MBA 500 Uber Presentation Notes and Rubric Info

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Southern New Hampshire University *

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500

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Management

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Jan 9, 2024

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Prompt Analyze Uber’s financial success and present your findings to senior management. In your findings, you will identify financial key performance indicators, industry financial benchmarks, and accounting guidelines related to Uber. Review the Uber Case Study provided in the textbook, and review the additional information related to Uber provided. 1. Review the Uber Case Study provided in the textbook.  Critical Thinking Case: Uber: Riding the Gig Economy 2. Review the following additional information related to Uber.  Investor information for Uber balanced scorecard/financial : In the annual report, review Uber’s balance sheet, income statement, and cash flow statement. Balance Sheet Info -More current liabilities than current assets in 2021 but was reversed in 2022 -Total assets eclipses total liabilities -Way less allocated to investments than last year -Total assets dropped relative to 2021 but so did total liabilities however total assets dropped at a higher rate -Stockholders equity dropped in half between 2021 and 2022 Income Statement Cash Flow Statement (page 79 but 83 on the pdf reader) OPERATIONS - Uber has set aside much more money “insurance accrued” in case claims need to be paid out. Why? Jumped 220 in millions from the previous year.

- 1068 to 492 drop in accrued expenses and other liabilities which shows Uber is responsibly paying its debts and eradicated a big chunk of it last year - Net cash used in operating activities increased exponentially out of the negative to the positive Net cash provided by (used in) operating activities (2,745) (445) 642 INVESTING -Proceeds from maturities and sales of marketable securities from 2291 to 376 from 2021 to 2022. Still profitable but much of the cashflow from investments decreased substantially in this category. Why? -Spent way less on the acquisition of businesses Acquisition of businesses, net of cash acquired FINANCING - Net cash provided by financing activities 1,379 1,780 15 dropped substantially from 1780 to 15 from one year to the next.  Uber: Corporate social responsibility (CSR) and environment, social, governance (ESG) metrics 3. Create a presentation for your CEO and senior management, discussing the following key criteria: a. Identify the financial key performance indicators of Uber’s success. b. Analyze how different functional areas, departments, or both of Uber contribute to its overall financial success.  What common industry financial benchmarks should Uber consider in developing its strategies to grow the business?

 Which financial benchmark can Uber adopt to measure its performance and increase its industry attractiveness? Use Porter’s five forces to support your answer.  Are there any critical elements of accounting guidelines that will be crucial for Uber to meet? Explain your reasoning. What to Submit Using PowerPoint, create a presentation that is 5 to 7 slides in length, and include references cited in APA format. Consult the Shapiro Library APA Style Guide for more information on citations. Sources from the PP extra and key insights https://www.wsj.com/market-data/quotes/UBER/financials/annual/income-statement *Uber went public in May 2019. Current stock price is $28.75 per share. Use the Uber Case Study in the textbook – the textbook authors wrote the case study. Use the two article links in the Guidelines and Rubric as well. At first glance, these financial key performance indicators would indicate a company in trouble. Financial KPIs The Net Margin is showing that despite strong revenue, the cost of sales is far outpacing income and generating massive losses for the company. The Return on Equity is showing there is less money coming in through revenue than owner’s equity put into the company. The current ratios during 2018-2019 show an ongoing ability to meet obligations. Increasing debt as indicated by the debt-to-equity ratio could make this unsustainable. Total assets during the same period were (in millions): *2018 - 23,988 *2019 – 31,761 *2020 – 33,252 (Balance Sheet, 2022). Balance Sheet Wall Street Journal Markets. Retrieved: https://www.wsj.com/market-data/quotes/UBER/financials/annual/balance-sheet

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Despite poor performance, Uber maintains sufficient liquidity to meet obligations. Achieved primarily through taking on debt and growing asset portfolio in food and automation. § Current Ratio: 2018 – 1.39 2019 – 1.92* 2020 – 1.71 § Debt to Equity Ratio: 2018 – (Negative owner’s equity in this period) 2019 – 1.11* 2020 – 1.50 Organization and Financial Success • Operations and Support Business Functions Suggestions •- Enhanced focus to improve profitability by optimizing operational processes to reduce the cost to deliver services. Uber is investing in robotic technologies. We could enhance manufacturing functions with AI (Artificial Intelligence) tools. •- Operational improvement strengthen Uber’s positioning in the Threat of New Entrants aspect of Porter’s Five Forces. •Uber Technologies (2020) notes that costs related to operations and support business function are anticipated to decrease YOY (year over year) as a percentage of revenue due to efforts to improve service delivery efficiency. Use Dr. Michael Porter’s Five Forces Framework information here. As Uber increases the volume of business, they can take advantage of economies of scale the reduce the cost per unit (or trip taken) on their platform (Dyer et al., 2020, p. 26). This will discourage new entrants that will not be able to operate at the same scale.

Research and Development Business Functions § Research and Development of AI tech explains Uber’s financial position and high debt load. § Schermerhorn & Bachrach (2020) explain in a case study of Uber that the long-term vision of the company rests in an autonomous vehicle powered fleet (p. 398). Uber’s major costs come from drivers’ pay, incentives, and bonuses which would be largely eliminated by an autonomous vehicle fleet (p. 398). An autonomous vehicle fleet would improve positioning in Porter’s Five Forces in the following ways: * Bargaining power of customers – Lower costs and speed of service attract new customers who can be swayed by a difference of just a few dollars or minutes. * Bargaining power of suppliers – Integration of self-driving vehicles, replacing human drivers would significantly reduce drivers’ bargaining power. * Threat of substitutes – As the first to market, Uber would have positive sum competition advantage as the driver of competition in new and different arenas.

* Threat of new entrants – Uber can out-spend any new entrants with their massive investment in the AI fleet, discouraging them from entering the market (Stewart, 2008) According to Schermerhorn & Bachrach (2020), most of Uber’s cost to produce goods currently comes from drivers’ pay, incentives, and bonuses which would be largely eliminated by an autonomous vehicle fleet (p. 398). An autonomous vehicle fleet would improve positioning in Porter’s Five Forces in the following ways: * Bargaining power of customers – Lower costs to operate attract price sensitive customers. Lack of existing substitute products reduces buyer bargaining power. * Bargaining power of suppliers – Forward integration of the largest supply expense (i.e., drivers) would significantly reduce supplier bargaining power. * Threat of substitutes – As the first to market, there would be no viable substitutes to the offering. Uber would have a significant differentiation advantage. * Threat of new entrants – Given the massive investment (and risk) Uber will have made to deploy this fleet, it would be very difficult for a competitor to enter the market. Additional Financial Considerations Reliance on EBITDA as a measure of profitability § Uber has relied on EBITDA as a measure of profitability as evidenced in their annual reporting. § Uber reported Adjusted EBITDA loss was $774 million, improving $1.8 billion from 2020 with Mobility Adjusted EBTTDA profit of $1.6 billion. Additionally, Delivery Adjusted EBTTDA loss of $348 million, improved $525 million and Delivery Adjusted EBTTDA margin as a percentage of Delivery Gross Bookings improved to (0.7)% from (2.9)%, compared to 2020. “We ended the year with $4.3 billion in cash and cash equivalents” ( Uber Technologies, 2021). Uber said it expected adjusted Ebitda of $25 million to $75 million in the fourth quarter and gross bookings of $25 billion to $26 billion. EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization.

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