Business Finance
Finance Question

Question Description

A company’s return on net operating assets (RNOA = NOPAT/Average NOA) is commonly used to evaluate financial performance. If managers cannot increase NOPAT, they can still increase this return by reducing the amount of net operating assets (NOA). In bullet form, list specific ways that managers could reduce the following assets:

1. Receivables
2. Inventories
3. Plant, property equipment

Final Answer

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Return on operating assets
Return on net operating assets determines the portion of operating income obtained
relative to the firm’s operating assets. A higher RNOA indicates that a firm is utilizing its
operating assets effectively to generate profits. RNOA can either be increased by increasing the
sales revenues or cutting down the net operating assets. Net operating assets can be reduced as
below;
Receivables
➢ Strengthening the management of the accounts receivables. T...

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