The Future of Uber and Its Drivers

Type of Business 

Uber is an American multinational company that engage in the provision of a wide range of services that include food delivery, peer to peer ride sharing among other services. The company, whose headquarters are in San Francisco is operation in other different parts of the world. The company operates within the transportation industry considering that it focuses on ride sharing as the primary service. The provision of services within the company is based on the use of technology, which helps in connecting the drivers with individuals that require to move from one location to another. The effectiveness in the delivery of services has helped the company earn a greater market share over the competitors thereby earning approximately 70% market share for ride sharing and approximately 25% market share for food delivery within the United States (Scheiber, 2017).

Size of the Organization 

Uber is considered one of the prominent companies in the transportation industry that play an important role in providing services to a wide range of customers. The company operates in 63 countries in the world, which is an indicator that the company has the ability to invest and operate within different economies. The total revenue of the company for the year 2018 was approximately $11.27 billion, which is an indication of the size of the company within the industry. The total assets for the company totals to $23.988 billion by the end of financial year 2018 (Rogers, 2015). The company has approximately 30,000 employees that are based in different parts of the world and whose objectives involve the provision of quality services to the customers. The huge number of employees is an indicator that the company is one of the largest in the transportation industry.

Background of the Company 

Uber company was founded in 2009 by Garrett Camp and Travis Kalanick, who are billionaires and entrepreneurs that developed the main behind the use of mobile app and website to connect the drivers with the customers. The company influenced the transportation industry through the implementation of technology, which helped in enhancing the delivery of services. The initial idea behind the establishment of the company was to create a cost-effective transportation means that would be comfortable and affordable for a majority of people in the society. Considering that most people required comfort and yet they could not afford hiring a vehicle, Uber services would be of great help as it capitalized on the elements of comfort and affordability of transport services.

The operations of the company are based on the use of a smartphone app that helps in connecting the drivers with the riders. The use of technology has enabled the company to remain among the top companies engaging operating within the transportation industry. An increase in the use of technology within the transportation industry has played a significant role in the establishment of companies that provide similar services with Uber creating a major competition within the industry. The main competitors of Uber include Lyft, Taxify, and Careem, which have a major influence on the transportation industry (Peticca-Harris, deGama, & Ravishankar, 2018) The stiff competition within the industry contribute to the need for the implementation of strategies that help the company to overcome competition and sustain the current market share. Based on the nature of measures implemented by the company, there has been criticism concerning the operations undertaken within the industry, which is an aspect that has influence the brand image of Uber.

Financial Statements 

Balance Sheet 

The balance sheet, as has been presented below, reflects on Uber’s financial performance between the year 2018 and 2021. The balance sheet summarizes the company’s financial positioning with focus being on examining its assets, liabilities, and more as a way of determining its approach towards building profitability. The information in the balance sheet is important, as it allows investors to make viable decisions on whether to invest in the company while considering all the major financial elements that define its current performance. For the company’s performance in 2020 and 2021, the data indicated is based on an evaluation of data from its performance in 2018 and 2019, which given an estimated projection of the company’s performance moving into the future.

Breakdown	2018 (‘000)	2019 (‘000)	2020 (‘000)	2021 (‘000)
Assets
Current Assets
Cash and Cash Equivalents	4,393,000	6,406,000	8,419,000	10,432,000
Total Cash	4,393,000	6,406,000	8,419,000	10,432,000
Net Receivables	919,000	919,000	919,000	919,000
Other Current Assets	21,000	179,000	337,000	495,000
Total Current Assets	6,837,000	8,658,000	10,479,000	12,300,000
Non-Current Assets
Gross property, plant and equipment	1,723,000	2,587,000	3,451,000	4,315,000
Accumulated Depreciation	-531,000	-946,000	-1,361,000	-1,776,000
Equity and other investments	5,969,000	11,667,000	17,365,000	23,063,000
Goodwill	39,000	153,000	267,000	381,000
Intangible Assets	54,000	82,000	110,000	138,000
Other long-term assets	1,335,000	1,787,000	2,239,000	2,691,000
Total non-current assets	8,589,000	15,330,000	22,071,000	28,812,000
Total Assets	15,426,000	23,988,000	32,550,000	41,112,000
Liabilities and stockholders’ equity
Current Liabilities
Total Revenue	87,000	61,000	35,000	9,000
Accounts Payable	213,000	150,000	87,000	24,000
Taxes payable	244,000	157,000	70,000	-17,000
Accrued liabilities	942,000	4,211,000	7,480,000	10,749,000
Deferred revenues	38,000	65,000	92,000	119,000
Other Current Liabilities	517,000	11,000	-495,000	-1,001,000
Total Current Liabilities	3,847,000	5,313,000	6,779,000	8,245,000
Non-current liabilities
Long Term Debt	3,048,000	4,535,000	6,022,000	7,509,000
Deferred taxes liabilities	1,041,000	1,072,000	1,103,000	1,134,000
Other long-term liabilities	741,000	1,811,000	2,881,000	3,951,000
Total non-current liabilities	20,136,000	8,342,000	-3,452,000	-15,246,000
Total Liabilities	23,983,000	13,655,000	3,327,000	-7,001,000
Stockholders’ Equity
Retained Earnings	-8,874,000	-10,334,000	-11,794,000	-13,254,000
Accumulated other comprehensive income	-3,000	-188,000	-373,000	-558,000
Total stockholders’ equity	-8,557,000	10,333,000	29,223,000	48,113,000
Total liabilities and stockholders’ equity	15,426,000	23,988,000	32,550,000	41,112,000

Income Statement 

The income statement, as has been presented below, reflects on Uber’s financial flow between the year 2018 and 2021 as a way of determining its financial position. The income statement reflects on financial elements that include the company’s revenue and expenses, each of which is important in seeking to determine the extent to which the company is likely to perform moving into the future. The income statement makes use of the company’s performance in 2018 and 2019 to define its projected performance in the financial years 2020 and 2021.

Breakdown	2018 (‘000)	2019 (‘000)	2020 (‘000)	2021 (‘000)
Total Revenue	3,845,000	7,932,000	11,270,000	13,052,000
Cost of Revenue	2,228,000	4,160,000	5,623,000	6,896,000
Gross Profit	1,617,000	3,772,000	5,647,000	6,156,000
Operating Expenses
Research Development	864,000	1,201,000	1,505,000	4,594,000
Selling General and Administrative	2,575,000	4,787,000	5,233,000	7,556,000
Total Operating Expenses	4,640,000	7,852,000	8,680,000	14,834,000
Operating Income or Loss	-3,023,000	-4,080,000	-3,033,000	-8,678,000
Interest Expense	334,000	479,000	648,000	653,000
Total Other Income/Expenses Net	117,000	-87,000	4,889,000	535,000
Income Before Tax	-3,218,000	-4,575,000	1,312,000	-8,577,000
Income Tax Expense	28,000	-542,000	283,000	-302,000
Income from Continuing Operations	-3,246,000	-4,033,000	987,000	-8,310,000
Net Income	-370,000	-4,033,000	997,000	-8,297,000
Net Income available to common shareholders	-370,000	-4,033,000	1,938,000	-5,732,000
Reported EPS
Basic	-0.25	-2.76	1.33	-
Diluted	-0.25	-2.76	1.26	-
Weighted average shares outstanding
Basic	1,458,714	1,458,714	1,458,714	-
Diluted	1,525,531	1,525,531	1,525,531	-
EBITDA	-2,537,000	-3,586,000	2,386,000	-

Part 2 

Key Elements for the Company to Evaluate and Measure Performance 

When evaluating the company’s balance sheet and income statements, it is clear that indeed the company is on a steady performance path, which is defined by its financial positioning, as can be seen from the statements. However, it is important to consider several key elements, individually, which would be of value in the evaluation and measurement of the company’s performance. The first key element to consider when evaluating the company’s performance its liabilities, which will consider both current and non-current liabilities. From the statement, Uber’s total liabilities reduced from $23.983 billion to $13.655 billion between 2018 and 2019. That is a clear indication of the fact that indeed the company is on a steady path towards streamlining its financial positioning as it operates in different countries around the world.

The financial projections reflect on the fact that the company is likely to experience a significant reduction in its liabilities between 2020 and 2021, which would suggest that indeed the company is maximizing on its ability to capitalize on profits gained from its revenues when making investments (Rauch & Schleicher, 2015). The evaluation of the trajectory of its liabilities, it is clear that the company is much more likely to improve on its profit margins between 2020 and 2021 in the event that it maintains its financial performance. Additionally, this also serves as an indication of the fact that the company is much more likely to establish itself, from a financial point of view, as it seeks to attract more investors as a way of funding its expansion plan.

The second element to consider when evaluating the company’s financial performance is total revenue, which is important in trying to determine the overall ability for a company to maintain its position within the consumer market (Jordan, 2017). When making investment decisions, investors often consider a company’s revenue, which serves as an indication of whether a company is performing in a manner to suggest possible success moving into the future. From the income statement, Uber’s total revenue from 2018 through to 2021 is $3.845 billion for 2018, $7.932 billion for 2019, $11.270 for 2020, and $13.052 billion for 2021. From a financial perspective, it can be argued that the company is experiencing a steady growth in its total revenue; thus, suggesting that it is in a rather effective position through which to maintain positive financial performance.

From the analysis of Uber’s total revenue, it is important to take note of the fact that the company is showing high prospects of being able to maximize in its financial positioning beyond 2021. However, it is important to take note of the fact that this will be determined by the company’s continued investment in areas such as research and development among others, which serve as key determinants of the company’s approach towards meeting the needs and wants set by its customers around the world. The expectation is that the company would be in a much better position of having to introduce new and innovative products for its customers. The idea is having to establish a front through which to ensure that the company is well positioned towards maintaining its position within the consumer market.

The third key element to consider in seeking to evaluate and measure the company’s performance is its gross profit, which reflects on whether indeed the company is likely to advance its financial positioning even as it maintains a steady financial path. From the income statement, presented above, Uber’s gross profit from 2018 through to 2021 is $1.617 billion in 2018, $3.772 billion in 2019, $5.647 billion in 2020, and $6.156 billion in 2021. An evaluation of the company shift in gross profit over the period of 4 year suggests that it is indeed seeking to position itself as being rather successful as it embarks on a process of having to increase its revenues. Uber, as a technological company, is seeking to expand its operations into new markets, which will help improve on its ability to maintain a steady growth in its profit margins.

The last element to consider when evaluating the company’s performance is its investment in research and development. While considering that Uber is a technological company, its ability to remain relevant in the market is defined by its investment in research and development of new products to match consumer demands in the markets. From the income statement, it can be noted that the company’s approach towards improving research and development is defined by a steady growth in its investment. In this element, the company is likely to increase its investment form $864 million in 2018 to $4.594 billion in 2021. One of the key areas that the company is likely to consider is the introduction of driverless cars, which would help towards capitalizing on the changes in technology. From this perspective, it can be argued that indeed the company is rather proactive towards ensuring that maintains a steady path towards advancing its financial growth.

Computer-Based Analysis 

An analysis of the company’s financial statements for the year 2018 to 2021 provide an indication that the cost of revenue is projected to increase significantly, which is an aspect that is attributed to various aspects in the company. Cost of revenue involves the total costs associated with producing and distributing goods and services in a company. The analysis of information concerning the cost of revenue helps in determining the costs incurred by a company during the process of obtaining goods and services (Isaac & Davis, 2014). Balancing on the costs of revenue in a company helps in determining whether a company is in a position to incur the desired profit margins. Additionally, the information on cost of revenue in a company helps in projecting the financial growth and development of a company and allows the analysis of the economic abilities of the company in overcoming different challenges.

In Uber, the cost of revenue as indicated in the financial statement, portrays a significant increase within the four years. In 2018, the const of revenue for the company is $2.228 billion, which increases with a huge margin to $4.160 billion in 2019. The increase in the costs is attributed to an increase in operations within the company that create the need to engage in the production of services to meet the demand. Considering the nature of strategies implemented within the company, the cost of revenue is projected to increase significantly to $5.623 billion in 2020 and to $5.623 billion in 2021. The projected increase in the cost of revenue may have major impact on the company considering that the costs may be used to reflect the profit margins that may be achieved by the company.

Use of the Cost of Revenue to Improve Performance 

Based on the analysis created in the previous section, cost of revenue, the company may be in a position of having to improve on its performance by seeking to reduce its cost margins, which would, in turn, seeking to increase its gross profits. From the analysis, it can be argued that an increase in the company’s revenue tends to have a direct impact on the company’s cost of revenue, which is equally likely to increase. However, the main challenge that the company is facing revolves around the fact that its cost of revenue margins are notably high, which impacts on its financial positioning significantly. An example can be seen from the 2021 income statement where the company’s total revenue is $13.052 billion whereas its cost of revenue is $6.896 billion.

Using this analysis, the company would be in a much better position of having to improve on its performance by adopting strategic approaches that are aimed at reducing its cost of revenue. One such approach would be reducing its Selling General and Administrative (SG&A), which is one of the notable costs that the company is facing, which would mean that the company would be in a much better position of having to reduce its operational costs (Rubin, 2017) Basically, this means that the company will improve on its profitability margins significantly, which would be of great value in seeking to advance its financial performance as it moves into the future while maximizing on its capacity to maintain proper financial outcomes.

Uber may need to streamline its administrative process, as well as, automate its routine tasks as a way of reducing labor costs, which would minimize its SG&A. As a technological company, Uber is facing a key challenge in dealing with labor costs considering that it is expected to employ a significant number of workers to undertake routine tasks (Dudley, Banister, & Schwanen, 2017). That is one of the key aspects that has affected the company’s cost of revenue whereby the company finds itself facing a higher possibility of experiencing reduced profitability. From this point of view, it is clear that indeed the company may maximize on its current financial position by streamlining some of its operations as a way of minimizing its cost margins. On the other hand, Uber may need to review the percentage it takes from its drivers downwards as a way of attracting more people to drive for the company.

Currently, Uber is taking a commission of between 20% and 25%, which is creating a challenge for majority its drivers in countries such as Canada, the United Kingdom, and Australia (Cannon & Summers, 2014). The impact that this is having is that the company finds itself facing a high risk of a reduced number of drivers, which reduces its revenue significantly. In the event that the company would reduce its percentage from its drivers, the impact that this is likely to have is that it will push the company towards accommodating more drivers. The resulting outcome is that the revenues that the company collects from the different countries would increase significantly; thus, allowing for the overlooking of its cost of revenue, which is likely to reduce as the company invests in its drivers.

Internal Controls for Proper Financial Reporting 

The internal controls in an organization have a significant role in enhancing the operations undertaken within an organization. The internal controls in an organization helps in promoting effectiveness in the achievement of strategic goals and objectives, which is an aspect that enhances reliability in financial reporting. For Uber company to engage in effective measures to achieve organizational goals and objectives, it is important to capitalize on the implementation of internal controls to help in promoting the accounting and auditing process through reliable financial reporting. Financial reporting has an important role in disclosing financial information to help in evaluating performance. An effective financial report has a significant role in the process of making economic decisions and understanding the financial position of a company.

The first internal control that would enhance proper financial reporting in Uber is risk assessment. Risk assessment is a significant aspect that helps towards engaging in an effective process of enhancing proper financial reporting (Rosenblat & Stark, 2016). In risk assessment, it is important to capitalize on the analysis of the objectives of the company to help in the effective management of risks that may be present in the organization. Risk assessment is a significant internal control that would allow the company to analyze different types of risks that may be a hinderance in the achievement of the goals and objectives a company. In Uber, risk assessment is crucial considering that the company capitalizes on the use of technology to connect the drivers with the customers. In that case, the issue of fraud risk may impact on the operations of the company, which may influence financial operations.

The second internal control that need to be put in place to ensure proper financial reporting is information and communication. Communication is an integral part in an organization as it helps in creating a network that enhances effectiveness in the internal control structure (Cherry, 2016). The quality of information is significant in an organization as it allows the key stakeholders to have a basic understanding of the financial issues that would be addressed within a financial report. Uber requires to invest ineffective communication channels that helps in the delivery of quality information, which is significant during the preparation of proper financial reports in the company. Additionally, it is important to note that financial reporting is dependent on the effective communication on an organization thus the need to focus on a communication structure that would support he exchange of information regarding the financial aspects in an organization.

Another significant internal control that requires to be put in place to enhance proper financial reporting is monitoring, which serves as a foundation for promoting effectiveness in various operations undertaken within the company. The process of monitoring in an organization involves the evaluation of various processes to identify issues that may create a major setback in effective operations in the company (Lobel, 2017). Financial reporting requires an individual to have adequate knowledge and information concerning the ongoing processes in the organization, which helps in the development of reliable financial reports. Lastly, it is important to capitalize on improving on the control environment, which is an aspect that helps in creating effective control structures. Maintaining integrity and ethical values in a company may help in promoting effectiveness in financial reporting considering that the development of the reports requires individuals to portray high standards of competence and commitment.

References

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Cherry, M. A. (2016). Are Uber and Transportation Network Companies the Future of Transportation (Law) and Employment (Law).  Tex. A&M L. Rev. ,  4 , 173.

Dudley, G., Banister, D., & Schwanen, T. (2017). The rise of Uber and regulating the disruptive innovator.  The political quarterly ,  88 (3), 492-499.

Isaac, E., & Davis, U. C. (2014).  Disruptive innovation: Risk-shifting and precarity in the age of Uber  (p. 7). Berkeley Roundtable on the International Economy,[University of California, Berkeley].

Jordan, J. M. (2017). Challenges to large-scale digital organization: the case of Uber.  Journal of Organization Design ,  6 (1), 11.

Lobel, O. (2017). The gig economy & the future of employment and labor law.  USFL Rev. ,  51 , 51.

Peticca-Harris, A., deGama, N., & Ravishankar, M. N. (2018). Postcapitalist precarious work and those in the ‘drivers’ seat: Exploring the motivations and lived experiences of Uber drivers in Canada.  Organization , 1350508418757332.

Rauch, D., & Schleicher, D. (2015). Like Uber, but for local governmental policy: The future of local regulation of the'sharing economy'.  George Mason Law & Economics Research Paper , (15-01).

Rogers, B. (2015). The social costs of Uber.  U. Chi. L. Rev. Dialogue ,  82 , 85.

Rosenblat, A., & Stark, L. (2016). Algorithmic labor and information asymmetries: A case study of Uber’s drivers.  International Journal of Communication ,  10 , 27.

Rubin, E. (2017). Independent Contractors or Employees: Why Mediation Should Be Utilized by Uber and Its Drivers to Solve the Mystery of How to Define Working Individuals in a Sharing Economy Model.  Cardozo J. Conflict Resol. ,  19 , 163.

Scheiber, N. (2017). How Uber uses psychological tricks to push its drivers’ buttons.  The New York Times ,  2 .