Compensation and benefits

Question description

The 2016 income statement and balance sheet (excerpts) for BNSF Railway are below.

BNSF Railway

Consolidated Statements of Income

Year ended December 31, 2016 2015 2014
(In millions)
Revenues $19,829 $21,967 $23,239
Operating expenses:
Compensation and benefits 4,769 5,043 5,023
Purchased services 2,418 2,546 2,592
Depreciation and amortization 2,128 2,001 2,123
Fuel 1,934 2,656 4,478
Equipment rents 766 801 867
Materials and other 1,129 1,196 1,143
Total operating expenses 13,144 14,243 16,226
Operating income 6,685 7,724 7,013
Interest expense 992 928 833
Other expense, net 0 21 11
Income before income taxes 5,693 6,775 6,169
Income tax expense 2,124 2,527 2,300
Net income $ 3,569 $ 4,248 $ 3,869
BNSF Railway

Consolidated Balance Sheets

December 31, 2016 2015
(in millions)
Current assets
Cash and cash equivalents $ 3,218 $ 2,329
Accounts receivable, net 1,272 1,198
Materials and supplies 825 829
Current portion of deferred income taxes 0 245
Other current assets 235 337
Total current assets 5,550 4,938
Property and equipment, net of accumulated

depreciation of $6,130 and $4,845, respectively

61,250 59,510
Goodwill 14,845 14,845
Intangible assets, net 430 468
Other assets 2,047 1,942
Total assets $84,122 $81,703

The footnotes to the financial statements included the following:

Property and equipment, net (in millions), and the corresponding ranges of estimated useful lives were as follows:

December 31, 2016 2015 2016

Range of

Estimated

Useful Life

Land for transportation purposes $ 6,063 $ 6,037
Track structure 22,287 21,200 15-50 years
Other roadway 25,990 24,767 7-100 years
Locomotives 8,338 7,794 7-35 years
Freight cars and other equipment 2,755 2,629 8-40 years
Computer hardware, software, and other 982 897 6-9 years
Construction in progress 965 1,031
Total cost 67,380 64,355
Less accumulated depreciation and

amortization

(6,130 ) (4,845 )
Property and equipment, net $61,250 $59,510

Required:

a. What proportion of total assets, does BNSF hold as property and equipment in 2016 and 2015? Does this surprise you?
b. Compute property and equipment turnover for 2016 and 2015. Property and equipment, net for 2014 was $55,806 million. Explain this ratio.
c. By what percentage are the assets ‘used up’ at year-end 2016? What implication does this ratio have for future cash flows at BNSF?
d. Estimate the useful life on average for the BNSF depreciable assets at year-end 2016. Which of the assets listed in the footnote explain this estimated useful life?
find the cost of your paper

Strawberries