Compute ROE and RNOA with Disaggregation Selected balance sheet and income state

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 Feb. 01, 2015 $38,748 1,828 40,576 13,602 17,202 30,804 9,772 $40,858 2,321 43,179 15,093 21,320 36,413 6,766 Operating liabilities Nonoperating liabilities Total liabilities Total stockholders' equity Sales Net operating profit before tax (NOPBT) Nonoperting expense before tax Tax expense Net income 89,599 12,299 858 4,428 7,013

Explanation / Answer

b)RNOA= net income/NOA
NOA=operating assets-operating liabilites
for 2016=(40858-15093)=25765
for 2015=(38748-13602)=25146
average noa=(25765+25146)/2=25455.50
RNOA=(7013/25455.50)
=27.55%
d)RNOA=net income/NOA=(net income/sales)*(sales/assets)
NOPM=7013/89599=7.83%
NOAT=89599/((25765+25146)/2)
=3.52
RNOA=(7.83%*2.25)=27.55%

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