A company is ROA is much lower than RNOA, what cause this difference?

User Generated

FUVAR100

Business Finance

Boston College

Description

1. A company in 2019 Return on Assets (ROA) is 17.82% and its Return on Net Operating Assets (RNOA) is 50.9%. Briefly discuss what could be driving the difference in these two ratios?

please be logical


2.Which of the following is not a correct statement about the reformulation of the financial statements?

b. The focus of the reformulation is on the common shareholders; thus, activities with non-controlling interests and/or preferred shareholders need to be re-classified.

d. The classification between short-term and long-term determines whether the item is an operating or financing activity.

3.what is the purpose of reformulating the financial statements? (just several sentences enough)

4.Which category would the line item “Net Interest Expense (Income)” be included in as part of the reformulated financial statements?

d. Net Financial Assets - NFA or (Net Financial Liabilities – NFL


Which of the following would not be a driver (part of) the calculation for RNOA (Return on Net Operating Assets?

d. Cost of Goods Sold


Which of the following would not be a driver (part of) the calculation for ROCE (Return on Common Shareholders’ Equity)?



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Explanation & Answer

Attached.

Question 1
Return on assets (ROA) is calculated by dividing the net income by average total assets. Return
on Net Operating Assets (RNOA) is calculated by dividing the net income by the net operating
assets. Operating assets include patents, inventory, equipment and account receivables, etc. The
Net Operating (NOA) is the total ope...


Anonymous
I was having a hard time with this subject, and this was a great help.

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