# 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.

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%

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