Exhibit 12

Xerox Corporation

Computation of Ratio of Earnings to Fixed Charges

The ratio of earnings to fixed charges, the ratio of combined earnings to fixed charges and preferred stock dividends, as well as any deficiency of earnings are determined using the following applicable factors:

Earnings available for fixed charges are calculated first, by determining the sum of: (a) income (loss) from continuing operations before income taxes, adjustment for minorities’ interests and equity income or loss, (b) fixed charges, as defined below, (c) amortization of capitalized interest and (d) distributed equity income. From this total, we subtract (a) capitalized interest and (b) preferred security dividend requirements of our consolidated subsidiaries and any accretion in the carrying value of the redeemable preferred securities of our consolidated subsidiaries.

Fixed charges are calculated as the sum of (a) interest costs (both expensed and capitalized), (b) amortization of debt expense and discount or premium relating to any indebtedness, (c) that portion of rental expense that is representative of the interest factor and (d) the amount of pre- tax earnings required to cover preferred security dividends and any accretion in the carrying value in the redeemable preferred securities of our consolidated subsidiaries. Note, in our calculation, all of the dividends and related carrying value accretion of the preferred securities of our consolidated subsidiaries are tax deductible, which are those referenced in Note 17 to the Consolidated Financial Statements included in our 2001 Form 10-K, as amended, under the caption, “Company-Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trusts Holding Solely Subordinated Debentures of the Company.” Therefore, the amount of pre-tax earnings required to cover the dividend requirements and accretion, are equal to the amount of such dividends and accretion.

Preferred stock dividends used in the ratio of earnings to combined fixed charges and preferred stock dividends consist of the dividends paid on our Series B Convertible Preferred Stock. These dividends are tax deductible.

	Three Months Ended March 31,
(In millions)	2002 Restated(1)			2001 Restated(1)
Fixed charges:
Interest expense	$	181		$	294
Portion of rental expense which represents interest factor		21			28
Total fixed charges before preferred security dividends of consolidated subsidiaries		202			322
Preferred security dividends of consolidated subsidiaries		36			14
Total fixed charges	$	238		$	336
Earnings available for fixed charges:
Earnings (2) (3) (4)	$	(50	)	$	668
Adjustment for (undistributed) distributed equity in income of affiliated companies		(11	)		28
Add: fixed charges before preferred security dividends of consolidated subsidiaries		202			322
Total earnings available for fixed charges	$	141		$	1,018
Ratio of earnings to fixed charges		**			3.03

** Earnings for the three months ended March 31, 2002 were inadequate to cover fixed charges. The coverage deficiency was $97 million.

⁽¹⁾ As restated. Refer to Note 2 and Note 21 to the Consolidated Financial Statements incorporated by reference in our 2001 Form 10-K, as amended and Note 13 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10Q/A.

⁽²⁾ Earnings is derived from our consolidated statements of income, included in our financial statements, as the Sum of: (a) (Loss) income before Income Taxes (Benefits), Equity Income, Minorities’ Interest, Cumulative Effect of Change in Accounting Principle and (b) Equity in net income of unconsolidated affiliates.

⁽³⁾ Earnings include the effect of the adoption of Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” The applicable portion of this Statement rescinds SFAS No. 4 “Reporting Gains and Losses from Extinguishment of Debt” which required all gains and losses from extinguishment of debt to be aggregated and, when material, classified as an extraordinary item net of related income tax effect. Accordingly, any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented and that does not meet the criteria in Accounting Principles Board Opinion No. 30 “Reporting the Results of Operations—Reporting the Effects of Disposal of a segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” for classification as an extraordinary item, was reclassified. As a result of adopting SFAS No. 145, the extraordinary gain on extinguishment of debt previously reported was reclassified to Other expenses, net and is therefore included in Earnings and Total earnings available for fixed charges in the accompanying table.

⁽⁴⁾ Earnings for the three months ended March 31, 2002 excludes the amortization of goodwill in accordance with the adoption of Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible Assets.” For additional information regarding the adoption of SFAS No. 142 and its effects on Earnings and Total earnings available for fixed charges, refer to Note 3 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q/A.

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