Question

# At May 31, 2016, FedEx Corporation reported the following amounts (in millions) in its financial statements:...

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. 1.Compute the debt-to-assets ratio and times interest earned ratio for 2016 and 2015. (Round your answers to 2 decimal places.)

1. 2-a. Creditors were providing a greater (or lesser) proportion of financing for FedEx’s assets?

• Greater

• Lesser

1. 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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