QUESTION 3 Partially correctMark 0.67 out of 2.00 P Flag question Compute ROE an
ID: 2328030 • Letter: Q
Question
QUESTION 3 Partially correctMark 0.67 out of 2.00 P Flag question Compute ROE and RNOA with Disaggregation Selected balance sheet and income statement information for Home Depot follows. $ millions Operating assets Nonoperating assets Total assets Jan. 31, 2016 $40,333 2,216 42,549 Feb. 01, 2015 $38,223 1,723 39,946 Operating liabilities Nonoperating liabilities Total liabilities 14,918 21,315 36,233 13,427 17,197 30,624 9,322 Total stockholders' equity 6,316 Sales Net operating profit before tax (NOPBT) Nonoperting expense before tax Tax expense Net income 88,519 11,774 753 4,012 7,009 Round all answers to two decimal places (ex: 012345-12.35%) a. Compute return on equity 89.64 b. Compute return on net operating assets (RNOA). 17.84 c. Use ROE and RNOA to determine the nonoperating return for the year 56.37 d. Disaggregate RNOA into components of profitability and productivity and show that the product of the two components equals RNOA. NOPM 8.61 NOAT 3.53 RNOA 30.8 CheckExplanation / Answer
Particulars
Amount ($)
Return on equity
Net income in 2016
7,009.00
Average equity (9322 +6316)/2
7,819.00
Return on equity (7009 x 100/7819)
89.64%
Return on net operating assets (RNOA)
Operating income after tax
7,009.00
Net operating assets for 2015 (38223-13427)
24,796.00
Net operating assets for 2016 (40333-14918)
25,415.00
Average net operating assets (24796+25415)/2
25,105.50
Return on net operating assets (7009 x 100/25105.50)
27.92%
Non-operating return for the year
Return on equity (ROE)
89.64%
Less: Return on net operating assets
27.92%
Non-operating return for the year
61.72%
Net operating asset turnover (NOAT)
Sales
88,519.00
Average net operating assets
Net operating assets for 2015 (38223-13427)
24,796.00
Net operating assets for 2016 (40333-14918)
25,415.00
Average net operating assets (24796+25415)/2
25,105.50
NOAT (88519/25105.50)
3.53 times
Net operating profit margin (NOPM)
Net operating profit after tax (11774 -4012)
7,762.00
Sales
88,519.00
Net operating profit margin (NOPM) (7762 x 100/88519)
8.77%
RNOA
27.92%
Particulars
Amount ($)
Return on equity
Net income in 2016
7,009.00
Average equity (9322 +6316)/2
7,819.00
Return on equity (7009 x 100/7819)
89.64%
Return on net operating assets (RNOA)
Operating income after tax
7,009.00
Net operating assets for 2015 (38223-13427)
24,796.00
Net operating assets for 2016 (40333-14918)
25,415.00
Average net operating assets (24796+25415)/2
25,105.50
Return on net operating assets (7009 x 100/25105.50)
27.92%
Non-operating return for the year
Return on equity (ROE)
89.64%
Less: Return on net operating assets
27.92%
Non-operating return for the year
61.72%
Net operating asset turnover (NOAT)
Sales
88,519.00
Average net operating assets
Net operating assets for 2015 (38223-13427)
24,796.00
Net operating assets for 2016 (40333-14918)
25,415.00
Average net operating assets (24796+25415)/2
25,105.50
NOAT (88519/25105.50)
3.53 times
Net operating profit margin (NOPM)
Net operating profit after tax (11774 -4012)
7,762.00
Sales
88,519.00
Net operating profit margin (NOPM) (7762 x 100/88519)
8.77%
RNOA
27.92%
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