INTERNATIONAL

FINANCE

NOVEMBER 15, 2022

UBER COMPANY
Table of Contents
INTRODUCTION:....................................................................................................................................2
SECTION A:............................................................................................................................................2
DEVELOPMENT 1: COVID-19:.................................................................................................................2
EFFECT OF THIS DEVELOPMENT ON UBER:............................................................................................2
STRATEGY DEVELOPED OR IMPLEMENTED BY THE COMPANY TO MITIGATE THE EFFECT OF THE
DEVELOPMENT:.....................................................................................................................................2
DEVELOPMENT 2: HIKE IN PETROL PRICES WORLDWIDE:.....................................................................3
EFFECT OF THIS DEVELOPMENT ON UBER:............................................................................................3
STRATEGY DEVELOPED OR IMPLEMENTED BY THE COMPANY TO MITIGATE THE EFFECT OF THE
DEVELOPMENT:.....................................................................................................................................3
SECTION B:.............................................................................................................................................4
DIVIDEND POLICY:.................................................................................................................................4
DIVIDEND IRRELEVANCE THEORY:.........................................................................................................4
SOURCES OF FINANCE:..........................................................................................................................4
EQUITY:..............................................................................................................................................4
DEBT:.................................................................................................................................................5
GEARING RATIO FOR 2020 AND 2021:...................................................................................................5
CAPITAL STRUCTURE THEORY:...............................................................................................................5
SECTION C:.............................................................................................................................................6
RATIO ANALYSIS:...................................................................................................................................6
PROFITABILITY RATIOS:..........................................................................................................................6
ROCE:.................................................................................................................................................6
OPERATING PROFIT MARGIN:............................................................................................................6
GROSS PROFIT MARGIN:....................................................................................................................7
EFFICIENCY RATIO:.................................................................................................................................7
ACCOUNT RECEIVABLE IN DAYS:........................................................................................................7
ACCOUNT PAYABLE RATIO:................................................................................................................8
ASSET TURNOVER RATIO:..................................................................................................................8
LIQUIDITY RATIOS:.................................................................................................................................9
CURRENT RATIO:...............................................................................................................................9
GEARING RATIO:....................................................................................................................................9
INTEREST COVERAGE RATIO:.............................................................................................................9
CONCLUSION:......................................................................................................................................10
REFERENCES:.......................................................................................................................................10
INTRODUCTION:
Each second matters in the twenty-first era, and in such a situation, even the thought of
standing in lines for buses or taxis doesn't appear to be a wise move. Uber Technologies, Inc.
developed a concept to maximise travel time and improve the experience (Moon, Y., 2015).
Garrett Camp, Oscar Salazar, and Travis Kalanick created Uber in 2009. As of 2022, Uber
has a sizable potential audience of over 93 million average monthly clients.
The economic results of Uber is examined in this study. Additionally, changes that have an
impact on Uber's economic success are described, notably how the company handles the
possible threats to its funding streams and dividend yield.

SECTION A:

DEVELOPMENT 1: COVID-19:
The current Covid-19 epidemic has had a negative impact on several companies. This
influence is not limited to a single area; it has an impact everywhere. From the transport and
tourism industries to the motels and healthcare industries, a great deal of enterprises have
been negatively impacted. (Donthu, N. and Gustafsson, A., 2020, pp.284-289) claims that
existing businesses as well as start-ups cannot be shielded from the negative effects of this.
Because of the current scenario in several nations, Uber Technologies, one such well-known
corporation, has also suffered a decline in its revenues. Uber Technologies Inc. is a shared
mobility network which provides deliveries and transportation operations, According to
(Pepić, L., 2018, pp.123-136) the firm is in the freight and distribution sector, and the
worldwide Covid-19 outbreak has had a negative impact on the entire transportation sector.

EFFECT OF THIS DEVELOPMENT ON UBER:

Due to the pandemic's widespread employment losses, there has been a detrimental decline in
appetite for Uber services. As a result, this has affected the revenue of Uber Motorists.
Additionally, many Uber users have been postponing their trips out of concern that they
could contract the coronavirus while travelling. Uber had a terrible year in 2020. When
contrasted to the final quarter of 2019, Uber's adjusted net sales fell by 16 percent, resulting
in a $968 million loss during the past three months. The business recorded a net loss of $6.7
billion for the whole year, which is significantly less than the $8.5 billion it lost in 2019. It
made less money compared to 2019 ($11.1 billion versus $13 billion), most likely because it
allowed for 5 billion fewer travels in 2020 than it did in 2019. According to a research by
(Mazareanu, E., 2020), India, which is home to a sizable infrastructure of Uber vehicles, has
also seen a dramatic fall in sales as a result of the complete shutdown that was implemented
for about 2 months.

STRATEGY DEVELOPED OR IMPLEMENTED BY THE COMPANY TO

MITIGATE THE EFFECT OF THE DEVELOPMENT:
Through collaborating with establishments that sold necessities and gave jobs to Uber's
drivers and several staff, the company pledged to supply necessities on schedule for Covid-19
(Kaur, G., 2021) refers to the recommendations made to deter the transmission of Covid-19
when sharing cabs. These regulations help consumers and commuters by limiting the
transmission of the disease and lessening its negative effects on other people (Raj, M.,
Sundararajan, A. and You, C., 2020) have examined how virtual networks help increase the
survivability of businesses throughout the downturn via preserving client accessibility. The
academics have talked about how companies halted in times of pandemics and how Uber
Technologies handled availability and need on its meal delivering network, "Uber Eats." Its
transportation offerings will be successfull if the Covid-19 standards are successfully applied
to it like "Uber Eats."

DEVELOPMENT 2: HIKE IN PETROL PRICES WORLDWIDE:

A major factor in the global rise in hyperinflation that is raising life quality is the pricing of
fuel. In the globalisation, choices are as diverse as the people making them and the nations
themselves: Walk farther. Clean off that bike. Use the metro, the bus, or the underground. To
preserve gasoline, press the gas pedal more lightly. Examine the trip; was it worthwhile?
could even abandon your automobile. Owing to the worldwide remoteness that was occurring
throughout the start of the epidemic, there was a diminished need for petroleum plus
electricity (Bhandari, N., 2018, pp.33-37). Power consumption surged once again when the
epidemic was finally over because individuals all around the globe wanted to resume their
prior lifestyles. Fuel costs have grown as a result of the increasing desire for power, which is
causing vendors to have producing issues.

EFFECT OF THIS DEVELOPMENT ON UBER:

Uber drivers are being forced off the roadway as a result of rising gas costs as they battle to
make ends meet and earn much less than they did three years ago, although customers
actually paying more for fares due to higher fares. All drivers were essentially hamstrung by
gas costs. Numerous drivers claim that it is no anymore financially possible, and as a result of
the increased cost, several ridesharing carriers are abandoning or cutting out. Today, there are
a lot fewer drivers (Kitchel, A.S., 2017). Uber is paying $1000 if you accomplish 30 rides in
90 days. Although the living costs has increased, Uber's rate rise of merely 2% isn't really
keeping up with inflation; operators want a 25% raise. Drivers stated that the rising cost of
gas is also resulting in inferior services for clients since longer Uber journeys are more
lucrative and smaller Uber trips are becoming progressively unfavorable.

STRATEGY DEVELOPED OR IMPLEMENTED BY THE COMPANY TO

MITIGATE THE EFFECT OF THE DEVELOPMENT:
Uber has declared a generous 15% increase in customer prices. According to Uber, the
increase is a response to the growing cost of petroleum. Pricing for gasoline and diesel have
skyrocketed. "We pay attention to drivers' comments and recognise that the present increase
in gasoline costs is worrying. Uber is increasing journey costs by 15% to assist operators be
less affected by the rise in petroleum costs. We would keep an eye on changes in gasoline
prices over the upcoming weeks and take additional action if necessary, Uber's chief of core
operations said in a letter.
In reaction to rising gasoline costs, Uber is implementing a premium on trips and deliveries in
the United States and Canada. According to the firm, the cost of an Uber journey would range
from $0.45 to $0.55, while the cost of an Uber Eats delivery would be between $0.35 and
$0.45 (Hall, J., Kendrick, C. and Nosko, C., 2015). Depending on the mileage travelled and
the government's petrol pricing, the fees may change. Uber stated in a declaration: "We
realise that costs have been rising throughout the industry, so we've performed our finest to
support operators and carriers without adding undue strain to customers.

SECTION B:

DIVIDEND POLICY:
The valuation of Uber is $48 billion. Uber is one of several large-cap tech companies that do
not distribute dividends to investors.

DIVIDEND IRRELEVANCE THEORY:

The dividend irrelevance concept, which contends that dividends have no impact on a firm's
share price,, is relevant here. According to the concept of dividend irrelevance, a firm's
potential to compete over the lengthy period may suffer if it pays out dividends when it
would be preferable to recoup the funds to grow the business (Priya, P.V. and
Mohanasundari, M., 2016, pp.59-69). For example, in the initial quarter of this year, Uber's
cost of revenues accounted for 67% of its revenue. Additionally, throughout the quarter, its
R&D costs devoured an additional 9% of net revenues, while advertising and administration
overhead accounted for 28% of net revenues. Whilst administration makes every effort to
keep all expenditures to a minimum, robust revenue progress would undoubtedly require
considerable levels of advertising and R&D spending. Uber needs to incur all of these costs
to continue growing, but doing so has a detrimental effect on free cash flow.
Shareholders shouldn't anticipate a dividend from Uber as long as the firm continues to
generate deficits. Even if the business turns successful, a dividend won't be paid out straight
once.

SOURCES OF FINANCE:
The streams of funding for the Uber Company include loan funding and equity funding. For
2020 and 2021, correspondingly, Uber's overall stockholders' equity is $12,967 million and
$15,145 million. Uber has both short-term and long-term obligations in regards of
indebtedness. Debt totaled $19,498 for one and $23,425 for the other.
EQUITY:
The balance sheet's table depicts that there were 5 million total equity shares granted. In 2020
and 2021, extra funding will total $35,931m and 38,608m, respectively. The rising paid-in
capital is a result of the corporation's continued great expansion, as operating this technical
firm requires significant financial resources. It is clear from a comparison of the two most
consecutive years that the overall equity has grown as a result of significant extra paid-in
capital.
DEBT:
Following is a depiction of the protracted indebtedness and credit. It consists of liabilities
held for sale, operational lease commitments, protracted loans and notes, short-term and long-
term insurance deposits, plus various current and non-current commitments. Check out the
table underneath.

GEARING RATIO FOR 2020 AND 2021:

RATIO 2020 2021
Gearing ratio 12633 14401
Non−current liabilities = x 100 = x 100
x 100 12633+ 12967 14401+15145
Non−current liabilities+ equity
= 49.35% = 48.74%

The gearing proportion indicates 49.35% of debt in 2020 and 48.74% in 2021, indicating that
financial leverage accounts for 50% of the finances used by the Uber firm. However, there is
additional factor to take into account: the debt amount has reduced from 2020 to 2021 by
1.24% (49.35 - 48.74 / 49.35).

CAPITAL STRUCTURE THEORY:

Uber's financial statement demonstrates that business adheres to the M n M irrelevancy
theory of capital structure by having modest amounts of debt. It is a corporate capital
structural concept which holds that, in the absence of income taxes and crisis charges, debt
financing has no impact on a valuation of the corporation. The fact that Uber's debt to equity
ratio is moderate, nonetheless, and that the danger of credit distress is declining as a
consequence, nevertheless, demonstrates that Uber's capital structure is virtually optimum.
Uber Technologies could benefit from leverage till it becomes difficult to pay it off, either
with fresh money or with free cash flow. As a result, if Uber Technologies is unable to satisfy
its constitutional duties to payoff loans, that might negatively impact the capital structure, the
corporation 's owners can lose everything.

SECTION C:

RATIO ANALYSIS:

PROFITABILITY RATIOS:
ROCE:
RATIO 2020 2021
ROCE=
Operating profit ( PBIT ) ( 4863) (3834)
x = x100 = x 100
Capital eployed 33252−6865 38774−9024
100
= -18.42% = -12.88%
Capital employed= Total
assets – current liabilities
Elaboration:
Relevance of the ratio:
ROCE is a metric of the yield on capital invested.. Computation shows that ROCE is negative
in both 2020 and 2021, -18.42% in 2020 and -12.88% in 2021, indicating that the firm is
losing money and isn't making the best use of the capital that has been invested in it.
Causes for the ratio's variation during the course of the 2 years:
First relationship between the numerator and denominator: The ROCE figure is negative
for a variety of causes. A $4863 million operating deficit was recorded in 2020, however this
was down to a $383 million loss in 2021. Despite a boost in capital value (perhaps brought on
by an increase in debt), Uber was unable to produce a profit upon its comeback in 2021.
Second present contextual reasons for the movement: The shift in the proportion could be
attributed to a few contextual factors. The primary cause of the significant operational deficit
in 2020 and 2021 is the pandemic's grave and terrifying effects on the transportation sector
when closure began in 2020.

OPERATING PROFIT MARGIN:

RATIO 2020 2021

Operating profit margin=
operating profit ( PBIT ) (4863) (3834)
x = X 100 = X 100
Total revenue 11139 17455
100
= -43.65% = -21.96%
Elaboration:
Relevance of the ratio:
Operating margin is a ratio of operating profit to sales. The operating margin was negative for
both of the years, -43.65% in 2020 and -21.96% in 2021, indicating that the corporation's
efficiency was subpar in both of those years.
Causes for the ratio's variation during the course of the 2 years:
First relationship between the numerator and denominator: The operating margin has
increased for a variety of considerations. In 2020, there was a $4863 million operating deficit.
In 2021, this was reduced to a $3834 million loss. The rise in costs and expenditures was the
primary factor contributing to the operational deficit in 2021. Although not in the similar
manner as cost, overall income also rose.
Second present contextual reasons for the movement: The poor results in both years can
be attributed to COVID19 and the global total shutdown.
GROSS PROFIT MARGIN:

RATIO 2020 2021

Gross profit margin=
Gross profit 5985 8104
x 100 = x 100 = x 100
Total revenue 11139 17455

= 53.73% = 46.42%
Elaboration:
Relevance of the ratio:
From 2020 to 2021, the gross profit margin decreased from 53.73% to 46.42%. After
covering direct costs, which implies Uber generated less money for every dollar of revenue in
2021.
Causes for the ratio's variation during the course of the 2 years:
First relationship between the numerator and denominator: Owing to the significant rise
in operational cost, which has a negative impact on both turnover and gross profit, the ratio
has fallen.
Second present contextual reasons for the movement: The state's limits on working from
home and the complete shutdown are what cause the decline in gross profit.

EFFICIENCY RATIO:
ACCOUNT RECEIVABLE IN DAYS:

RATIO 2020 2021

Account receivable ratio =
Account receivable 1073 2439
x 365 = x 365 days = x 365 days
Total revenue 11139 17455

= 35 days = 51 days
Elaboration:
Relevance of the ratio:
Days for receiving turnover were 35 in 2020 but rose to 51 in 2021. As consumers are
requiring a little longer to pay their Uber balances, this would appear to be a decline in
productivity.
Causes for the ratio's variation during the course of the 2 years: First relationship
between the numerator and denominator: The days for receiving turnover rose from 35 in
2020 to 51 in 2021. Despite the fact that revenues are rising alongside receivables. However,
sales are increasing at a slightly slower pace than receivables. Which demonstrates the firm's
inability to get money from customers.
Second present contextual reasons for the movement: According to Uber, there were a lot
of unbilled receivables because of Covid-19 and other destabilizing circumstances, and
nobody was able to pay their bills on schedule.
ACCOUNT PAYABLE RATIO:

RATIO 2020 2021

Account payable ratio=
Account payable 235 860
= x 365 = x 365 days = x 365 days
Cost of sales 5154 9351

= 17 days = 34 days
Elaboration: 
Relevance of ratio:
Account payable days were 17 in 2020 but jumped to 34 in 2021, suggesting that Uber took a
little longer to pay off its obligations.
Causes for the ratio's variation during the course of the 2 years:
First relationship between the numerator and denominator: The ratio has risen as a result
of a growth in both account payable and cost of sales, albeit not at the identical rate.
Second present contextual reasons for the movement: Owing to Covid-19 and other
disturbing circumstances, Uber acknowledges that there were a lot of unpaid invoices that
were not cleared in a timely manner.
ASSET TURNOVER RATIO:

RATIO 2020 2021

Asset turnover ratio
Net sales 11139 17455
= = =
Average total assets (33252+31761)/2 (38774+ 33252)/2

= 0.34 = 0.48
Elaboration:
Relevance of the ratio:
Asset turnover ratio grew from 0.34 in 2020 to 0.48 in 2021, but both values remain below an
admissible threshold, indicating that the firm was unable to earn profits in proportion to the
assets it had deployed.
Causes for the ratio's variation during the course of the 2 years:
First relationship between the numerator and denominator: Due to growing revenues but
a relatively slow rise in total assets, the proportion has risen but has not yet reached the
acceptable standard.

LIQUIDITY RATIOS:
CURRENT RATIO:

RATIO 2020 2021

Current ratio =
Current assets 9882 8819
= =
Current liabilities 6865 9024

= 1.43 = 0.97
Elaboration:
Relevance of the ratio:
Boeing's current ratio is above 1, but drops to 0.97 in 2021, meaning Uber won't be able to
pay its short-term obligations when they become due in that year.

Causes for the ratio's variation during the course of the 2 years:
First relationship between the numerator and denominator: Current ratio was 1.43 in
2020. Nevertheless, in 2021, there dropped to 0.97. Due to a decline in current assets and a
rise in current liabilities, this resulted.
Second present contextual reasons for the movement: Uber acknowledges that all current
liabilities rose in 2021 as a result of the Covid-19's declining current ratio.

GEARING RATIO:
INTEREST COVERAGE RATIO:

RATIO 2020 2021

Interest coverage ratio=
EBIT (4863) (3834)
= = =
Interest expense 458 483
 = -10.6 = -7.9
Elaboration:
Relevance of the ratio:
In 2020 and 2021, Uber had interest coverage ratios of -10.6 and -7.9, respectively. The
negative figures indicate that, given its losses in 2020 and 2021, Uber may find it difficult to
pay loan interest.
Causes for the ratio's variation during the course of the 2 years:
Present contextual reasons for the movement: Uber's negative cash flow implies that it
will postpone paying interest on its debt because it is unsure of when transit agencies will
resume at their pre-pandemic levels.

CONCLUSION:
This analysis implies that Uber is a successful company but in the times of covid as well as
high fuel prices condemned it to restricted range and it is getting impossible for the company
to reach new peaks. The company’s sources of finance depends on debt financing plus equity
financing. Uber company have faces a massive amount of lossess in 2020 and 2021 due to
total lockdown all around the world and travelling restrictions.

REFERENCES:
Donthu, N. and Gustafsson, A., 2020. Effects of COVID-19 on business and research. Journal
of business research, 117, pp.284-289.
Pepić, L., 2018. The sharing economy: Uber and its e? ect on taxi companies. Acta
Economica, 16(28), pp.123-136.
Mazareanu, E., 2020. Coronavirus: impact on the transportation and logistics industry
worldwide. Statista. Available online at https://www. statista. com (accessed December 25,
2020).
Kaur, G., 2021. The Impact of Covid-19 pandemic on Uber’s ridesharing activities. Jyväskylä
University of Applied Sciences.
Raj, M., Sundararajan, A. and You, C., 2020. COVID-19 and digital resilience: Evidence
from Uber Eats. arXiv preprint arXiv:2006.07204.
Moon, Y., 2015. Uber: Changing the way the world moves. Harvard Business School, Case,
101.
Bhandari, N., 2018. Hike in prices of petrol and its impact on demand and supply.
International Journal for Advance Research and Development, 3(8), pp.33-37.
Kitchel, A.S., 2017. The uber effect: how transportation networking companies impact
automotive fuel consumption (Doctoral dissertation, Georgetown University).
Hall, J., Kendrick, C. and Nosko, C., 2015. The effects of Uber’s surge pricing: A case study.
The University of Chicago Booth School of Business.
Priya, P.V. and Mohanasundari, M., 2016. Dividend policy and its impact on firm value: A
review of theories and empirical evidence. Journal of Management Sciences and Technology,
3(3), pp.59-69.