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accounting odd question E 9

During 2007 Federal Express reported the following information (in millions): net sales of $35,214 and net income of $2,016. Its balance sheet also showed total assetsat the beginning of the year of $22,690 and total assets at the end of the year of $24,000.

Calculate the (a) asset turnover ratio and (b) return on assets ratio.
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According to the given problem,Net sales = $35,214Net income = $2,016Beginning total assets = $22,690Ending total assets = $24,000a) Asset turnover ratio: The formula for calculating the total asset turnover ratio isTotal assetturnover ratio = Net sales / Total assetsBut Total assets value is computed by taking the average of the beginning and ending total assets for the period:Total assets =(Beginning total assets + Ending total assets) / 2= ($22,690 + $24,000) / 2= $23,345Substituting the values in the above formula, we getTotal asset turnoverratio = $35,214 / $23,345=1.51 timesTherefore, the total asset turnover ratio is 1.51 timesb) The formula for calculating the Return on total assets isROA = Net income / Total assetsThe total assets value is taken which we calculated for the previous ratioROA= $2,016 / $23,345=0.086 or 8.6%Therefore, the return on assets is 8.6%
answered by: talha khan
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