. These include trucks, equipment, planes, inventory, intangible objects, and cash. Liabilities are the monies owed to others such as bank notes or other companies. The stockholders equity is the net worth of the company. The change in the balance sheet for the beginning of the period to the end of the period is reflected in the statement of cash flow. This statement shows all the cash income, such as collection of receivables, loan proceeds, additional paid-in capital to name a few. Then all cash-out flows are shown, such as loan payments, reduction in account payable and purchase of fixed...