FORM 10-Q

		   SECURITIES AND EXCHANGE COMMISSION
			 Washington, D.C. 20549
(Mark One)

[ X ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended:    March 31, 1996

	OR

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________ to___________

Commission File Number 1-4471

			XEROX CORPORATION
		   (Exact Name of Registrant as
		     specified in its charter)

	    New York                       16-0468020             
 (State or other jurisdiction   (IRS Employer Identification No.) 
of incorporation or organization)

			      P.O. Box 1600
		     Stamford, Connecticut   06904-1600
		  (Address of principal executive offices)
				(Zip Code)

			     (203) 968-3000                 
	  (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months 
(or for such shorter period that the registrant was required to 
file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.
 
Yes     X     No           

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

    Class                        Outstanding at April 30,1996

Common Stock                              107,867,241  shares
Class B Stock                                   1,000  shares

		  This document consists of 25 pages.

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			    Xerox Corporation
				Form 10-Q
			     March 31, 1996

Table of Contents
							     Page
Part I -  Financial Information

   Item 1. Financial Statements

      Consolidated Statements of Income                        4

      Consolidated Balance Sheets                              5

      Consolidated Statements of Cash Flows                    6

      Notes to Consolidated Financial Statements               7


   Item 2. Management's Discussion and Analysis of Results of
     Operations and Financial Condition

      Document Processing                                     10

      Discontinued Operations                                 16

      Capital Resources and Liquidity                         19

      Hedging Instruments                                     20


Part II - Other Information

   Item 1. Legal Proceedings                                  22

   Item 6. Exhibits and Reports on Form 8-K                   22

Signatures                                                    23


Exhibit Index

   Computation of Net Income per Common Share                 24

   Computation of Ratio of Earnings to Fixed Charges          25

   Financial Data Schedule        (filed in electronic form only)

3 
 


PART I - FINANCIAL INFORMATION
				 Xerox Corporation
			  Consolidated Statements of Income

						     Three months ended
							    March 31,
(In millions, except per-share data)                     1996     1995

Revenues
  Sales                                               $ 1,917  $ 1,864
  Service and rentals                                   1,755    1,651
  Finance income                                          256      252
  Total Revenues                                        3,928    3,767


Costs and Expenses
  Cost of sales                                         1,092    1,102
  Cost of service and rentals                             898      837
  Equipment financing interest                            130      125
  Research and development expenses                       254      218
  Selling, administrative and general 
    expenses                                            1,166    1,099
  Other, net                                                4       19
  Total Costs and Expenses                              3,544    3,400


  Income before Income Taxes, Equity Income
    and Minorities' Interests                             384      367

  Income taxes                                            139      142
  Equity in net income of unconsolidated
    affiliates                                             20       13
  Minorities' interests in earnings of
    subsidiaries                                           28       51

Income from Continuing Operations                         237      187

Discontinued Operations                                     -      (40)


Net Income                                             $  237  $   147

Primary Earnings per Share
  Continuing Operations                                $ 2.03  $  1.60
  Discontinued Operations                                   -     (.37)
Primary Earnings per Share                             $ 2.03  $  1.23

Fully Diluted Earnings per Share
  Continuing Operations                                $ 1.95  $  1.54
  Discontinued Operations                                   -     (.34)
Fully Diluted Earnings per Share                       $ 1.95  $  1.20
See accompanying notes.

4 
 

				Xerox Corporation
			    Consolidated Balance Sheets

					       March 31,     December 31,
(In millions, except share data in thousands)      1996             1995
Assets

Cash                                           $      5          $   136
Accounts receivable, net                          2,183            1,914
Finance receivables, net                          3,998            4,069
Inventories                                       2,911            2,656
Deferred taxes and other current assets           1,112            1,095

  Total Current Assets                           10,209            9,870

Finance receivables due after one year, net       6,350            6,406
Land, buildings and equipment, net                2,135            2,105
Investments in affiliates, at equity              1,261            1,314
Goodwill                                            625              627
Other assets                                        976              876
Investment in discontinued operations             4,819            4,810

Total Assets                                   $ 26,375         $ 26,008
									

Liabilities and Equity

Short-term debt and current portion of 
  long-term debt                               $  3,208        $   3,274
Accounts payable                                    503              578
Accrued compensation and benefit costs              499              731
Unearned income                                     229              228
Other current liabilities                         2,242            2,216

  Total Current Liabilities                       6,681            7,027

Long-term debt                                    8,709            7,867
Postretirement medical benefits                   1,024            1,018
Deferred taxes and other liabilities              2,401            2,437
Discontinued operations liabilities -                                   
  policyholders' deposits and other               2,724            2,810
Deferred ESOP benefits                             (547)            (547)
Minorities' interests in equity of subsidiaries     754              755
Preferred stock                                     759              763
Common shareholders' equity                       3,870            3,878

Total Liabilities and Equity                   $ 26,375        $  26,008

Shares of common stock issued and outstanding   107,990          108,343

See accompanying notes.
5 
 


				  Xerox Corporation
			  Consolidated Statements of Cash Flows

Three months ended March 31    (In millions)            1996          1995

Cash Flows from Operating Activities 
Income from Continuing Operations                       $ 237       $  187
Adjustments required to reconcile income to cash
 flows from operating activities:
  Depreciation and amortization                           150          158
  Provisions for doubtful accounts                         47           39
  Provision for postretirement medical benefits            11           15
  Charges against 1993 restructuring reserve              (50)        (111)
  Minorities' interests in earnings of subsidiaries        28           51
  Undistributed equity in income of affiliated companies  (20)         (13)
  Increase in inventories                                (325)        (342)
  Decrease in finance receivables                          19           46
  Increase in accounts receivable                        (287)        (151)
  Decrease in accounts payable and accrued compensation 
    and benefit costs                                    (317)        (219)
  Net change in current and deferred income taxes          54           39
  Other, net                                             (154)          78
    Total                                                (607)        (223)

Cash Flows from Investing Activities                                      
  Cost of additions to land, buildings and equipment    (148)          (43)
  Proceeds from sales of land, buildings and equipment    31            14
  Purchase of additional interest in Rank Xerox            -          (972)
    Total                                               (117)       (1,001)

Cash Flows from Financing Activities
  Net change in debt                                     861         1,372
  Dividends on common and preferred stock               (110)          (97)
  Proceeds from sale of common stock                      32            60
  Repurchase of common and preferred stock               (96)           (4)
  Dividends to minority shareholders                       -           (26)
    Total                                                687         1,305
Effect of Exchange Rate Changes on Cash                    -            (4)

Cash Provided (Used) by Continuing Operations            (37)           77

Cash Used by Discontinued Operations                     (94)          (91)
Decrease in Cash                                        (131)          (14)

Cash at Beginning of Period                              136            43

Cash at End of Period                                 $    5        $   29

See accompanying notes.                

6
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


1. The consolidated financial statements presented herein have 
been prepared by Xerox Corporation ("the Company") in accordance 
with the accounting policies described in its 1995 Annual Report 
to Shareholders and should be read in conjunction with the notes 
thereto. Effective with 1996 reporting, the Company's China 
operations are fully consolidated.  The 1995 financial statements 
presented herein have been restated to reflect this change and 
several other accounting reclassifications to conform with the 
1996 presentation.  The impact of these changes is not material 
and did not affect net income.

In the opinion of management, all adjustments (consisting only of 
normal recurring adjustments) which are necessary for a fair 
statement of operating results for the interim periods presented 
have been made. Interim financial data presented herein are 
unaudited.


2. Inventories consist of (in millions):

					March 31,      December 31,
					    1996              1995

Finished products                       $   1,790         $  1,646
Work in process                               115               88
Raw materials and supplies                    371              295
Equipment on operating leases, net            635              627
    Total                               $   2,911         $  2,656


3. Common shareholders' equity consists of (in millions):

					March  31,     December 31,
					    1996              1995

Common stock                             $    110         $    109
Additional paid-in-capital                  1,581            1,552
Retained earnings                           2,449            2,321
Net unrealized gain (loss) on
  investment securities                         3               (1)
Translation adjustments                      (187)            (103)
Treasury stock                                (86)               -
    Total                                $  3,870         $  3,878


4. The Company's Consolidated Balance Sheet at March 31, 1996 
includes current and non-current accrued liabilities of $240 
million and $112 million, respectively, associated with the 
Document Processing restructuring program announced in December 
1993.  At December 31, 1995, the corresponding accrued 
liabilities aggregated $395 million.  During the three month 
period ended March 31, 1996, restructuring-related activity 

7
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


reduced the accrued liability by $43 million.  Management 
believes the aggregate reserve balance of $352 million at March 
31, 1996 is adequate for the completion of the restructuring 
program.  Additional information concerning the progress of the 
restructuring program is included in the accompanying 
Management's Discussion and Analysis on page 13.

5. Interest expense totaled $148 million and $137 million for the 
three months ended March 31, 1996 and 1995, respectively.  


6. Litigation 
     
Continuing Operations

On March 10, 1994, a lawsuit was filed in the United States 
District Court for the District of Kansas by two independent 
service organizations (ISOs) in Kansas City and St. Louis and 
their parent company.  On April 15, 1994, another case was filed 
in the United States District Court for the Northern District of 
California by 21 different ISOs from 12 states.  Plaintiffs in 
these actions claim damages (to be trebled) to their individual 
businesses resulting from essentially the same alleged violations 
of law at issue in the antitrust class action in Texas, which was 
settled by the Company during 1994.  Claims for individual lost 
profits of ISOs who were not named parties were not included in 
that class action.  One of the plaintiffs in the suit filed in 
California subsequently filed its own complaint alleging 
essentially the same claims.  In one of the pending cases damages 
are unspecified and in the other two damages in excess of $10 
million are sought.  In addition, injunctive relief is sought in 
each of the actions.  The actions have been consolidated for 
pretrial proceedings in the District of Kansas.  The Company has 
asserted counter-claims against certain of the plaintiffs 
alleging patent and copyright infringement, misappropriation of 
Xerox trade secrets, conversion and unfair competition and/or 
false advertising.  On December 11, 1995, the District Court 
issued a preliminary injunction against the parent company of the 
Kansas City and St. Louis ISOs for copyright infringement.  The 
Company denies any wrongdoing and intends to vigorously defend 
these actions and pursue its counterclaims.

Discontinued Operations

Farm & Home Savings Association (Farm & Home) and certain Talegen 
insurance companies (Insurance Companies) entered into an 
agreement (Indemnification Agreement) under which the Insurance 
Companies are required to defend and indemnify Farm & Home from 
certain actual and punitive damage claims being made against Farm 
& Home relating to the Brio superfund site (Brio).  In a number 

8
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


of lawsuits pending against Farm & Home in the District Courts of 
Harris County, Texas, several hundred plaintiffs seek both actual 
and punitive damages allegedly relating to injuries arising out 
of the hazardous substances at Brio.  The Insurance Companies 
have been defending these cases under a reservation of rights 
because it is unclear whether certain of the claims fall under 
the coverage of either the policies or the Indemnification 
Agreement.  The Insurance Companies have been successful in 
having some claims dismissed which were brought by plaintiffs who 
were unable to demonstrate a pertinent nexus to the Southbend 
subdivision.  However, there are numerous plaintiffs who do have 
a nexus to the Southbend subdivision.  The Insurance Companies 
have been in settlement discussions with respect to claims 
brought by plaintiffs who have or had a pertinent nexus to the 
Southbend subdivision.  If not settled, one or more of these 
cases can be expected to be tried in 1996.

9
 


			Xerox Corporation
	     Management's Discussion and Analysis of
	   Results of Operations and Financial Condition

		       Document Processing

Underlying Growth

To understand the trends in the business, we believe that it is 
helpful to adjust revenue and expense growth (except for ratios) 
to exclude the impact of changes in the translation of foreign 
currencies into U.S. dollars.  We refer to this adjusted growth 
as "underlying growth."

When compared with the major European currencies, the U.S. dollar 
was approximately 1 percent weaker in the 1996 first quarter than 
in the 1995 first quarter.  As a result, foreign currency 
translation had only a marginal impact on our total revenue and 
expense growth in the 1996 first quarter.

We do not hedge the translation of foreign currency-denominated 
revenues.

Revenues

We estimate that the components of underlying revenue growth were 
as follows:
				       Underlying Growth       
			       1996               1995         
				Q1        FY   Q4   Q3   Q2   Q1

Total Revenues                   4%        7%   2%   8%   8%  11%

Sales
   Equipment*                    7         6   (1)  12    8    8
   Supplies                      -         9   (1)   9   10   21
   Paper                        (2)       39   22   42   42   54
    Total                        2         9    -   11   12   18

Service/Rentals/Document Outsourcing
   Service                       1         2    1    1    4    3
   Rentals                       2         1    1    3   (2)   3
   Document Outsourcing         48        46   51   44   43   46
     Total                       6         6    5    6    6    6

Finance Income                  (1)       (4)  (1)  (7)  (2)  (4)

Memo:
Revenues Excluding 
   Equipment Sales               3         9    6    8    9   12

* Only includes equipment sales to end-users

10
 

The increase in equipment sales to end users in the first 
quarter, compared with the 1995 fourth quarter, primarily 
reflects double digit growth in the United States, Latin America 
and Canada, partially offset by a decline in Rank Xerox.

Revenues from supplies, paper, service, rentals, document 
outsourcing and other revenues, and income from customer 
financing represented 72 percent of total revenues in the 1996 
first quarter.  Growth in these revenues is primarily a function 
of the growth in our installed population of equipment, usage and 
pricing.  The significant decline in growth in the first quarter 
reflects the reduced growth in supplies and paper sales.

  Supplies sales: Flat revenues in the 1996 first quarter are 
due to an unusually strong 1995 first quarter when supplies 
sales increased 21 percent.
 
  Paper sales: Our strategy is to charge a spread over mill 
wholesale prices to cover our costs and value added as a 
distributor.  The decline in the 1996 first quarter is due to 
lower sales volumes compared with the 1995 first quarter when 
customers were stocking in anticipation of shortages, 
partially offset by higher average prices as a result of 
significant price increases in the first half of 1995.
 
  Service revenues: The modest growth in recent quarters 
reflects the trend to document outsourcing and competitive 
pricing pressures.
 
  Rental revenues: Non-U.S. rental revenues continued the long 
term decline reflecting a customer preference for outright 
purchase. In the U.S., however, there has been an increasing 
trend toward cost-per-copy rental plans, which adversely 
affects up-front equipment sales, service revenues and finance 
income.
 
  Document Outsourcing: This growth reflects the trend of 
customers to outsource their document processing requirements 
to Xerox.  This has the effect of diverting revenue from 
equipment sales, service and finance income. This trend 
reduces current period total revenues but increases revenues 
in future periods.
 
  Finance income: Our strategy for financing equipment sales is 
to charge a spread over our cost of borrowing and to lock in 
that spread by match-funding the notes receivable with 
borrowings of similar maturities.  Strong growth in the 
financing of equipment sales in Brazil more than offset a 
decline in interest income in the U.S. and Rank Xerox 
resulting from lower average interest rates and the trend to 
document outsourcing.

11
 

Geographically, the underlying revenue growth rates are 
estimated as follows:

			       1996                1995        
				Q1        FY   Q4   Q3   Q2   Q1

Total Revenues                   4%        7%   2%   8%   8%  11%

   United States                 5         3   (3)   5    5    8
   Rank Xerox                   (2)        8   10    2    5   13
   Other Areas                  11        16    2   27   25   17

U.S. revenues increased 5 percent in the 1996 first quarter, 
compared with a decline of 3 percent in the 1995 fourth quarter. 
The improvement in the 1996 first quarter was driven by 
exceptional sales of the DocuTech and color products resulting 
from improvements implemented since mid-1995.

Rank Xerox (Rank Xerox Limited and related companies) 
manufactures and markets Xerox products principally in Europe.  
Rank Xerox revenues declined 2 percent in the first quarter 
compared with a very strong first quarter last year.  The decline 
was also a result of some weakness in the economic environments 
in France, Germany and Russia.  Revenues in the United Kingdom 
declined modestly compared with a strong 1995 first quarter.

Other Areas include operations principally in Latin America and 
Canada.  Revenue growth was excellent in Brazil and strong in 
Mexico and Canada.  In 1995, our revenues were approximately $1.4 
billion in Brazil and $200 million in Mexico.

For the major product categories, the underlying revenue growth 
rates are estimated as follows:

			       1996                1995        
				Q1        FY   Q4   Q3   Q2   Q1

Total Revenues                   4%        7%   2%   8%   8%  11%

   Black & White Copiers         -         2   (2)   3    2    4
   Enterprise Printing          19        17   10   18   20   22


Revenues from black-and-white copying represented 59 percent of 
total document processing revenues in the 1996 first quarter and 
for the 1995 full year.  Strong growth in Latin America was 
offset by a modest decline in Rank Xerox.  Revenues from 
enterprise printing, including production publishing, data center 
printing, network printing, and color printing and copying, 
represented 27 percent of total revenues in the 1996 first 
quarter compared with 25 percent for the 1995 full year.  

12
 

Exceptional U.S. sales of the DocuTech and color products were 
tempered by weak Rank Xerox performance.


Productivity Initiatives

In 1993, we announced a restructuring program to significantly 
reduce the cost base and to improve productivity. Our objectives 
were to reduce our worldwide work force by more than 10,000 
employees and to close or consolidate a number of facilities.

To date, the activities associated with the 1993 restructuring 
program have reduced employment by 12,400, achieved pre-tax cost 
reductions of approximately $350 million in 1994 and $650 million 
in 1995, and we are on track towards achieving our restructuring 
program objectives.  However, a portion of the savings has been 
reinvested to reengineer business processes, to support the 
expansion in growth markets, and to mitigate anticipated 
continued pricing pressures.


Gross Profit and Expenses

Employment increased by 800 in the 1996 first quarter to 86,700 
in the quarter as a result of the hiring of additional sales 
representatives for our worldwide operations and the hiring of 
employees to support our fast-growing document outsourcing 
business.  Reductions from our ongoing productivity program 
totaled 400 in the quarter.

Gross profit increased 6 percent as a result of volume and an 
improvement in gross margins.

The gross margins by revenue stream were as follows:

				       Gross Margins            
			  1996                 1995             
			   Q1     FY     Q4     Q3     Q2    Q1 

Total Gross Margin %      46.0%  46.1%  46.7%  46.0%  46.5% 45.2%

Sales                     43.0   43.0   45.0   42.7   42.7  40.9
Service and Rentals       48.9   49.6   48.9   49.3   50.8  49.3
Financing                 49.0   49.7   50.1   50.1   48.3  50.4

Total gross margins improved by 0.8 percentage points in the 1996 
first quarter from the 1995 first quarter.  The improvement of 
2.1 percentage points in the sales gross margin from the 1995 
first quarter was principally due to cost reductions and 
favorable product and geographical mix, partially offset by 
pricing pressures.  The erosion in the service and rentals gross 
margin of 0.4 percentage points from the 1995 first quarter was 

13
 

largely due to pricing pressures and economic cost increases, 
partially offset by the benefits from productivity initiatives.
Research and development (R&D) expense increased 17 percent 
compared with a low 1995 first quarter reflecting increased 
investment in future product introductions.  Although this rate 
of growth is unlikely to be sustained, we will continue to invest 
in technological development to maintain our premier position in 
the rapidly changing document processing market.  We expect to 
introduce a stream of new, technologically innovative products in 
the coming months, the most recent was the DocuColor 40 which was 
announced in April, 1996.  Xerox R&D is strategically coordinated 
with that of Fuji Xerox Co., Ltd., an unconsolidated joint 
venture between Rank Xerox Limited and Fuji Photo Film Company 
Limited.  Fuji Xerox invested approximately $600 million in R&D 
in 1995.

Selling, administrative and general expenses (SAG) increased 6 
percent in the 1996 first quarter due to economic cost increases, 
expansion in growth markets, principally in our Brazilian 
operations, and investments to increase worldwide sales 
effectiveness, including the expansion of direct sales coverage 
and indirect distribution channels, partially offset by improved 
productivity.  SAG was 29.7 percent of revenue in the first 
quarter, an increase of 0.5 percentage points from the 1995 first 
quarter.

The $15 million decrease in other expenses, net, in the 1996 
first quarter reflects increased interest and investment income 
and reduced foreign currency losses from balance sheet 
translation, partially offset by higher interest expense, 
principally due to the financing of the increased financial 
interest in Rank Xerox.


Income Taxes, Equity in Net Income of Unconsolidated Affiliates 
and Minorities' Interests in the Earnings of Subsidiaries

Income before income taxes, equity in net income of 
unconsolidated affiliates and minorities' interests increased 5 
percent to $384 million in the 1996 first quarter from $367 
million in the 1995 first quarter.

The effective tax rate was 36.3 percent in the 1996 first quarter 
and 38.6 percent in the 1995 full year.  The decline was 
primarily due to a lower statutory tax rate in Brazil.

Equity in the net income of unconsolidated affiliates, 
principally Fuji Xerox, increased in the 1996 first quarter to 
$20 million from $13 million in the 1995 first quarter.  The 
increase in Fuji Xerox income was due to revenue growth in their 
domestic market.

14
 

Minorities' interests in the earnings of subsidiaries was $28 
million in the 1996 first quarter compared with $51 million in 
the 1995 first quarter.  The decline was due to lower Rank Xerox 
income and our increased financial interest in Rank Xerox.  On 
February 28, 1995, we increased our financial interest in Rank 
Xerox to 80 percent from 67 percent.


Income

Income in the 1996 first quarter was $237 million, a growth of 26 
percent compared with $187 million in the 1995 first quarter

Primary earnings per share increased 27 percent to $2.03 in the 
1996 first quarter.  Fully diluted earnings per share increased 
27 percent to $1.95.


China Operations Consolidation and Other Reclassifications

Effective with 1996 reporting, our China operations are fully 
consolidated.  Prior year financial and operating results have 
been restated to reflect this change and several other accounting 
reclassifications to conform with 1996 reporting.  The impact of 
these changes on the financial statements and underlying trends 
is not material and there is no change in income.

15
 

		      Discontinued Operations

The investment in the discontinued financial services businesses 
which includes Insurance, Other Financial Service, Third-Party / 
Real-Estate and assigned debt totaled $2.1 billion at March 31, 
1996 compared with $2.0 billion at December 31, 1995.  The 
increase primarily includes scheduled payments to Ridge Re for 
annual premium installments and associated finance charges.  A 
discussion of the discontinued businesses follow.

Insurance Segment

In January 1996, Xerox announced agreements to sell all of our 
Remaining Talegen insurance units (Coregis Group, Inc., Crum & 
Forster Holdings, Inc., Industrial Indemnity Holdings, Inc., 
Westchester Specialty Group, Inc. and three insurance-related 
service companies) and The Resolution Group, Inc. (TRG) to 
investor groups led by Kohlberg Kravis Roberts & Co. (KKR) and 
senior management of the Remaining companies. The sales, expected 
to close in the middle of this year, will consist of two 
concurrent transactions with proceeds totaling $2.7 billion, 
including the assumption of Talegen debt.  The transactions are 
subject to customary closing conditions, including buyer 
financing and regulatory approvals.  In connection with the 
announced sales, the Company recorded a fourth quarter, 1995, 
$1,546 million after-tax charge. As a result of the sales of the 
Talegen units, the insurance segment has been classified as a 
discontinued operation for all periods presented and its 
operating results did not affect the Company's earnings in the 
first quarter of 1996.

Operating results for the discontinued insurance segment in the 
first quarter of 1996 and 1995 follow:


			   Revenue        After-Tax Income
(In Millions)           1996     1995      1996      1995
Talegen/TRG             $530     $683      $ 24      $ 20

Total Insurance         $525     $674      $(10)     $(40)


The improvement in the 1996 after-tax income compared with 1995 
reflects the absence of the 1995 settlement between Monsanto and 
Talegen which totaled $22 million after-tax.  The 1996 Total 
Insurance after-tax loss of $10 million was charged to reserves 
established for this purpose and, therefore, does not impact the 
Company's earnings.  The investment at March 31, 1996 totaled 
$1,786 million compared with a restated balance of $1,678 million 
at December 31, 1995.  The increase primarily includes 
contractual payments to Ridge Re for annual premium installments 
and associated finance charges.  Under the terms of the 

16
 

aforementioned sales agreements, the investment is considered to 
be fully recoverable by management.

Other Financial Services

Other Financial Services (OFS), which were discontinued in the 
fourth quarter of 1993, had no after-tax income in the first 
quarter of 1996 and 1995.  The net investment in OFS at March 31, 
1996 was $95 million compared with a restated $114 million at 
December 31, 1995.  The decrease in the investment primarily 
reflects the sale of the remaining portion of First Quadrant 
Corp.  Management currently believes that the liquidation of the 
remaining OFS units will not result in a net loss. 

On June 1, 1995, Xerox Financial services, Inc. (XFSI) completed 
the sale of Xerox Financial Services Life Insurance Company and 
related companies (Xerox Life Companies) to a subsidiary of 
General American Life Insurance Company.  After the sale, the 
Xerox Life Companies names were changed to replace the name 
"Xerox" in the corporate titles with the name "Cova" (Cova 
Companies).  OakRe Life Insurance Company (OakRe), an XFSI 
subsidiary formed in 1994, has assumed responsibility for 
existing Single Premium Deferred Annuity (SPDA) policies issued 
by Xerox Life's Missouri and California companies via coinsurance 
agreements (Coinsurance Agreements). The Coinsurance Agreements 
include a provision for the assumption (at their election) by the 
Cova Companies, of all of the SPDA policies at the end of their 
current rate reset periods.  A Novation Agreement with an 
affiliate of the new owner provides for the assumption of the 
liability under the Coinsurance Agreements for any SPDA policies 
not so assumed by the Cova Companies.  Other policyholders (of 
Immediate, Whole Life, and Variable annuities as well as a minor 
amount of SPDAs issued by Xerox Life New York) will continue to 
be the responsibility of the Cova Companies. 

As a result of the Coinsurance Agreements, at March 31, 1996, 
OakRe retained approximately $2.4 billion of investment portfolio 
assets (transferred from the Xerox Life Companies)  and 
liabilities related to the reinsured SPDA policies. Interest 
rates on these policies are fixed and were established upon  
issuance of the respective policies.  Substantially all of these 
policies will reach their rate reset periods within the next five 
years and will be assumed under the Agreements as described 
above.  At March 31, 1996 the "maturities" of OakRe's assets and 
liabilities were not fully matched as the Xerox Life Companies' 
portfolio was designed to recognize that policy renewals  
extended liability "maturities", thereby permitting investments 
of somewhat longer average duration. OakRe's practice is to 
selectively improve this match over time as market conditions 
allow.  As of March 31, 1996 we estimate that "maturities" are 
effectively matched for approximately 60% of ultimate policy 
liabilities.

17
 

In connection with the aforementioned sale, XFSI established a 
$500 million letter of credit and line of credit with a group of 
banks to support OakRe's coinsurance obligations.  The term of 
this letter of credit is five years and it is unused and 
available at March 31, 1996.  Upon a drawing under the letter of 
credit, XFSI has the option to cover the drawing in cash or to 
draw upon the credit line.

Third-Party / Real-Estate

During the first quarter of 1996, sales of real-estate and third-
party assets and run-off activity reduced assets associated with 
these businesses by $14 million to a total of $475 million.  
Assigned debt totaled $211 million at March 31, 1996, a $20 
million decline from the year-end 1995 level.  The net decrease 
in the investment in 1996 is mainly the result of run-off and 
selected sales of discontinued third-party financing assets. 
Management believes that the combination of existing reserves 
together with run-off profits should adequately provide for any 
credit losses or losses on disposition.

18
 

Capital Resources and Liquidity

Total debt, including ESOP and Discontinued Operations debt not 
shown separately in our consolidated balance sheets, increased to 
$12,529 million at March 31, 1996, from $11,794 million at 
December 31,1995. The principal causes for the change in 
consolidated indebtedness since year end, and versus first 
quarter 1995, are as follows:

(In millions)                                1996        1995
Total Debt as of January 1                 $11,794     $10,939
Non-Financing Businesses:
Document Processing Operations                 773         590
Increased financial interest in Rank Xerox       -         972
Discontinued Businesses                         73         132
Total Non-Financing                            846       1,694
Financing Businesses                          (146)       (104)
Total Operations                               700       1,590
Shareholder dividends                          110          97
Equity-related and other changes, net          (75)        (67)
Total Debt as of March 31                  $12,529     $12,559

For purposes of capital ratio analysis, total equity includes 
common equity, preferred stock and minorities' interests in the 
equity of subsidiaries.

The following table summarizes the changes in total equity during 
the first three months of 1996:


(In millions)
Total equity as of January 1,1996           $5,396
Income from Continuing Operations             $237
Shareholder Dividends Paid                    (110)
Common stock repurchased                       (91)
All Other, net                                 (49)
Balance as of March 31, 1996                $5,383


On a consolidated basis, the debt-to-capital ratio at March 31, 
1996 was 72 percent compared with 71 percent December 31, 1995.

19
 


Non-Financing Operations

The following table summarizes Document Processing non-financing 
operations cash generation and borrowing for the three months 
ended March 31, 1996 and 1995:

				     Cash Generated/(Borrowed)
				    Three Months Ended March 31,
(In millions)                       1996                  1995
Document Processing  
Non-Financing:  
Income                              $185                  $130
Depreciation and Amortization        150                   158
Restructuring Payments               (50)                 (111)
Capital Expenditures                (148)                  (43)
Assets Sold                           31                    14
Working Capital/Other               (941)                 (738)
				   $(773)                $(590)

First quarter 1996 cash usage of $773 million was $183 million 
greater than in the first three months of 1995 due primarily to 
increased capital spending related to facilities infrastructure 
investments and an abnormally low level of spending during the 
first three months of 1995 and increased receivables. These 
factors were partially offset by higher net income and lower 
restructuring payments in 1996.

Financing Businesses

Financing business debt was reduced by $146 million and $104 
million during the first three months of 1996 and 1995, 
respectively as increased financing related to higher equipment 
sales in the U.S. was more than offset by lower RX sales activity 
and a reduction in discontinued third-party financing debt.  
Financial leverage remained equal to our 6.5:1 debt-to-equity 
guideline as of March 31, 1996.


Hedging Instruments

We have entered into certain financial instruments to manage 
interest rate and foreign currency exposures. These instruments 
are held solely for hedging purposes and include interest rate 
swap agreements, forward foreign exchange contracts and foreign 
currency swap agreements. We have long-standing policies 
prescribing that derivative instruments are only to be used to 
achieve a set of very limited objectives: to lock in the value of 
cross-border cash flows and to reduce the impact of currency and 
interest rate volatility on costs, assets and liabilities. We do 
not enter into derivative instrument transactions for trading 
purposes.

20
 

Currency derivatives are primarily arranged in conjunction with 
underlying transactions that give rise to foreign currency-
denominated payables and receivables: for example, an option to 
buy foreign currency to settle the importation of goods from 
suppliers, or a forward foreign-exchange contract to fix the rate 
at which a dividend will be paid by a foreign subsidiary. In 
addition, when cost-effective, currency derivatives are also used 
to hedge balance sheet exposures in hyperinflationary economies.

We do not hedge foreign currency-denominated revenues of our 
foreign subsidiaries since these do not represent cross-border 
cash flows.

With regard to interest rate hedging, virtually all customer 
financing assets earn fixed rates of interest and, therefore, we 
"lock in" an interest rate spread by arranging fixed-rate 
liabilities with similar maturities as the underlying assets. 
Additionally, customer financing assets in one currency are 
consistently funded with liabilities in the same currency. We 
refer to the effect of these conservative practices as "match 
funding" customer financing assets. This practice effectively 
eliminates the risk of a major decline in interest margins 
resulting from a rising interest rate environment. Conversely, 
this practice does effectively eliminate the opportunity to 
materially increase margins when interest rates are declining.

More specifically, pay fixed-rate and receive variable-rate swaps 
are typically used in place of more expensive fixed-rate debt. 
Pay variable-rate and receive variable-rate swaps are used to 
transform variable-rate medium-term debt into commercial paper or 
local currency LIBOR obligations. Additionally, pay variable-rate 
and receive fixed-rate swaps are used from time to time to 
transform longer-term fixed-rate debt into commercial paper or 
libor-based rate obligations. The transactions performed within 
each of these three categories enable the cost effective 
management of interest rate exposures. The potential risk 
attendant to this strategy is the performance of the swap 
counterparty. We address this risk by arranging swaps exclusively 
with a diverse group of strong-credit counterparties, regularly 
monitoring their credit ratings, and determining the replacement 
cost, if any, of existing transactions.

Our currency and interest rate hedging are typically unaffected 
by changes in market conditions as forward contracts, options and 
swaps are normally held to maturity consistent with our objective 
to lock in currency rates and interest rate spreads on the 
underlying transactions.

21
 



PART II - OTHER INFORMATION



Item 1.  Legal Proceedings

The information set forth under note 6 contained in the "Notes to 
Consolidated Financial Statements" on pages 8-9 of this Quarterly 
Report, on Form 10-Q, is incorporated by reference in answer to 
this item.


Item 6.  Exhibits and Reports on Form 8-K.


(a)  Exhibit 11  Computation of Net Income per Common Share.

     Exhibit 12  Computation of Ratio of Earnings to Fixed
     Charges.

     Exhibit 27  Financial Data Schedule(in electronic form only)


(b)  Current Reports on Form 8-K dated January 18, 1996 and 
January 24, 1996 reporting Item 5 "Other Events" were filed 
during the quarter for which this Quarterly Report is filed.


22
 

			   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 
1934, the registrant has duly caused this report to be signed on 
its behalf by the undersigned thereunto duly authorized.





					 XEROX CORPORATION
					   (Registrant)




				   _____________________________
Date:  May 8, 1996                 By  Philip D. Fishbach      
				   Vice President and Controller
				  (Principal Accounting Officer)



23
 



Exhibit 11
			       Xerox Corporation

		   Computation of Net Income Per Common Share
      (Dollars in millions, except per-share data; shares in thousands)

							  Three months ended
								 March 31,  
							      1996      1995

I. Primary Net Income Per
     Common Share

   Income from continuing operations                      $    237 $    187
   Accrued dividends on ESOP preferred stock, net              (11)     (11)
   Accrued dividends on redeemable preferred stock              (1)      (1)
     Adjusted income from continuing operations                225      175
     Discontinued operations                                     -      (40)
     Adjusted net income                                  $    225 $    135

   Average common shares outstanding 
     during the period                                     108,331  106,359
   Common shares issuable with respect 
     to common stock equivalents for
     stock options, incentive and 
     exchangeable shares                                     2,679    2,834
   Adjusted average shares outstanding 
     for the period                                        111,010  109,193

   Primary earnings per share:
     Continuing operations                                $   2.03 $   1.60
     Discontinued operations                                     -     (.37)
   Primary earnings per share                             $   2.03 $   1.23


II.Fully Diluted Net Income Per 
    Common Share

   Income from continuing operations                      $    237 $    187
   Accrued dividends on redeemable preferred stock              (1)      (1)
   ESOP expense adjustment, net of tax                          (1)      (2)
   Interest on convertible debt, net of tax                      1        1
     Adjusted income from continuing operations                236      185
     Discontinued operations                                     -      (40)
     Adjusted net income                                  $    236 $    145

   Average common shares outstanding  
     during the period                                     108,331  106,359
   Stock options, incentive and 
     exchangeable shares                                     2,679    3,047
   Convertible debt                                            881      881
   ESOP preferred stock                                      9,406    9,649
   Adjusted average shares outstanding
     for the period                                        121,297  119,936

   Fully diluted earnings per share:
     Continuing operations                                $   1.95 $   1.54
     Discontinued operations                                     -     (.34)
   Fully diluted earnings per share                       $   1.95 $   1.20


24
 


Exhibit 12                       Xerox Corporation
		  Computation of Ratio of Earnings to Fixed Charges
			Three months ended            Year ended
			    March 31,                December 31,
(In Millions)             1996    1995    1995    1994    1993*   1992   1991

Fixed charges:
  Interest expense      $  148  $  137  $  605  $  520  $  540  $  627 $  596
  Rental expense            35      41     142     170     180     187    178
    Total fixed charges
      before capitalized
      interest             183     178     747     690     720     814    774
  Capitalized interest       -       0       -       2       5      17      3
    Total fixed charges $  183  $  178  $  747  $  692  $  725  $  831 $  777

Earnings available for
  fixed charges:
  Earnings**            $  404  $  380  $1,979  $1,602  $ (193) $1,183 $1,035
  Less undistributed
    income in minority
    owned companies        (20)    (13)    (90)    (54)    (51)    (52)   (70)
  Add fixed charges before
    capitalized interest   183     178     747     690     720     814    774
  Total earnings 
    available for
    fixed charges       $  567  $  545  $2,636  $2,238  $  476  $1,945 $1,739

Ratio of earnings to
   fixed charges (1)(2)   3.10    3.06    3.53    3.23    0.66    2.34   2.24

(1) The ratio of earnings to fixed charges has been computed based on the 
    Company's continuing operations by dividing total earnings available for 
    fixed charges, excluding capitalized interest, by total fixed charges.  
    Fixed charges consist of interest, including capitalized interest, and 
    one-third of rent expense as representative of the interest portion of 
    rentals.  Debt has been assigned to discontinued operations based on 
    historical levels assigned to the businesses when they were continuing 
    operations adjusted for subsequent paydowns.  The discontinued operations 
    consist of the Company's Insurance and Other Financial Services businesses 
    and its real-estate development and third-party financing businesses.

(2) The Company's ratio of earnings to fixed charges includes the effect of 
    the Company's finance subsidiaries, which primarily finance Xerox 
    equipment.  Financing businesses are more highly leveraged and, therefore, 
    tend to operate at lower earnings to fixed charges ratio levels than do 
    non-financial businesses.

*   1993 earnings were inadequate to cover fixed charges.  The coverage 
    deficiency was $249 million.

**  Sum of "Income before Income Taxes, Equity Income and Minorities' 
    Interests" and "Equity in Net Income of Unconsolidated Affiliates."


25
 
 

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM XEROX CORPORATION'S MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-1996 MAR-31-1996 5 0 12,925 394 2,911 10,209 4,827 2,692 26,375 6,681 12,178 25 734 110 3,760 26,375 1,917 3,928 1,092 2,120 1,424 31 148 384 139 237 0 0 0 237 2.03 1.95