Answer:
a. Return on equity is 89.2%
b.Return on net operating assets (RNOA) is 20.0%
c. nonoperating return for the year is 69.2%
d RNOA is 20.025%
Explanation:
$ millions Jan. 31, 2016 Feb. 01, 2015
Operating assets $40,583 $38,473
Nonoperating assets 2,241 1 ,748
Total assets 42,824 40,221
Operating liabilities 15,018 13,527
Nonoperating liabilities 21,285 17,167
Total liabilities 36,303 30,694
Total stockholders' equity 6,521 9,527
Sales 88,999
Net operating profit before tax (NOPBT) 12,024
Nonoperting expense before tax 778
Tax expense 4,088
Net income 7,158
NOPAT = Net operating profit before tax (NOPBT) - Tax expense
= 7936
277822 - 151357
a. Compute return on equity.
ROE = Net income / Average share equity
= 7,158/ ((6,521 + 9,527 )/ 2)
= 7158 / 8024
= 0.892
= 89.2%
b. Compute return on net operating assets (RNOA).
=NOPAT / Average operating asset
= 7936 / ((40583 + 38473)/2)
= 7936 / 39528
= 0.20
= 20 %
c. Use ROE and RNOA to determine the nonoperating return for the year.
=ROE - RONA
= 89.2% - 20%
= 69.2%
d. Disaggregate RNOA into components of profitability and productivity and show that the product of the two components equals RNOA.
NOPM = NOPAT / Sales
= 7936 / 88999
= 0.089
=8.9%
NOAT = Sales / Average operating asset
= 88999 / ((40583 + 38473)/2)
= 88999 / 39528
= 2.25%
RNOA = NOPM x NOAT
= 8.9 x 2.25
= 20.025%
