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UBER TECHNOLOGIES, INC. FINANCIAL STATEMENT ANALYSIS

Executive Summary
This report provides a detailed financial analysis and evaluation of the
economic and strategic analysis of Uber Technologies, Inc. The analysis methods
include SWOT and PESTEL analysis to examine and determine the current and past
economic characteristics and competition levels. The strategies adopted by the
company in the day-to-today operations to compete and perform will also be
assessed, and a decision on whether they are healthy or weak will be pointed out.
Financial ratio analysis will be performed to determine the company's profitability,
short-term and long-term liquidity, including the bankruptcy risk measurement for the
last three years. Financial ratios will be calculated and comparative analysis to
establish its overall performance for the previous three years. Problems affecting the
economic analysis will be identified, and recommendations made to solve them.
Appropriate proposals will be put forward to help the company meet its goals and
objectives depending on the results found in the financial analysis.
A. Introduction
Uber Technologies, Inc., also commonly known as Uber, is an American
technology company. The company was discovered in March 2009, and it became a
public company in May 2019 after being incorporated in the New York Stock
Exchange. The company headquarters is located in San Francisco, with operations
in over 900 metropolitan areas globally. It offers various services, including ride-
hailing, food delivery through Uber Eats, couriers, package delivery, freight
transportation, and motorized scooter rental, and electric bicycle through a Lime
partnership. The company has an estimated 93 million monthly active users globally
on its platform. It has a 71% market share for ride-sharing and a 22% market share
for food delivery in the United States.
B. Economic and Strategic Analysis
a.) . Economic attributes: demand, supply, manufacturing, and marketing
From driver earnings to community spending, to increase mobility options,
riders, and drivers who utilize Uber significantly impact the economy. Uber operates
as a digital assemblage app platform, linking passengers who require a ride from a
specific point to another point with drivers prepared to serve them. Passengers
generate demand, drivers supply the demand, and Uber acts as the facilitator or
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marketplace to ensure all this happens smoothly and seamlessly on a mobile

platform (Lee, 2017). Uber uses a surge pricing strategy to leverage the concept of
supply and demand. When the demand for rides exceeds the car supply, surge
pricing sets in, increasing the price and vice versa. Uber's surge pricing balances
supply and demand by re-distributing cars to the areas where prices are higher,
ensuring that surge goes down due to the increase of drivers.
Uber's manufacturing strategy is based on technology focus through heavy
investment in its mobile app development and iteration to ensure continued growth
and competitive performance. The company also collaborates with car
manufacturing companies to produce low-energy cars, electric cars, and automated
cars with features that can enhance their operations.
Uber has an excellent marketing strategy that has made it more successful
than its competitors (Maheshwari, 2019). One of Uber's key strategy depends on
their successful marketing is building brand awareness (Wirtz & Tang, 2016). The
branding strategy for Uber is unequaled with its transparency and simplicity.
Everyone knows that Uber is an application that helps people connect with car
drivers, benefitting both sides in a convenient and modern way. The branding has no
inconveniences and absolutely no complications, allowing Uber to compete
confidently in the taxi market.
Another marketing strategy that Uber uses is the cost awareness strategy.
Uber attracts its customers with cost awareness perks that they cannot easily find
anywhere else. This marketing strategy helps individuals identify in advance exactly
how much they will pay for a particular trip going anywhere and in their preferred
method. Therefore, it is easier for people to go from one place to another without
stressing how much it would cost. Furthermore, this strategy has the additional perk
of making the Uber rides cheaper in most cases than the competitors with loyalty
discounts and promo codes. Partnership strategy is another marketing strategy that
has propelled Uber to enhanced growth and success. Uber has prospered massively
in utilizing this marketing strategy by frequently partnering with various businesses
and making promotional offers to either company's services. A such, Uber users can
link their profiles to other business app profiles and relish different perks of such
partnerships that usually reward loyalty to those in active collaboration with Uber.
The company also supports its drivers in various ways; since the company's entire
model directly depends on having a smooth flow of drivers ready to react to
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passengers' requests, Uber has, in fact, resorted to a wide variety of psychological

tactics to keep drivers engaged (Scheiber, 2017). Other marketing strategies
adopted by Uber include direct selling offered by their app platform, social networks
and viral marketing, email marketing, and online advertisements, all of which have
put Uber above their competitors.
b.). Rivalry among Existing Firms (direct rivalry, diffuse rivalry, or
concentrated rivalry (such as a monopoly, a duopoly, or an oligopoly)?
Uber experiences a direct rivalry with existing firms in an oligopolistic market,
especially with Lyft. The scope of rivalry among existing firms in the ride-hailing
industry is very intense. The companies are continually trying to reduce their prices
and offer a better deal. Uber is always offering discounts and promo codes for their
riders to gain more customers from their competitors. The rivalry is intense since
Uber, and its competitors are competing for the same customers and hence the need
to outsmart each other.
c.). Threat of New Entrants
The threat of new entrants into the Uber ride-hailing industry sector is
massive. It is straightforward to replicate the Uber business model and its application
by any other company. Due to the business model's internet-based nature, new
entrants to the market will not have any problems accessing distribution channels.
The ride-hailing industry features low barriers to entry, and it involves few
risks. New entrants have lower costs than the first movers, the number of sunk costs
is low, and modern technology makes it simple to hail a cab using the internet.
Furthermore, Uber has low switching costs to a new taxi technology on both its driver
and consumer side. This has led to an increase in Uber's local and global
competitors due to low entry barriers and lower costs being incurred to enter the
market.
The existing main rivals in the industry, Uber, and Lyft, possess distinct
competitive advantages that make it harder for new entrants to compete and be
successful. These distinct competitive advantages include better reputation and
brand, greater financial, technical, marketing, research and development,
manufacturing, longer operating histories, and an immense loyalty or user base. This
make it hard for new entrants to compete successfully and struggle to gain in the
ride-hailing market share. For example, in the United States alone, Uber has a 60%
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market share, while its main competitor Lyft has a market share of 40%. This makes
it extremely difficult for a new entrant to make a name of itself in such a market.
The firms in the industry will likely generate low profits if new firms can quickly
enter the market. The reason behind this is because the ride-hailing sector is a
highly competitive market, and firms in the industry will continue reducing their prices
to maintain their market share and attract more customers, including preventing new
entrants from having a share of the market. As such, their profits are likely to
dwindle, and they will end up making losses due to the high costs spent on keeping
afloat.
d.). Threat of substitutes
In the ride-hailing industry, the threat of substitutes is pretty high. Different
member organizations can quickly provide a replacement for Uber services. The
substitutes can range from other rivals, and taxi services, including other public
transport means such as trains. The abundance of substitutes in the ride-hailing
industry is enough to curb Uber from increasing its prices. Due to price sensitivity, a
minor rise in Uber rates can result in customers taking on the services of its closest
rivals and alternatives. Customers are likely to switch to other substitutes more often
because of price changes.
C.). Identify the corporate strategy that the firms pursue to compete in their
industry
a.). Nature of product or Service
The firms in the ride-hailing industry focus on product expertise strategy. The
products and services are built with the expertise that permits the firms to set the
standard for powering movement on-demand and provide platform users with an
intuitive interface, continually offering advanced features and functionality. They also
ensure that the products and services are enhanced to deliver safety and trust.
b.). Degree of Geographical Diversification
Market penetration is the growth strategy adopted by the firms in this industry.
The firms focus on increasing their current products and services in the existing
markets, including expanding personal mobility into new markets. Through
operational excellence strategy, the firms use their extensive market-specific
knowledge to rapidly launch and scale products in cities and other countries,
supporting drivers, consumers, shippers, restaurants and enhancing relationships
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with cities (Maheshwari, 2019). Uber has extensively increased its operations in
many different countries globally to reduce business and operational risks.
c.). Supply (value) chain management
The industry firms identify the sources of value and competitive advantage for
the ride-hailing industry through value chain analysis. This involves value addition in
the business operations' internet-based nature, which is the primary source of value
for firms in this industry. Therefore, the firms ensure that their apps are working
effortlessly to meet customer needs by equipping them with advanced features and
capabilities. The industry firms rely heavily on social media marketing and direct
selling to communicate their marketing strategies to the target customer segment. A
convenient payment method is also a significant source of value addition for the
firms in the industry. Customer's credit cards registered with the app are
automatically charged so that they don't have to cash or use credit cards when they
arrive at their various destinations. A high customer service level is one of the critical
value chain management for firms in this industry. Riders are given the chance to
rate their drivers after each journey, and driver's accounts with average low riding
scores are immediately removed from the platform. Drivers, therefore, are motivated
to maintain a clean car and provide excellent customer service. Customers can also
complain if their driver took a longer route to reach the destination, and refunds can
be issued in such situations to enhance exemplary customer service.
C. Calculate and analyze profitability analysis of the company based on:
a.). ROA

Profitability Formula 2019 2018 2017

ratio
Return On Net Income /Loss −8,506 997 −4,033
×100 % ×100 % ×100 %
Avg . Total Assets 27,874.5 19,707 15,569.5
Assets (ROA)
= (30.5%) = 5.1% = (25.9%)

Return on assets (ROA) is a profitability ratio that provides how much profit a
company can generate from its assets (Coulon, 2020). That is, it measures how
efficient a company is in developing earnings from its total assets. The higher the
ROA number, the more efficient a company manages its total assets to generate
profits.
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b.). Do you find the profitability satisfactory? Comment on both the level and
trend. Also, comment on the reasons that cause the changes as observed.
According to ROA calculation, the company's profitability for the years 2019
and 2017 is extremely unsatisfactory since the ROA is negative. For the year 2018,
the profitability is satisfactory since ROA is positive. The company is not using its
assets efficiently to generate income.
The company experienced a negative ROA in the year 2017; then, in 2018,
there was a massive improvement in the company performance as its ROA jumped
from negative 25.9% to positive 5.1%. This is because, in the year 2017, the
company suffered a tremendous income loss which contributed to its negative ROA.
The company's operation costs surpassed its total revenue and other incomes,
resulting in a substantial net loss. In 2018, the company generated more revenue
than its operation costs, resulting in a net gain. This contributed to appositive ROA
since the company was able to utilize its assets efficiently to generate income. In
2019, the company experienced a massive decline in its performance in year 2019
with a negative 30.5% ROA. This was because of enormous costs of operation
incurred, which was more than the revenues generated, resulting in a net loss, which
contributed to a negative ROA.
c.). EPS – comment on profitability based on EPS as stated on the income
statement
Profitability Formula 2019 2018 2017
ratio
Earnings Net Income/ Loss (8,506,000) 997,000−997,000 (4,033,000)
−Preferred 1,248,353 478,999 426,360
Per Share
Dividends
= (6.81) =0 = (9.46)
(EPS) Weighted Avg . Common
Shares
Outstanding

The earning per share (EPS) is a ratio that measures the amount of net
income earned for each share of its stock, and it is mostly used to estimate corporate
value. A higher EPS indicates the more excellent value and the more profitable a
company is considered to be. The company experienced a negative EPS in the year
2017 due to the massive losses incurred. In 2018, no EPS was declared since the
small profits earned were issued to preferred shareholders, who received cash
dividends referred to as preferred dividends. This value of preferred dividends must
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be deducted from net income when calculating the EPS. In the year 2019, the
company incurred a negative EPS due to extreme net losses suffered. Generally, the
company over the three years has a bad EPS, which means the company is not
profitable at all.
Overall, Uber's profitability is in bad shape due to its considerable costs to
sustain its operations. Competitive advantage is measured by profit share, a
company's share of an industry's profits. This definition means that competitive
advantage is impossible if an industry lacks profitability (Cohan, 2019).

E.). Calculate and analyze financial ratios used to measure the short-term
liquidity risk
Short-term Formula 2019 2018 2017
Liquidity
ratios
Current Assets 13,925 8,658 6,837
Current Liabilities 5,639 4,259 3,847
Current
= 2.47 = 2.03 = 1.78
Ratio
Cash∧Cashequivalents 11,412+¿ 1,642 6,473+¿ 1,335 4,535+¿ 926
+ Short term Investments 5,639 4,259 3,847
Quick Ratio
+ Accounts Receivable
= 2.31 = 1.83 = 1.42
Current Liabilities
11,412 6,473 4,535
Cash+ Cash Equivalents 5,639 4,259 3,847
Cash Ratio
Current Liabilities
= 2.02 = 1.52 = 1.18

a.). Comment on the liquidity risk of both companies. Also, comment on the
reasons that cause the changes as observed.
Short-term liquidity ratios are essential when considering a company's ability
to pay off short-term liabilities using the available resources (Coulon, 2020). The
ratios help examine and assess a company's financial health and show its ability to
convert its assets to raise cash (Stittle and Wearing, 2011). The three common ratios
computed under short-term liquidity ratios are current ratio, quick ratio, and cash
ratio. The current ratio measures the company's ability to pay off the total current
liabilities using its current assets. The quick ratio measures the company's ability to
pay off the short-term liabilities that fall due using only cash and cash equivalents.
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While quick ratio, also known as acid test ratio, measures a company's ability to
meet its short-term obligations using its most liquid assets.
A good current ratio is between 1.5 to 2, which indicates that the business has
enough current assets than liabilities to cover its debts. Uber's current ratio in the
year 2017 of 1.78 was good and above the recommended industry average. The
current ratio further improved in the year 2018 and 2019 to 2.03 and 2.47,
respectively. This shows that Uber can meet its short-term obligations with ease
since it has enough current assets.
An excellent quick ratio is 1 or higher. The greater the number, the more liquid
assets a company has to cover its short-term obligations. Uber's quick ratios for the
years 2017, 2018, and 2019 of 1.42, 1.83, and 2.31 are over and above the
recommended rate of 1.13, which means that the company has enough liquid assets
to pay off its short-term debts as they fall due.
A good cash ratio is one that at least 0.5 to 1. Uber's cash ratios for the years
2017, 2018, and 2019 of 1.18, 1.52, and 2.02 are over and above the industry
recommended rate of 0.34. This means that the company has enough highly liquid
assets to pay off its short-term liabilities.
Overall, Uber has adequate liquidity according to the short-term liquidity ratios
calculated. It shows that the company is in good financial health and is unlikely to
face financial distress. The higher ratios mean that the company has a healthy and
higher safety margin to meet its short-term liabilities when they arise.

F.). Calculate and analyze financial ratios used to measure the long-term
liquidity risk.

Long-term Formula 2019 2018 2017

Liquidity
ratios
16,578 17,196 11,773
Total Liabilities 31,761 23,988 15,426
Debt Ratio
Total Assets
= 0.52 = 0.72 = 0.76
16,578 17,196 11, 773
Total Liabilities 14 , 190 (7,385) (8,557)
Debt to
Total
= 1.17 = (2.33) = (1.38)
Equity Ratio Shareholders Equity
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Times (7,874) 1,960 (4,096)

EBIT
559 648 479
Interest Interest
Earned Ratio = (14.09) = 3.02 = (8.55)

a.). Comment on long-term liquidity risk (financial leverage and solvency risk)
of both companies. Also, comment on reasons that cause the changes as
observed
The debt ratio is used to evaluate a company's leverage. It shows how much
debt a company is carrying to finance its assets or its ability to cover its liabilities with
its assets. The ideal rate usually is 0.4 and below. Uber's 2017 debt ratio of 0.76 was
much higher than the recommended industry rate of 0.57, which means that most of
its assets are financed through debt. Uber's debt ratio slightly reduced to 0.72, which
was still higher than the recommended rate. In 2019, there was a massive
improvement in Uber's debt ratio. The figure of 0.52 was within the recommended
industry rate, which means that it had a balanced debt to equity financing. That is,
Uber has a balanced optimal capital structure, which means that it has the proper
mix of equity and debt financing that maximizes its market value while minimizing its
cost of capital.
The debt-to-equity ratio is the measurement between a company's total debt
and total equity. It indicates how much debt a company uses to finance its
operations. A good debt-to-equity ratio is 1 and below. A higher ratio is typically
considered high risk since it suggests that the company is heavily financing its
growth with debt rather than equity financing (Coulon, 2020). Uber had a negative
debt-to-equity ratio in both 2017 and 2018 of -1.38 and - 2.33, respectively. The
company has negative shareholder equity, and that its liabilities are more than its
assets.
Times interest earned ratio is a measure of a company's ability to meet its
debt obligations based on its current net income. A high ratio of more than 2.5 is
considered an acceptable risk, and that the company can meet its interest
obligations since it has higher income earnings. Uber's times interest earned ratios of
– 8.55 and – 14.09 for the years 2017, and 2019 which means that it is in severe
financial trouble. That is, the company is making losses and is unable to service its
interest payments or debts. Uber's times interest earned ratio for the year 2018 was
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3.02, a massive improvement from 2017. It means that the company had enough
income to cover its interest payments or service its debts.

G.). Calculate and predict bankruptcy risk for the company using Z-Score
Altman's Z-score model is used to calculate and predict the state of financial
distress of any company (Altman & Hotchkiss, 2010). It can predict the chances of a
business going bankrupt in the next two years. The model combines five financial
ratios to predict a company's probability of becoming insolvent in the next two years.
The Z-score mode formula: 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Z-Score Formula 2020 2019

ratios
9,882−6,865 13,925−5,639
Working Capital 33,252 31,761
A
Total Assets
= 0.0907 = 0.2609
(23,130) (16,362)
Retained Earnings 33,252 31,761
B
Total Assets
= (0.1951) = (0.5152)
(6,488) (7,874)
EBIT 33,252 31,761
C
Total Assets
= (0.1951) = (0.2479)
89,950 51,050
Market Value 19,498 16,578
D
of equity
= 4.6133 = 3.0794
Total Liabilities
11,139 14,147
Total Sales 33,252 31,761
E
Total Assets
= 0.3350 = 0.4454
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Bankruptcy Formula 2020 2019

Ratio

Altman Z- 1.2A+1.4B+3.3C+0.6D (1.2x0.0907) + (1.4x -0.6956) (1.2x0.2609) + (1.4x

Score ratio +1.0E + (3.3x -0.1951) + -0.5152) + (3.3x 0.2479) +
(0.6x4.6133) + (1x0.3350) (0.6x3.0794) + (1x0.4454)

= 3.54 = 1.07

Interpretation
Distress Zones - 1.81 < Grey Zones < 2.99 - Safe Zones
According to the Altman Z-score ratios calculated, it can be concluded that
Uber's bankruptcy risk in the year 2019 was in a critical position. This is because the
figure of 1.07 was less than 1.81, which means that Uber was experiencing financial
difficulties and high risk, with a high probability of going bankrupt. However, in the
year 2020, the company bounced back significantly with a figure of 3.54. This figure
is above 2.99, which is in a safe zone. This indicates that the company is stable
financially, and it is unlikely to run bankrupt.
Conclusion
The discussion has demonstrated how vital a company's financial analysis is
required to ascertain its financial and economic health, which is important for the
executives, shareholders, and the public at large. According to Uber's economic and
strategic analysis, the company has manifested how well it is currently managing its
business operations by adopting various strategies that are making it gain a
substantial competitive advantage over its rivals in the industry. These strategies,
including business, marketing, and corporate strategy, have put Uber on top of the
map as the best in the ride-hailing industry. The company has diversified and
penetrated a large market base through strong branding and marketing strategy,
putting it ahead of its main competitors, such as Lyft. Uber's sharing economy has
generated employment for people in large numbers globally.
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Regarding the profitability analysis, Uber's performance is inadequate since it

has been experiencing massive losses, which are not suitable for its financial well-
being, future growth prospects, and shareholders who require a return on their
investment. This low or lack of profitability is the hefty costs the company is incurring
in managing its operations. From the liquidity point of view, Uber is performing well
concerning meeting its short-term liabilities. However, regarding long-term liquidity,
the company is performing very poorly. The reasons are that, its liabilities are more
than its assets and an overreliance on debt to manage its operations. Regarding
bankruptcy, the company is in a strong position and is unlikely to face any financial
distress regarding the current situation.
Uber has been facing several issues in its business operations. From top
management issues, the low image on work ethics, taxi drivers and their driver's
protest, and varied government rules, regulations in different countries. These issues
have affected Uber's performance reducing its market share as a result. Therefore,
Uber needs to adopt different strategies to counter such issues, considering how
competitive the ride-hailing industry has become. Uber needs to cut its massive
costs to generate profits and stay competitive in the market. The company should
also seek to have an optimal capital structure and avoid overreliance on debt as a
finance source. The Ride-hailing industry has many players currently. Suppose Uber
is to remain the dominant force and stay afloat for the foreseeable future. In that
case, the company needs to restructure its entire business operations and address
all the challenges hindering its progress.

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