Question

Compute and Compare ROE, ROA, and RNOA
Selected balance sheet and income statement information for Oracle Corporation follows. (Perform the required computations from the perspective of an Oracle shareholder.

$ millions	May 31, 2015	May 31, 2014
Operating assets	$62,090	$57,002
Nonoperating assets	54,368	38,819
Total assets	116,458	95,821
Operating liabilities	20,180	19,055
Nonoperating liabilities	41,958	24,097
Total liabilities	62,138	43,152
Total Oracle stockholders' equity	54,320	52,669
Total revenues	38,559
Operating income before tax	13,993
Nonoperating expense before tax	1,037
Tax expense	3,498
Net income	9,458

a. Compute return on equity (ROE)
Round answer to two decimal places (ex: 0.12345 = 12.35%)
Answer

%

b. Compute return on net assets (ROA)
Round answers to two decimal places (percentage ex: 0.12345 = 12.35%)
Answer

%

c. Compute return on net operating assets (RNOA)
Round answers to two decimal places (percentage ex: 0.12345 = 12.35%)
Answer

%

Answer 1

Compute return on equity (ROE) as follows: A 1 Net income (1) 2 Stockholders' equity as of May 31,2014 3 Stockholders' equity as of May 31,2015 4 Average stockholders equity (2) 5 Return on equity (ROE) (1 = 2) $9.458.00 $52.669.00 $54,320.00 $53.494.50 17.68% Therefore, ROE is 17.68% Calculations are shown below: А 1 Net income (1) 2 Stockholders' equity as of May 31,2014 3 Stockholders' equity as of May 31,2015 4 Average stockholders equity (2) 5 Return on equity (ROE) (1 - 2) 9458 52669 54320 =B2+B3)/2 =B1/B4 Compute return on net assets (ROA) as follows: Α 8 Net income (1) 9 Total assets as of May 31,2014 10 Total assets as of May 31,2015 11 Average total assets (2) 12 Return on net assets (ROA) (1-2) $9,458.00 $95.821.00 $116,458.00 $106.139.50 8.91% Therefore, ROA is 3.91%. Calculations are shown below: Α 8 Net income (1) 9 Total assets as of May 31,2014 10 Total assets as of May 31,2015 11 Average total assets (2) 12 Return on net assets (ROA) (1 - 2) 9458 95821 116458 =(B9+B10/2 =B8/B11

Compute RNOA as follows: А 15 Net income (1) 16 Operating assets as of May 31,2014 17 Less: Operating liabilities as of May 31,2014 18 Net Operating assets as of May 31, 2014 $9.458.00 $57,002.00 $19.055.00 $37.947.00 20 Operating assets as of May 31,2015 21 Less: Operating liabilities as of May 31,2015 22 Net Operating assets as of May 31, 2015 23 Average operating assets (2) 24 Return on operating assets (RNOA) (1 + 2) $62.090.00 $20.180.00 $41.910.00 $39.928.50 23.69% Therefore, RNOA is 23.69%. Calculations are shown below: B 15 Net income (1) 19458 16 Operating assets as of May 31, 2014 57002 17 Less: Operating liabilities as of May 31,2014 19055 18 Net Operating assets as of May 31,2014 =B16-B17 19 20 Operating assets as of May 31, 2015 62090 21 Less: Operating liabilities as of May 31,2015 20180 22 Net Operating assets as of May 31, 2015 =B20-B21 23 Average operating assets (2) =B18+B22/21 24 Return on operating assets (RNOA) (1 - 2) =B15/B23