Financial Ratio Analysis of Uber and Lyft

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Nov 24, 2024

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Contents Introduction ................................................................................................................................................. 1 Financial Ratio Analysis of Uber and Lyft ................................................................................................... 2 Liquidity ratios ........................................................................................................................................ 3 Profitability Ratios ................................................................................................................................... 5 Leverage Ratios ....................................................................................................................................... 5 Balanced scorecard ...................................................................................................................................... 7 Reporting Integration ................................................................................................................................. 10 Customer satisfaction Techniques .............................................................................................................. 13 Conclusion ................................................................................................................................................. 13

Introduction The American logistics company Uber Technologies, Inc. works with more than 900 sites around the world. Uber's services include logistics, food delivery, goods distribution, courier services, electric bicycle and motorised scooter rental through a partnership with Lime, and ferry transportation. Uber Technologies doesn't own any cars, and for every reservation, it gets a 25% fee. Customers are told ahead of time how much their transportation will cost, but the actual amount depends on the details of their trip and where they are going. In the second quarter of this year, 100 million people used Uber every month around the world. In the United States, Uber has a 68 percent share of the ridesharing market and a 26 percent share of the food remittance market. Urbanisation, or the digital commoditization of service sectors, is a term that came about because of Uber's success in the sharing economy. Other entrepreneurs have named their businesses "Uber for X" as a reference to Uber. Like other companies like it, Uber has been criticised for treating its drivers like temporary and independent contractors, which hurts taxi companies and makes traffic worse. The company was also scolded for taking part in many misleading practises and not following local laws. This report gives a financial analysis of Uber Technologies, which includes a ratio analysis to figure out how profitable and liquid the company is. There will also be a comparison of the financial metrics from the previous year. Lastly, suggestions for things the group could do to help it reach its goals and aims would be made. American company Uber Technologies combines ride-hailing with other services like Uber Eats and package delivery. The service is used by about 90 million people around the world, which is about 71% of the market. Because Uber works in an oligopolistic market, it has to deal with direct competition from Lyft. The ride- hailing business is very competitive, and prices are often lowered by competitors to offer better

deals. Uber's main rival is Lyft, which has several advantages over Uber. Some of the benefits of merging the two companies are better reputation, brand, marketing, and research. Financial Ratio Analysis of Uber and Lyft The liquidity, solvency, and profitability of a business tell us a lot about its financial health. This chapter talks about Uber and Lyft, two companies that are competitors (Ready Ratios Financial Analysis, 2021). Figure 1 Uber vs. Lyft Financial Ratios for Analysis 2018-2021 Source: Yahoo Finance The debt ratio and the debt to equity ratio are the two main ways to figure out how healthy a company's finances are. The amounts of capital and debt are shown in the table below. The ratio of Uber's debt to its equity has gone up from 0.38 to 0.583. This ratio of debt to income shows that Uber is doing very well financially. Even though Lyft's liabilities made up 38.4% of its total capital at the time, its debt-to-equity ratio has stayed the same at 0.384. Since total debts

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shouldn't be more than 60% of total capital, this number is fine. Normal corporate structure for Lyft is when the debt ratio is less than or equal to 0.60. Liquidity ratios This is a common way to figure out how stable a company's finances are. By using the current ratio, it shows how well the company can meet its obligations with the money it has on hand. Uber's current ratio was found by dividing its current assets by its current liabilities. Most of the time, there are more than two. On the last day of the period that was looked at, Uber's current ratio was 1.43, which was lower than the year before, when it was 2.46. Because of this, the organisation might not be able to pay its debts when they are due. Lyft, which competes with Uber, has a ratio of 1.25, which is lower than last year's ratio of 1.32. This suggests that, like Uber, Lyft would have trouble paying its bills with the money it has now. Figure 2: Uber Technologies Current Ratio Source: Uber Annual Report 2021

Figure 3: Lyft Current Ratio Source: Lyft Current Ratio 2017-2021 | LYFT, 2021 Figure 4: Financial statement Uber vs Lyft (2020 – 2018) Source: Yahoo Finance & Annual Reports

Profitability Ratios Last year's profit was $5.154 million, which is $5.154 million less than this year's. Due to the company's loss before taxes and interest, as well as its financial and operational activity, negative profits are recorded. Profitability can be measured by the gross margin, the operational margin, and the profit margin. Uber's ratio of gross margin to revenue is 53.73, while Lyft's is 38.78. Both businesses have negative operational margins and negative profit margins. This is because their financial and operational activities caused them to lose money before taxes and interest were taken out. - Uber's annual return on equity (ROE) is 52.34 percent, which shows that the owners' investments are making money. Because of the loss in 2020, the total was less than zero. The fact that Uber has a return on assets (ROA) of -20.41 while Lyft has a ROA of -37.46 is interesting. Because the ROA calculations for both businesses came up with bad numbers, the profitability of both is seen as unacceptable. As is clear, assets are not being used in the best way to make money. Leverage Ratios The right debt-to-equity ratio should be at or below 0.5, which means that equity should cover at least half of the firm's assets. The ratio of debt to equity should be one or less. Both Uber and Lyft have debt-to-income ratios that are less than one, which makes them great options for financing. To figure out financial leverage, you divide your long-term debts by your equity.

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Figure 5 : Uber Debt to Equity Ratio Source: annual report Figure 6: Lyft Debt to Equity Ratio Source: annual report

Balanced scorecard Robert made the balanced scorecard in 1992. Uber uses it to judge how well its drivers do their jobs. A balanced scorecard is a set of measures that are consistent and work well together. Using the intergraded technique of the flat score card, businesses can evaluate the effectiveness of their plans and make changes in areas like financial gain, customer preferences and choice architecture, operations, and supply chain bottleneck. The scorecard tool could help Uber's leaders gain a long-term competitive edge by making it clearer how financial resources, internal procedures, and operational management fit together in the company's overall strategy. About 85% of Uber's top managers say they talk about strategy for less than an hour every month, while 50% say they do. Balanced scorecards can be used to communicate and evaluate in the following ways: What are the most important qualities of a disruptive investor in Uber? What kinds of changes can we expect in the near future? How do people feel about the services Uber offers? As a network of transportation from one place to another, Uber is changing the way people get around the world. Uber's infrastructure isn't as good as that of other big transportation companies like Lyft and FedEx. Because of this, Uber is not responsible for keeping cars in good shape or fixing them. "Peer-to-peer coordination between drivers and customers, supported by software and advanced reputation metrics," is how its network works instead. Uber is a very controversial company because of the way it does business, which may not be a good thing. People tend to think that big companies hurt products. The idea is true for uber technologies, and it is now one of the most important tensions in the scenario: Even though it will take some time

for the regulatory system to catch up to Uber's innovative business model, the company doesn't seem to be slowing down anytime soon. Businesses need to do more than just keep track of their assets and debts if they want to do well in the digital age. For businesses to stay competitive in the current market, they need to use their intangible assets and put them to work. Businesses should also try to come up with new products and services that fit the needs of certain parts of the market. Usually, an organization's organizational plan is based solely on financial indicators, while other important factors are ignored. The Balanced Scorecard is a way to run a business that was created by Drs. Robert S. Kaplan and David P. Norton. It shows how a company's long-term performance and its customers' goals are related. The framework also sets the company's financial goals, how well its systems and people work, and how it runs internally. The Balanced Scorecard is made up of four separate parts: From a financial point of view, there are measures of the company's strategy, how the strategy is being put into action, and whether the strategy is helping the bottom line. Some of these measurements are financial ratios, projections of income, and changes in the budget. The second perspective is about customers and stakeholders. It is made up of metrics that look at how happy customers are with the price, quality, and availability of services and goods. The third part is internal processes, which are new ways of doing things inside the company that make it successful. The fourth part of the Balanced score looks at learning and growth. This method looks at how an employee's skills change over the course of their job. So, the Balanced Score tries to suggest an alternative way to run the business that will help it reach its long-term investment goals. The Balanced Scorecard's weakness is that it only gives measurements and no ideas. It also seems to be an old-fashioned way of thinking because it only looks at the inside and not the outside.

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Even though the BSC framework has been criticised, it can be used in a wide range of industries and organisations. The ride-hailing company Uber has been losing money for a while, and it hasn't started paying dividends yet. Even so, many investors keep buying Uber shares because the company's growth depends on meeting normal organisational performance requirements. Uber's services are based on the strong idea that reducing the time between customers and drivers makes for a better experience for both customers and stakeholders. A strategy that puts the customer first is set up so that customers will like the organisation. Uber's internal operations are based on the needs and service expectations of its external stakeholders, and it has made diversity and innovation essential to its operations. Uber's plan for growth and learning is shown by the addition of a driver-based statistic that uses customer feedback to rate drivers' performance. Figure 7: Four Points of View Balanced Scorecard Source: Developed by Author

Uber has used a variety of ways to measure, which have helped the company reach its strategic goal of offering transportation services that are reliable, affordable, and quick. A financial analysis and the making of a "balanced scorecard" for Uber Technologies showed that the company has improved its ability to learn and come up with new ideas by training its employees and using new digital technologies. Uber has also put in a lot of work both inside and outside the company to create micro-insurance solutions that fit the needs of customers and to improve customer satisfaction through quick services and claim payments. All of these important things affect how well Uber Technologies does financially. Reporting Integration The goal of the framework for integrated international reporting is to speed up the use of integrated reporting around the world. Creditors and lenders can use this framework to get good information before giving out payments. Integrated reporting is a good way to improve corporate reporting and show how well a company can create long-term value. Integrated reporting also makes people more aware of how the economy, human capital, environment, and society all depend on each other. Integrated marketing shows how competitive Uber is in each of these areas. The rides say that Uber has to deal with competition from private cars, which make up most of its passenger market. Also, the round face comes from public transportation, which is easy to get to and often cheaper than other ways to get around. There are also companies like Lyft, Bolt, and Yandex that help people get rides. Competition has also led to a wider range of business activities, such as Door Dash and Amazon delivering food from restaurants to their customers. Takeout and delivery services are also in competition with Uber Eats. The integrated study shows that Uber Company has become more competitive in many places by lowering prices and past fares and

service costs. People think that these changes hurt Uber's finances. Uber has lost a lot of money since it started operating in the U.S. and other countries. Projections for the future show that Uber's costs will go up a lot, and the company may never be profitable. If Uber classifies its drivers as employees instead of independent contractors, the company's bottom line will go down. Uber drivers are considered independent contractors because they make their own decisions about what services to provide. It is to be anticipated that advertising in the media and in print, as well as events, sales promotions, and many other types of public relations, will be included in Uber's marketing communication mix. The advertising practises of Uber have, on several occasions, been the source of problematic situations. It was believed that a number of different modifications were required for the optimal performance. However, despite its success, the company has also had failures in the past. Therefore, the executive summary of the study recommends that the firm do a SWOT analysis as well as a PESTEL analysis in order to get a deeper understanding of the structure of the organisation as a whole as well as the influence of corporate culture on the structure of the organisation. The capacity to operate on a worldwide scale, the technical capabilities of Uber's platform, the company's solid liquidity position, and the company's flexibility to run several business lines are Uber's strengths. Even though Uber has set a goal to become profitable in terms of EBITDA by the end of 2021, the fact that its business model is not profitable right now remains one of the company's greatest weaknesses. It is possible for Uber to provide on-demand services through the internet, which is one of the choices it has. The only danger that Uber has is that it operates in a business that is very competitive and is severely regulated in many countries across the globe.

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The business techniques that Uber drivers use provide them an advantage over other drivers in the industry. As a result of Uber's digital platform for ridesharing and the company's innovative disruptions in the logistics business, more and more drivers are joining the sharing economy. By taking a close look at the transactional cost inputs and processes, Uber drivers may enhance their position relative to the competition and increase the amount of money they earn over the long term. Uber drivers have a competitive advantage when they are able to provide better services at a cheaper cost (cost-benefit) than their rivals, other drivers who participate in vehicle pooling, and traditional taxi drivers. In addition, Uber drivers provide additional advantages to clients as well as Uber itself, which are comparable to the benefits provided by other Uber drivers and standard taxi drivers (differentiation interest) (differentiation interest). The basic premise behind how Uber connects customers and drivers is that it operates on a model that prioritizes community sharing, equitable matching, and market pricing. ICT is making it simpler for firms that provide ridesharing services to expand in the sharing economy. Each driver is equipped with a Phone, which enables them to more effectively operate the platform. Every Uber driver is required to conceal the characteristics of the operating system in order to get the thirty-fourth most crucial estimate and interest. Therefore, using web technology may prove to be one of the most effective methods for a company to engage with its clientele. According to Lim, new technologies that are associated with the sharing economy have the potential to drastically alter the future of work by eliminating many traditional forms of employment. Once technical knowledge is developed or gained, it is able to be employed again and over again at a minimal cost in an economy that is prospering thanks to digital technology. The increase in the number of people using smartphones has led to an increase in the demand for various digital services. Because of this, Uber drivers who make use of the app are able to pick

up more customers.So, an Uber driver who knows how to use the digital technologies that the Uber platform uses can have an edge over other drivers and make more money. Customer satisfaction Techniques Customer satisfaction is how well a product (like a car) and service (like a ride) meet or go beyond what a customer wants. So, Uber drivers with a customer satisfaction rating of 35 or higher will be able to keep working for Uber, which could help them sell more and make more money. Uber has a competitive advantage in the industry of ridesharing platforms because it makes more money than its competitors. There are no social benefits to this. It used relational models, like the dyadic traditional taxi market, to explain how customers see the relationship between actors. Stolberg et al. (low in market price) found that riders liked connections with a lot of imbalances in Communal Sharing, EM, and high inequality, as well as connections that matched them back (low in market pricing). Uber drivers may be able to get ahead of the competition by using internal tools, team rituals, and other factors. Still, Uber drivers need to know that the three-way link of the ridesharing economy gives them a number of important competitive advantages, such as lower costs and better service. Uber drivers, for example, use a variety of methods and strategies to stay ahead of the competition in the ridesharing industry. The profits of Uber drivers also affect how much money Uber and vehicle owners make. So, I've come up with five ways Uber drivers can get ahead of the competition and make more money.

Conclusion Based on an analysis of financial data and the creation of a business support centre (BSC), Uber Technologies has helped its employees learn and be more creative by giving them training and letting them use new digital technologies. The company spent a lot of money both internally and externally on making micro-insurance solutions that fit the needs of customers and on making customers happier by giving them 15 quick services and claim settlements. Uber Technologies These important things all contribute to Uber Technologies's financial success. These ideas explain how Uber drivers can get an edge over their competitors and make more money. There is a lot of talk about the following things: Technology, making money on flights, flexible work hours, customer service, and partnerships are all things that need to be thought about. In the end, I make suggestions based on the things that support each point of view. These rules could bring in new investors to the logistics industry, create jobs to keep up with the city's growing population, and provide a full service that helps people from all walks of life by bringing in more tax money. The report gives a financial analysis that shows how well the business did the year before. There will be suggestions for the right ways to help the organisation reach its goals. This study compares and contrasts Uber and Lyft, as well as a number of their most important performance traits. Financial performance indicators measure how liquid, solvent, and profitable a company is. The Balanced Scorecard is a management tool that shows how an organization's long-term performance fits in with the goals of its customers. The goal of the integrated international reporting is to speed up the use of integrated reporting around the world so that creditors and financiers can get good information before giving out money.

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Financial Ratio Analysis of Uber and Lyft

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