Below is my data that i find for FedEx ratios can you help how to answers the qu

Question

Below is my data that i find for FedEx ratios can you help how to answers the questions - Thanks a) Find the financial leverage ratios for THE COMPANY assigned for you of the project for the last 3-5 years in the Internet. Present these ratios as the table(s) in your project. • Debt-to-assets ratio (Debt ratio) • Debt-to Equity ratio • Interest Coverage ratio (the Times Interest Earned) b) Write (about) 1 page of the analysis of the ratio results. In your analysis you should answer the following questions. Please explain your answer to each question. How is THE COMPANY financing its assets? Discuss how much risk is associated with the bonds issued by the company? How can this risk be measured? Please explain. Federal Express Corporation Ratios 2015-12 2016-12 2017-12 Debt Ratio 0.60 0.70 0.67 Debt-To Equity 0.48 1 0.93 Interest Coverage 7.92 9.15 9.94

Explanation / Answer

The ratios are presented below:

Debt to capital ratio:

                                                2015       2016       2017

Debt ratio                            0.60        0.70        0.67

D/E                                         0.48        1.0          0.93

Interest coverage            7.92        9.15        9.94

The debt to assets ratio of the company is more than 0.50 which implies that more than 50% of the assets of the company is financed through debt. This is also corroborated by the debt to equity ratio which has also grown close to 1 suggesting that debt and equity has got equal weightage in their contribution to assets of the company.

The bonds associated with the company has moderate to low risk because of the very high interest coverage ratio which implies that the company should be able to meet its coupon repayment obligations and also its capital structure is moderately leveraged, thus implying that the bonds are of moderate to low risk.

The risk of the bonds can be assessed qualitatively through the debt to asset ratio and the interest coverage ratio. And a quantitative assessment of the risks of the bonds can be assessed through the credit default spreads of the bonds . The spreads as compared to the risk free US treasuries can be compared to assess the riskiness of the bonds and its default probability.

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