2004, 2005, 2006, 2007
oAnalyze federal express working capital management. Explain why the company’s operating and cash cycles are currently optimized. If you think they are not optimized, explain why.
*Analyze the company's working capital management based on their inventory period, accounts receivable period, accounts payable period, cash conversion cycle, and operating cycle.
o Based on the Federal Express company’s financial statements, list the long-term debt held by the corporation, maturity dates and yield to maturity. List the types of stock issued by the company, the stocks’ current selling price, and the 52-week average selling price.
o Compute the weighted average cost of capital (WACC) for both years and discuss
your findings.
o Write a brief analysis that summarizes the data you’ve gathered throughout the
weeks and evaluates how Federal Express compares to industry averages.
o Write your recommendations on whether as an investor you should buy Federal Express
company's stock and why.
Please note that we don't do students' homework for them. If there's not a tutor with this specialty online right now, be sure to go back into your textbook or use a good search engine. http://hanlib.sou.edu/searchtools/
Once YOU have come up with attempted answers to YOUR questions, please re-post and let us know what you think. Then someone here will be happy to comment on your thinking.
=)
To analyze Federal Express's working capital management and answer the questions you've posed, we need access to the company's financial statements, specifically their balance sheets, income statements, and statement of cash flows for the relevant years (2004, 2005, 2006, 2007). These statements will provide the necessary information to calculate the metrics, ratios, and figures required to answer each question.
1. Analyzing Working Capital Management:
To evaluate the company's operating and cash cycles and determine whether they are currently optimized, we need to calculate and analyze the following metrics:
- Inventory Period: This is the average number of days it takes for the company to sell its inventory.
- Accounts Receivable Period: This is the average number of days it takes for the company to collect payments from its customers.
- Accounts Payable Period: This is the average number of days it takes for the company to pay its creditors.
- Cash Conversion Cycle: This is the time it takes for the company to convert its investments in inventory and accounts receivable into cash.
- Operating Cycle: This is the total time it takes for the company to purchase raw materials, convert them into finished goods, sell those goods, and collect payment.
By analyzing and comparing these periods and cycles across the relevant years, we can assess whether they have been optimized or not. If the cycles have been significantly reduced or improved, it indicates better efficiency in managing working capital. Conversely, if the cycles have increased or are longer than industry averages, it suggests potential inefficiencies.
2. Long-term Debt and Stock Analysis:
To analyze Federal Express's long-term debt and stock, we need to access the company's financial statements and relevant notes. From there, we can identify:
- Long-Term Debt: Look for the section that discloses the company's long-term debt, including the total amount outstanding, maturity dates, and terms (yield to maturity).
- Types of Stock Issued: Examine the notes to the financial statements or the equity section to identify the different types of stock issued by the company.
- Current Selling Price and 52-Week Average Selling Price: Research recent stock market data to determine the current selling price and the 52-week average selling price for each type of stock issued by the company.
3. Weighted Average Cost of Capital (WACC):
To compute the WACC for Federal Express for the specified years, gather the following information:
- Cost of Equity: Estimate the cost of equity using the Capital Asset Pricing Model (CAPM) or comparable methods.
- Cost of Debt: Obtain the interest expense and outstanding debt balance from the financial statements, and calculate the effective interest rate as a weighted average.
- Capital Structure: Determine the proportion of equity and debt in the company's capital structure.
- Weighted Average Cost of Capital (WACC): Combine the costs of equity and debt, weighted by their respective proportions in the capital structure.
4. Industry Comparison:
Compile the gathered data and industry averages to assess how Federal Express compares to its peers. Calculate relevant financial ratios, such as profitability, liquidity, leverage, and operational efficiency ratios, to evaluate the company's performance against industry benchmarks.
5. Buying Recommendation:
Based on the analysis conducted and your personal investment goals and risk appetite, make a recommendation on whether to buy Federal Express's stock. Consider the company's financial performance, growth prospects, industry trends, and any other relevant factors that might impact the stock's future performance. Provide a clear rationale for your recommendation.
Please note that due to the complexity and specificity of the information required, it may be beneficial to consult relevant financial reports, external sources, or seek the assistance of a financial professional to ensure accuracy and completeness in your analysis.