Question

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?

Answer 1

(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