The following is a summary of performance data of FedEx over a three-year period
ID: 2756961 • Letter: T
Question
The following is a summary of performance data of FedEx over a three-year period:
Year 1
Year 2
Year 3
34,734
39,304
42,680
33,550
37,852
40,648
1,184
1,452
2,032
25,654
27,385
29,903
11,695
10,498
13,926
15,654
15,220
14,727
1,998
2,378
3,186
-2,781
-3,419
-4,049
-692
-287
-244
Required:
Given the information in the table above, calculate the following:
Profit margin on sales
Return on assets
Return on equity
Total debt to total assets
Total asset turnover
(in millions)Year 1
Year 2
Year 3
Sales34,734
39,304
42,680
Cost of Goods Sold33,550
37,852
40,648
Net Income1,184
1,452
2,032
Assets25,654
27,385
29,903
Total Debt11,695
10,498
13,926
Equity15,654
15,220
14,727
Operating Cash Flow1,998
2,378
3,186
Investment Cash Flow-2,781
-3,419
-4,049
Financing Cash Flow-692
-287
-244
Explanation / Answer
* Profit Margin On sales ==> This Suugests "Net Profit Margin" Gained by the FEDEX out of its OPERATIONAL Activities(Termed as Sales here).
==> i.e., "NET PROFIT" arrived after deducting COST OF GOODS SOLD
SALES Revenue generated out of operational activities
Deduced to ==> Net Income ===> 1
Sales
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> Return on Assets = Simply it can be said that the rate at which the INCOME can be generated out of the company's Assets
==> INCOME ====>> 2
Company's Assets
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> Return on equity ==> In simple, it can be elaborated as a Ratio related to the EQUITY Shareholders since they invest in the company and they are curious to know how their investment is performing/yielding,
This ratio is well used to compare the Earning per share in comparison to various firms in the industry.
==> NET INCOME ==> 3
Shareholders Equity
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> Total Debt to Total Assets = Ratio to compare Debts and Assets of the company, in order to ensure the creditors are more secured by advancing any loans or credit to the company.
===> TOTAL DEBTS ===> 4
TOTAL ASSETS
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> Total Asset to Turnover Ratio == It measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.
==> Net Sales Revenue ==> 5
Assets of the company
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Then by applying above formulae (1,2,3,4,5) for various years we get as follows :
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Year 1 Year 2 Year 3
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1. Profit Margin on Sales 1,184 (=3.408%) 1,452 (=3.69%) 2,032 (=4.7610%)
37,734 39,304 42,680
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2.Retutn on Assets 1184 (=4.61%) 1452 (=5.302%) 2032 (6.795%)
25654 27385 29903
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3. Return on Equity 1184 (=7.56%) 1452 (=9.54%) 2032 (=13.79%)
15654 15220 14727
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4. Debt to Asset Ratio 11695 (=45.58%) 10498 (=38.33%) 13926 (=46.57%)
25654 27385 29903
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5. Asset to Turnover Ratio 34734 (=135.39%) 39304 (=143.52%) 42680 (=142.72%)
25654 27385 29903
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