Analyzing the Growth in Shareholders’ Equity (Easy) The following numbers were calculated from the financial statements...
Analyzing the Growth in Shareholders’ Equity (Easy) The following numbers were calculated from the financial statements for a firm for 2012 and 2011:
(2012) (2011)
Return on common equity (ROCE) 15.2% 13.3%
Return on net operating assets (RNOA) 11.28% 12.75%
Sales (millions) $ 16754 $ 11035
Average net operating assets (millions) $6981 $4414
Average net financial obligations (millions) $2225 $ 241
Average common equity (millions) $4756 $ 4,173
Explain to what extent the change in common equity from 2011 to 2012 is due to sales growth, net assets required to support sales, and borrowing.
Homework Answers
Explain to what extent the change in common equity from 2011 to 2012 is due to sales growth, net assets required to support sales, and borrowing.
Answer:-
Change in CSE = 583
Change in sales = 5,719
Change in 1/ATO = 1/2.4 – 1/2.5 = 0.4167 – 0.4 = 0.0167
Change in NFO = 1,984
Change in CSE = 583 = (5,719 x 0.4) + (0.0167 x 16,754) – 1,984
= 2287.6 + 279.8 – 1,984.0
↓ ↓ ↓
Due to Due to Due to
Sales NOA Borrowing
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Analyzing the Growth in Shareholders’ Equity (Easy) The
following numbers were calculated from the financial statements...
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