Question

Suppose during 2014 that Federal Express reported the following information (in millions): net sales of $35,497 and net income of $98. Its balance sheet also showed total assets at the beginning of the year of $25,633 and total assets at the end of the year of $24,244. Calculate the asset turnover and return on assets. (Round answers to 2 decimal places, e.g. 6.25 or 17.54%.)

Answer 1

Asset Turnover = $35,497 ÷ $ 24,938.5 = 1.42

Return on Assets: $98 ÷ 24,938.5 = 0.39%

Step-by-step explanation:

• Asset Turnover Ratio is an efficiency ratio indicate how well the company assets are utilized in order to generate sales revenue or sales income in $.

Formula: Net Sales ÷ Average Total Assets.

*Average Assets = (Opening Assets + Closing Assets) ÷ 2

So the average assets are: (25,633+24,244) ÷ 2 = 24,938.5

Asset Turnover = $35,497 ÷ $ 24,938.5 = 1.42

• Return on Assets is a ratio that shows the percentage how profitable a company's assets are in generating revenue.

Formula: Net Income ÷ Total Average Assets.

Return on Assets: $98 ÷ 24,938.5 = 0.39%

Answer 2

Asset turnover 1.42

Return on assets 0.39%

Step-by-step explanation:

Here, we are asked to calculate the asset turn over and the return on assets.

Mathematically;

Asset turnover = Net sales/Average total assets

Net sales = $35,497

average total assets = (25,633+24,244)/2 = 24938.5

Asset turnover = 35,497/24938.5 = 1.42

The return on assets can also be calculated mathematically.

mathematically, return on assets = Net income/Average total assets

Net income = $98

Average total assets = 24,938.5 from above

= 0.0039 or 0.39%