Question

You are a CEO of a company. You are analyzing the performance of your company, as a comparison to your industry/competitors. Your analysis of RNOA (Return on Net Operating Assets) is as follows: Your RNOA is 16%, but the industry benchmark is 10%. Your NOPM is 18%, but the industry benchmark is 17%. Your NOAT is.89, but the industry benchmark is 59. What interpretations can you draw from the information above that would be useful for managing your company? For example, how do you compare to your competitors? Which measurement is your companies strong point? What area do you have room for the higher level of improvement?

Financial statement analysis

Answer 1

	Your company	Industry
Return on net operating assets	16%	10%
Net operating profit margin	18%	17%
net operating asset turnover	0.89	0.59
return on operating assets ratio, measure the relationship between the net profit and net operating assets. This ratio defines the rate of return earned on the investment in operating assets. On an comparison of company performance with the industry it is found that company's performance is better than industry and its competitors.
Net operating profit margin ratio measures the relationship between the operating profit and net sales of the company. A high NOPM is always preferred and in the given situation company's performance is better but its very near to industry average of 17% so there is further scope for improvement of this ratio by decreasing the operating expenses of the company
net operating asset turnover measures the relationship between net sales and operating assets of the company. A higher ratio indicates the better efficient use of operating assets. In the given situation company performance is better than industry and its competitors. company can make more efforts to improve the better use if operating assets of the company.