At May 31, 2016, FedEx Corporation reported the following amounts (in millions) in its financial statements:
2016 | 2015 | |||||||
Total Assets | $ | 13,700 | $ | 11,500 | ||||
Total Liabilities | 9,453 | 7,705 | ||||||
Interest Expense | 360 | 360 | ||||||
Income Tax Expense | 750 | 740 | ||||||
Net Income | 1,140 | 1,060 | ||||||
Required:
1.Compute the debt-to-assets ratio and times interest earned ratio for 2016 and 2015. (Round your answers to 2 decimal places.)
2-a. Creditors were providing a greater (or lesser) proportion of financing for FedEx’s assets?
Greater
Lesser
2-b. FedEx Incorporated was more (or less) successful at covering its interest costs, as compared to 2015?
(1)-The debt-to-assets ratio and times interest earned ratio for 2016 and 2015.
Debt-to-assets ratio for 2016 = Total Liabilities / Total assets
= $9,453 / $13,700
= 0.69
Debt-to-assets ratio for 2015 = Total Liabilities / Total assets
= $7,705 / $11,500
= 0.67
Times interest earned ratio for 2016 = [Net Income + Income tax expenses + Interest expenses] / Interest expenses
= [$1,140 + $750 + $360] / $360
= $2,250 / $360
= 6.25 Times
Times interest earned ratio for 2015 = [Net Income + Income tax expenses + Interest expenses] / Interest expenses
= [$1,060 + $740 + $360] / $360
= $2,160 / $360
= 6.00 Times
2-a. Creditors were providing a “GREATER” proportion of financing for FedEx’s assets
2-b. FedEx Incorporated was “MORE” successful at covering its interest costs, as compared to 2015
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