Compute the DuPont Disaggregation of ROE Refer to the balance sheets and income statement below for Facebook Inc. FACEBOOK INC. Consolidated Statement of Income For Year Ended December 31, $ millions 2018 Revenue $57,449 Costs and expenses Cost of revenue 10,966 Research and development 11,884 Marketing and sales 7,846 General and administrative 5,062 Total costs and expenses 35,758 Income from operations 21,691 Interest and other income (expense), net 2,059 Income before provision for income taxes 23,750 Provision for income taxes 3,249 Net income $20,501 FACEBOOK INC. Consolidated Balance Sheet At December 31, $ millions 2018 2017 Current assets Cash and cash equivalents $11,630 $8,079 Marketable securities 31,095 35,243 Accounts receivable, net 9,198 5,832 Prepaid expenses and other current assets 1,779 1,020 Total current assets 53,702 50,174 Property and equipment, net 24,683 15,332 Intangible assets, net 1,294 1,884 Goodwill 19,912 19,832 Other assets 2,576 2,135 Total assets $102,167 $89,357 Current liabilities Accounts payable $820 $380 Partners payable 2,152 2,001 Accrued expenses and other current liabilities 5,509 2,892 Deferred revenue and deposits 1,758 98 Total current liabilities 10,239 3,760 Other liabilities 6,190 6,417 Total liabilities 16,429 10,177 Stockholders' equity Common stock and additional paid-in capital 42,906 43,806 Accumulated other comprehensive loss (760) (227) Retained earnings 43,592 35,601 Total stockholders' equity 85,738 79,180 Total liabilities and stockholders' equity $102,167 $89,357 a. Compute return on equity (ROE). Numerator Denominator ROE Answer Answer Answer Answer b. Apply the DuPont disaggregation into return on assets (ROA) and financial leverage. Numerator Denominator ROA Answer Answer Answer Answer Numerator Denominator FL Answer Answer Answer Answer Ratio Number ROA Answer FL Answer ROE ***ROE may be different from ROE calculation in part a due to rounding c. Calculate the profitability and productivity components of ROA. Numerator Denominator PM Answer Answer Answer Answer Numerator Denominator AT Answer Answer Answer Answer d. Confirm the full DuPont disaggregation: ROE = PM × AT × FL. Ratio Number PM Answer AT Answer FL Answer ROE

Compute the DuPont Disaggregation of ROE Refer to the balance sheets and income statement below for Facebook Inc. FACEBOOK INC. Consolidated Statement of Income For Year Ended December 31, $ millions 2018 Revenue $57,449 Costs and expenses Cost of revenue 10,966 Research and development 11,884 Marketing and sales 7,846 General and administrative 5,062 Total costs and expenses 35,758 Income from operations 21,691 Interest and other income (expense), net 2,059 Income before provision for income taxes 23,750 Provision for income taxes 3,249 Net income $20,501 FACEBOOK INC. Consolidated Balance Sheet At December 31, $ millions 2018 2017 Current assets Cash and cash equivalents $11,630 $8,079 Marketable securities 31,095 35,243 Accounts receivable, net 9,198 5,832 Prepaid expenses and other current assets 1,779 1,020 Total current assets 53,702 50,174 Property and equipment, net 24,683 15,332 Intangible assets, net 1,294 1,884 Goodwill 19,912 19,832 Other assets 2,576 2,135 Total assets $102,167 $89,357 Current liabilities Accounts payable $820 $380 Partners payable 2,152 2,001 Accrued expenses and other current liabilities 5,509 2,892 Deferred revenue and deposits 1,758 98 Total current liabilities 10,239 3,760 Other liabilities 6,190 6,417 Total liabilities 16,429 10,177 Stockholders' equity Common stock and additional paid-in capital 42,906 43,806 Accumulated other comprehensive loss (760) (227) Retained earnings 43,592 35,601 Total stockholders' equity 85,738 79,180 Total liabilities and stockholders' equity $102,167 $89,357 a. Compute return on equity (ROE). Numerator Denominator ROE Answer Answer Answer Answer b. Apply the DuPont disaggregation into return on assets (ROA) and financial leverage. Numerator Denominator ROA Answer Answer Answer Answer Numerator Denominator FL Answer Answer Answer Answer Ratio Number ROA Answer FL Answer ROE ***ROE may be different from ROE calculation in part a due to rounding c. Calculate the profitability and productivity components of ROA. Numerator Denominator PM Answer Answer Answer Answer Numerator Denominator AT Answer Answer Answer Answer d. Confirm the full DuPont disaggregation: ROE = PM × AT × FL. Ratio Number PM Answer AT Answer FL Answer ROE

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter14: Financial Statement Analysis

Section: Chapter Questions

Problem 26E: Comprehensive income Anson Industries, Inc., reported the following information on its 20Y1 income...

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Compute the DuPont Disaggregation of ROE

Refer to the balance sheets and income statement below for Facebook Inc.

FACEBOOK INC.
Consolidated Statement of Income
For Year Ended December 31, $ millions	2018
Revenue	$57,449
Costs and expenses
Cost of revenue	10,966
Research and development	11,884
Marketing and sales	7,846
General and administrative	5,062
Total costs and expenses	35,758
Income from operations	21,691
Interest and other income (expense), net	2,059
Income before provision for income taxes	23,750
Provision for income taxes	3,249
Net income	$20,501

FACEBOOK INC.
Consolidated Balance Sheet
At December 31, $ millions	2018	2017
Current assets
Cash and cash equivalents	$11,630	$8,079
Marketable securities	31,095	35,243
Accounts receivable, net	9,198	5,832
Prepaid expenses and other current assets	1,779	1,020
Total current assets	53,702	50,174
Property and equipment, net	24,683	15,332
Intangible assets, net	1,294	1,884
Goodwill	19,912	19,832
Other assets	2,576	2,135
Total assets	$102,167	$89,357
Current liabilities
Accounts payable	$820	$380
Partners payable	2,152	2,001
Accrued expenses and other current liabilities	5,509	2,892
Deferred revenue and deposits	1,758	98
Total current liabilities	10,239	3,760
Other liabilities	6,190	6,417
Total liabilities	16,429	10,177
Stockholders' equity
Common stock and additional paid-in capital	42,906	43,806
Accumulated other comprehensive loss	(760)	(227)
Retained earnings	43,592	35,601
Total stockholders' equity	85,738	79,180
Total liabilities and stockholders' equity	$102,167	$89,357

a. Compute return on equity (ROE).

	Numerator	Denominator	ROE
	Answer	Answer
	Answer	Answer

b. Apply the DuPont disaggregation into return on assets (ROA) and financial leverage.

	Numerator	Denominator	ROA
	Answer	Answer
	Answer	Answer

	Numerator	Denominator	FL
	Answer	Answer
	Answer	Answer

	Ratio	Number
	ROA	Answer
	FL	Answer
	ROE

***ROE may be different from ROE calculation in part a due to rounding

c. Calculate the profitability and productivity components of ROA.

	Numerator	Denominator	PM
	Answer	Answer
	Answer	Answer

	Numerator	Denominator	AT
	Answer	Answer
	Answer	Answer

d. Confirm the full DuPont disaggregation: ROE = PM × AT × FL.

	Ratio	Number
	PM	Answer
	AT	Answer
	FL	Answer
	ROE

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