Exhibit 12 (b)



Xerox Corporation



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



Earnings available for fixed chargesare calculated first, by determining the sum of: (a) income (loss) from continuing operations before income taxes, (b) distributed equity income, (c) fixed charges, as defined below and (d)
amortization of capitalized interest, if any. From this total, we subtract capitalized interest, if any.



Fixed chargesare 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 and (c) that portion of
rental expense that is representative of the interest factor.



Preferred
stock dividendsused in the ratio of earnings to combined fixed charges and preferred stock dividends consist of the amount of pre-tax earnings required to cover dividends paid on our Series B convertible preferred stock and our Series C
mandatory convertible preferred stock. The Series B dividends are tax deductible and, as such, are equivalent to the pre-tax earnings required to cover such dividends. The Series B convertible preferred stock was redeemed and converted to common
stock as of May 27, 2004 and, as such, there will be no future dividends beyond such date.



Computation of Ratio of Earnings to Fixed Charges



|                                                                             |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|---------------------------------------------------------------------------- |  | -------------------------------- | ---- | - | ------------------------------- | - | ---- | ---- |  | - | ----- | - |  | - | ---- | -
|($ In millions)                                                              |  | Three Months Ended September 30, |      |   | Nine Months Ended September 30, |  
|                                                                             |  | 2004                             |      |   | 2003                            |   |      | 2004 |  |   | 2003  |  
|Fixed charges:                                                               |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Interest expense                                                             |  | $                                | 176  |   |                                 | $ | 216  |      |  | $ | 530   |   |  | $ | 695  |  
|Portion of rental expense which represents interest factor                   |  |                                  | 20   |   |                                 |   | 18   |      |  |   | 64    |   |  |   | 55   |  
|                                                                             |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Total fixed charges                                                          |  | $                                | 196  |   |                                 | $ | 234  |      |  | $ | 594   |   |  | $ | 750  |  
|                                                                             |  |                                  |      |  
|Earnings available for fixed charges:                                        |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Earnings                                                                     |  | $                                | 225  |   |                                 | $ | 155  |      |  | $ | 756   |   |  | $ | 149  |  
|Less: Undistributed equity in income of affiliated companies                 |  |                                  | (59  | ) |                                 |   | (13  | )    |  |   | (93   | ) |  |   | (33  | )
|Add: fixed charges before capitalized interest and preferred stock dividends |  |                                  | 196  |   |                                 |   | 234  |      |  |   | 594   |   |  |   | 750  |  
|                                                                             |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Total earnings available for fixed charges                                   |  | $                                | 362  |   |                                 | $ | 376  |      |  | $ | 1,257 |   |  | $ | 866  |  
|                                                                             |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Ratio of earnings to fixed charges                                           |  |                                  | 1.85 |   |                                 |   | 1.61 |      |  |   | 2.12  |   |  |   | 1.15 |  
|                                                                             |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  



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Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock

Dividends



|                                                                          |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|------------------------------------------------------------------------- |  | -------------------------------- | ---- | - | ------------------------------- | - | ---- | ---- |  | - | ----- | - |  | - | ---- | -
|($ In millions)                                                           |  | Three Months Ended September 30, |      |   | Nine Months Ended September 30, |  
|                                                                          |  | 2004                             |      |   | 2003                            |   |      | 2004 |  |   | 2003  |  
|Fixed charges:                                                            |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Interest expense                                                          |  | $                                | 176  |   |                                 | $ | 216  |      |  | $ | 530   |   |  | $ | 695  |  
|Portion of rental expense which represents interest factor                |  |                                  | 20   |   |                                 |   | 18   |      |  |   | 64    |   |  |   | 55   |  
|                                                                          |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Total fixed charges                                                       |  | $                                | 196  |   |                                 | $ | 234  |      |  | $ | 594   |   |  | $ | 750  |  
|Preferred stock dividends pre-tax income requirements                     |  |                                  | 24   |   |                                 |   | 35   |      |  |   | 87    |   |  |   | 56   |  
|                                                                          |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Total combined fixed charges and preferred stock dividends                |  |                                  | 220  |   |                                 |   | 269  |      |  |   | 681   |   |  |   | 806  |  
|Earnings available for fixed charges:                                     |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Earnings                                                                  |  | $                                | 225  |   |                                 | $ | 155  |      |  | $ | 756   |   |  | $ | 149  |  
|Less: Undistributed equity in income of affiliated companies              |  |                                  | (59  | ) |                                 |   | (13  | )    |  |   | (93   | ) |  |   | (33  | )
|Add: fixed charges                                                        |  |                                  | 196  |   |                                 |   | 234  |      |  |   | 594   |   |  |   | 750  |  
|                                                                          |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Total earnings available for fixed charges and preferred stock dividends  |  | $                                | 362  |   |                                 | $ | 376  |      |  | $ | 1,257 |   |  | $ | 866  |  
|                                                                          |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  
|Ratio of earnings to combined fixed charges and preferred stock dividends |  |                                  | 1.65 |   |                                 |   | 1.40 |      |  |   | 1.85  |   |  |   | 1.07 |  
|                                                                          |  |                                  |      |   |                                 |   |      |      |  |   |       |   |  |   |      |  



24