FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Analysis and Interpretation of Ratios When RNOA Exceeds 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 $55,838
Costs and expenses  
Cost of revenue 9,355
Research and development 10,273
Marketing and sales 7,846
General and administrative 3,451
Total costs and expenses 30,925
Income from operations 24,913
Interest and other income (expense), net 448
Income before provision for income taxes 25,361
Provision for income taxes 3,249
Net income $22,112

 

FACEBOOK INC.
Consolidated Balance Sheet
At December 31, $ millions 2018 2017
Current assets    
Cash and cash equivalents $10,019 $8,079
Marketable securities 31,095 33,632
Accounts receivable, net 7,587 5,832
Prepaid expenses and other current assets 1,779 1,020
Total current assets 50,480 48,563
Property and equipment, net 24,683 13,721
Intangible assets, net 1,294 1,884
Goodwill 18,301 18,221
Other assets 2,576 2,135
Total assets $97,334 $84,524
Current liabilities    
Accounts payable $820 $380
Partners payable 541 390
Accrued expenses and other current liabilities 5,509 2,892
Deferred revenue and deposits 147 98
Total current liabilities 7,017 3,760
Other liabilities 6,190 6,417
Total liabilities 13,207 10,177
Stockholders' equity    
Common stock and additional paid-in capital 42,906 40,584
Accumulated other comprehensive loss (760) (227)
Retained earnings 41,981 33,990
Total stockholders' equity 84,127 74,347
Total liabilities and stockholders' equity $97,334 $84,524
Combined federal and state statutory tax rate 22%  

 

a. Compute net operating profit after tax (NOPAT) for 2018. Assume that the combined federal and state statutory tax rate is 22%. Hint: Carefully consider whether nonoperating expense is positive or negative.

  NOPAT
  Answer

 

b. Compute net operating assets (NOA) for 2018 and 2017.

  Year NOA
  2018 Answer
  2017 Answer

 

c. Compute RNOA and disaggregate it into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2018.

  Numerator Denominator RNOA
  Answer Answer  
  Answer Answer  

 

  Numerator Denominator NOPM
  Answer Answer  
  Answer Answer  

 

  Numerator Denominator NOAT
  Answer Answer  
  Answer Answer  

 

d. Compute return on equity (ROE) for 2018.

  Numerator Denominator ROE
  Answer Answer  
  Answer Answer

 

 

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