Question

Selected balance sheet and income statement information for Home Depot follows.

Compute ROE and RNOA with Disaggregation Selected balance sheet and income statement information for Home Depot follows. $ millions Operating assets Nonoperating assets Total assets Operating liabilities Nonoperating liabilities Total liabilities Total stockholders' equity Sales Net operating profit before tax (NOPBT) Nonoperting expense before tax Tax expense Net income Jan. 31, 2016 Feb. 01, 2015 $40,683 $38,573 2,266 1,773 42,949 40,346 15,043 13,552 21,275 17,157 36,318 30,709 6,631 9,637 89,234 12,124 803 4,001 7,320 Round answers to two decimal places (ex: 0.12345 = 12.35%) a. Compute return on equity.

Answer 1

solution mm of return un @ computation on equity uw w Return on eauity, net income Average stockholdley's equity Average stockholder's equity = 6.63179,634 2 = $8.134 Pesturn on equity = $71320 : 89.99% $8,134 6 computation of the return on net operating assets (RNDA) um um Return on net olerating assets Net Income Average net operating al assets potenci pet olevating Assets (2015): 538,573(-)13.552 $ 25,021 niet operating assets (2016) : $40,683(-)15,003 m = $ 25,640

Average net operating assets - 25,02) +25,640 2 = 25.330.5 assets return or not operating $7,320 $ 25,330.5 = 28.90% © computation of non-operating returo for the year as shown below, w me ROEⓇ = RNOA t non-operating return unu Non-Operating return - ROB(-) RNOA = 89.99%-) 28.90%. = 61.09% @disaggregate RNOA into components as Profitability and Productivity as shown ہر below ہر لیہ لیہ Perceda = NOPM - NOPAT – Salls 12.1241-14,001 89.234 = 9.10%

NOAT: sales Average operating assets $89,234 $40,683 +$38.573 $89.234 $39, 628 9.95 Average OLLEV = operating liabilities NOA - $15,043 $25.640 = 0.59 RNOA - NO PM X NOATY (HOLLEU) = 9.107 X9.257 X (1+0.59) - 9.10% x9.95% X 1.59 = 32.55)
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