Question

Suppose during 2022 that Federal Express reported the following information (in millions): net sales of $34,600 and net income of $92. Its balance sheet also showed total assets at the beginning of the year of $24,620 and total assets at the end of the year of $23,300. Calculate the asset turnover and return on assets. (Round asset turnover to 2 decimal places, e.g. 6.25 and return on assets to 1 decimal place, e.g. 17.5%.) Asset turnover enter the asset turnover rounded to 2 decimal places times Return on assets enter the return on assets in percentages rounded to 2 decimal places %

Answer 1

Asset turnover = 144.07%

Return on Asset = 0.38%

Step-by-step explanation:

The asset turnover ratio is a financial measure that indicates how much sales revenue is made for each $1 invested in assets while the returns on asset is the financial ratio that show how much net income is generated for each $1 invested in assets.

Mathematically,

Assets turnover = Sales revenue / Average assets

Return on Asset = Net income / Average assets

Average asset = (assets at beginning of period + asset at end of period)/2

= ($24,620 + $23,300) / 2

= $23,960

Asset turnover = $34,600/$23,960

= 1.44407

= 144.07%

Return on Asset = $92/$23,960

= 0.003839733

= 0.38%