FedEx Canada Source of Finance (Millions) Balance

FedEx Canada

Source of Finance (millions)

Balance sheet value as of: 28 Feb 2011

Market value as of:____6/5/2011

Proportion in total financing

Cost of capital (WACC)

Product of (4)x (5)

Short-term debt

1,685,000

D/E Ratio: 11.07

Long-term debt 1

1,667,000

Long-term debt 2

Long-term debt 3

Preferred shares

Common equity

Total

1,716,000

Revenue

39.30B

34.73B

35.49B

37.95B

35.21 B

-Purchase of Office Supplies

-Direct and indirect labor

-Marketing expense

- Depreciation

1.91 B

1.90 B

1.89 B

1.70 B

1.52 B

EBIT

2.34 B

1.97 B

2.11 B

3.35 B

-Taxes

Net income

1.45 B

1.18 B

98.00 M

1.12 B

2.02 B

+ Depreciation

Operating cash flow

4.04 B

3.14 B

2.75 B

3.48 B

3.56 B

Are there any important economic variables that financial managers of FedEx Corporation need to identify before expanding in Canada?

At the current time FedEx will have to take into consideration the overall global economic climate. Throughout the globe there has been an economic downturn that has affected many sectors including both large and small businesses. With this understood the company has to evaluate the effect of small and large businesses closing or reducing in size on FedEx' bottom line. More specifically financial managers will have to examine fluctuations in fuel price which is one global price fluctuation that has a profound effect on the company's bottom line because FedEx has to fuel so many aircraft and vehicles. In addition the company will likely face foreign currency exchange risks. According to the company's annual report, "The principal foreign currency exchange rate risks to which we are exposed are in the euro, Chinese yuan, Canadian dollar, British pound and Japanese yen. Historically, our exposure to foreign currency fluctuations is more significant with respect to our revenues than our expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. During 2010, operating income was positively impacted due to foreign currency fluctuations. During 2009, foreign currency fluctuations negatively impacted operating income (Fed Ex Annual Report)." As a result of foreign currency risks financial managers must take the proper precautions and develop solutions associated with mitigating the risks associated with the What are the main challenges that the financial managers of FedEx Corporation will face to open up new branch in Canada?