the corporate tax reduction provided by the U.S government

the corporate tax reduction provided by the U.S government

Companies in the realization of profits after utilization of assets are mostly attributed to by the aspect incentives that have been introduced by some of the countries within which the companies operate. For instance, the corporate tax reduction provided by the U.S government.

Return on Equity

Table: 4

Return on Equity is used in measuring the effectiveness of a company in the generation of revenue using the funds provided by the stakeholders. A high positive return on equity ratio shows excellent utilization of the money that is provided by the stakeholders, and the company is capable of generating profits from the Equity it had accumulated. From the data in table 4, it can be seen clearly that the ROE rose from 14% to 18% in the financial year 2018 and then fell in the year 2019 to 9%.during the last three years there was no significant share issue that was recorded. Therefore the realization of the conclusion that the cause for the decline in return on Equity was developed by the net income growth of the company, which slowed the retained earnings. When comparing the UPS within the same financial period, they showed ROE ratios, which were higher than 100%, since the companies operation is funded mainly by debts, thus making the absolute values of the proportions to be irrelevant (MacGillavry and Sinyan, 2016). The changes that are shown by the return on Equity for the last three financial periods generate a more accurate image of the effectiveness of the company towards the utilization of the owner’s Equity for income generation. For the period between 2016 and 2018, the ROE ratio declined from795%to157 this was attributed to by significant increment of the company’s retained earnings. Although the company has shown the availability of funds that are in the form of retained earnings, the company has illustrated less effectiveness in the usage of the funds in profits generation.

Efficiency ratios can have positive and negative impacts on business operations. For instance, if a company has a low rate of LiabilityLiability, turnover, which can be subjected to deliberate payment delays experience, resulting in the company facing denial of further credits. The desire for achievement of large asset ratio could subject the Management into cutting down the necessary investments within stock for finished goods or fixed assets such reduced volumes cause delays in making of customers deliveries. Therefore the presence of undue attention to the performance of the efficiency ratios may not be present in the long term desires and interests of the company.

Liquidity

Liquidity is used in the expression of the ability of any business entity payment of its liabilities when they fall due or even before they fall due. Such ability is influenced by several factors, including the current assets and liabilities and cash resources. Most of the short term creditors have a high interest in this analysis as well as the banking rate for evaluation of the interest they will accrue from the lending. To measure the level of liquidity for the DHL Company, we rely on the current ratio. By use of current ratio, one can tell the users to what extent has the made maximization of its currents assets for payment of its current debts as well as other payables (MacGillavry and Sinyan, 2016). The computations involving quick ratio assumes the company’s inventory this regarding them inefficient for DHL as the company holds less inventory. The current assets for DHL retrieved were as follows

Table: 5 DHL current ratio

From the table, it can be observed that the financial year 2017 had the highest current, which declined in the preceding years 0.95 and 0.89, respectively. The decline in the ratios, as shown, is influenced by the increase of short term debts as well as a decrease in the current assets. This is creating an image of DHL Company to be involved in too much short term borrowings and reduced current assets. Within the same duration of operations, UPS presented their current ratios as follows 1.18, 1.22, and 1.15, respectively. This indicating that UPS was in a better position to cater to its obligations when compared to DHL company. This was due to; increasing their cash balances with long-term borrowing, taking fewer owner withdrawals, and reinvestment of the revenue accrued back to the business operations an increment of the current assets using new equity investments, collection of the outstanding accounts receivable, paying out some of their current liabilities, and conversion of fixed assets into cash by making the sale of the unused equipment (Cho et al., 2020).

Leverage

These are financial ratios that are significant in the measurement of the organization’s financial obligations, capital structure, as well as the ability of the firm to meet such requirements. Leverage ratios focus on the strength of the firm from the short term and long term perspective of handling its obligations, thus gaining more relevance compared to the liquidity ratios which focus on only short term obligations of the firm. Total liabilities for DHL Company for 2017, 2018, and 2019 were recorded as follows 38, 672, 50,470, and 52,169 million euros, respectively. Their total equities stood at 12, 903, 13, 873, and 14,392, respectively, for 2017, 2018, and 2019 (Cho et al., 2020)s.

Table: 6 DHL Company Debt-Equity Ratio

A high debt to equity ratio shows an indication that the company is mostly financing its operations from debt for growth purposes. This scenario shows out to the lenders and investors that their investment with such companies is risky since there is a possibility that the company will not be able to repay its dues in time or at all.

At the same point of time (2017, 2018, and 2019), 93.1, 43.4, and 15.4 were the respective debt-equity ratios for UPS Company. The company has higher leverage compared to DHL despite the ratios declining along. The company is found to be funding most of its operations using borrowed funds. The company is influenced to use much borrowing in its activities to meet the fact that industry requires an organization that is capital intensive, which is used in development and generation of modification, which is meant to curb the challenge of competition (Herlod,2017). The logistics industry conducting its operations globally requires a company that engages in such operation to be capital intensive to be able to meet the demands of its customers globally. These factors have the highest magnitude of having subjected UPS to many debts to meet the requirements of the competitive industry.

Debt ratio

They are financial ratios, which to what percentage is the company’s asset funded through debt. It describes the ratio of total debt, which is total assets and long term liabilities.

Table: 7 DHL Debt ratio

The company’s total liabilities and total assets happened to be tallying and therefore projecting to a constant debt ratio in the three fiscal periods. A large proportion of the DHL assets was funded through borrowing. This develops an unsafe environment for creditors and investors who face the risk of loss for their investment in scenarios where the company becomes classified as default on debts, where the creditors get the first preference of liquidation(Herlod,2017).

Equity ratio

These are financial ratios that are used in indicating the relative proportion of the Equity that has been applied in the financing of the organization’s assets. These components are frequently realized from the company’s statement of financial position and also the balance sheet. In other cases, the ratio can be calculated by the use of the market values where the company’s equities happen to be traded publicly.

Table: 8 DHL Equity Ratio

The ratio of the company from the table is recorded as 0.33, 0.27, 0.27. The ratios express that there was a decrease in the equity ratio in 2018, which remained constant in the following year. A company operating with an equity ratio value of less than0.5 is regarded as a leveraged company. With the highest case of a leveraged company being considered as the one with a ratio of 0.50 and above, such company’s tend to gain more access to funding from their shareholder’s Equity more than they do from debts.

Efficiency

When analyzing a potential organization investment, it is significant for one to evaluate the firm’s financial operation along every angle and perspective. Efficiency ratios are used to create a comparison on what the firm owns in terms of its sales and profit performance as well as information of investors and about the organization ability to utilize what it has made the highest profit possible to the benefits of the shareholders and the owners(Herlod,2017).

Table: 9 DHL Total Asset Turnover

The company shows an increase in efficiency within the financial years of its operation. However, the ratios are still low, indicating that the company has made priorities on decreasing costs and increasing revenues.

Business performance

The companies projected a prosperous business environment in 2017, and part of 2018, the business operations in 2019 were also not very promising.DHL company embarked on the application of the principle power of simplicity, through which the executives were obliged with the responsibility of ensuring they utilized the dozen of opportunities that presented themselves for the benefits of the owners and the shareholders. For instance, the decision to convince the company to make adjustments from traditional shipping and focus on international express service was one of the millionaire opportunity that the executive projected that would make the company realize substantial profits. But was subjected to various challenges of making structural changes and convincing of the stakeholders how the idea was more profitable than the traditional one which they were using (MacGillavry and Sinyan, 2016).

Strategy execution

Within every second each day, there is an average of 17 direct interactions taking place involving a DHL employee and a client. The company is defined by employees achieved by customer experience. Through this recognition, the company has emulated application of the focus strategy for achievement of its objectives set as the four-link chain of success Motivation of employees:

Linked with the provision of more exceptional service

Resulting in loyal clients

And the development of a profitable network

The adoption of the implied changes was not an overnight activity for the firm since the ideas were subjected to rejection and negative perception from the employees. To counter this, the managed organized a series of intranet videos followed by uncountable town hall meetings established globally, with the main agenda being sharing of the new strategy.

People driving profit

The company investing in people has expressed more benefits to the firm.  By increasing their market share, employee, and customer satisfaction. Efforts by the company to motivate its employees have made the company revive from operating a billion losses to the realization of more than 2 billion dollars profitability that was recorded by the company’s history in 2018. The achievement can be acknowledged to the focus strategy, which has remained consistent throughout the years of the company’s operation. To some extent, the company even utilized using the same internal approach to its managers, making adjustments on dates and timelines, but the main focus being the core element (Cho, 2020). The growth of DHL operations can also be credited to the principle of focusing on what they do best, making aggressive investment in the right culture, and ensuring that their Management is accessible and visible.

DHL Company has established exemplary performance in the last three financial years, with the company reaping significant revenue margin growth, which is driven by strategies and structures and tax incentives offered by the government that has influenced the growth of the entity. The company has also been capable of meeting both its short term and obligations, implying that the company has the potential of evading scenarios of being involved in credit risk compared to its competitors such as the UPS, which has a heavy reliance on debts to fund its operations. The concentration of the company in the innovation sector has projected the relevance of the company globally.

Some aspects require improvement and others which have to be foregone to ensure that the company is capable of achieving its vision and mission objective, this include;

Extensive exploration of new markets

The logistics industry is mostly dependent on the global market. The company should ensure they develop measures that will ensure they are capable of accessing more market appeal by continuously adapting its unique characteristics of serving its clients, which distinguishes the entity from other competitors within the industry. Technology diversity which ensures the company can adopt all the new measurement that are posed by technology, ensuring they keep in touch with their clients frequently. The company is also expected to be more aggressive when utilizing the resources of its own and that of the shareholders to ensure they increase the reputation they achieve from the clients. This is by exploring new markets and intensive awareness using all the channels available to ensure their impact is felt globally and thus boosting their customer levels subjected to the generation of more revenue.

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