Question

Compute, Disaggregate, and Interpret RNOA of Competitors Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements. $ millions HAL SLB Total revenue $23,995 $32,815 Pretax net nonoperating expense 653 426 Net income 1,657 2,177 Average operating assets 23,361 67,836 Average operating liabilities 5,888 16,499 Marginal tax rate 22% 19% Return on equity 18.56% 5.86% a. Compute return on net operating assets (RNOA) for each company. b. Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for each company. Do not round until your final answer. Round answers to two decimal places (percentage example: 0.12345 = 12.35%). HAL SLB RNOA 7.09 % x 3.21 % X NOPM 6.91 % x 6.63 % X NOAT 1.03 x 0.48 X

Answer 1

	Return of Net Operating Assets (RNOA)		(in $)
(a)	Particulars	HAL	SLB
	Net Operating Profits after tax
	Net Income (after tax)	1,657	2,177
	Marginal Tax Rate	22%	19%
	Net Income (before tax) (Net Income (after tax)*100/(100-Tax Rate)	2,124	2,688
	Add : Pre tax net non operating Expense	653	426
	Net Operating Income before tax	2,777	3,114
	Marginal Tax Rate	22%	19%
	Less Tax Expense (Net Operating Income before tax* Marginal Tax Rate)	-611	-592
A	Net Operating Income after tax	2,166	2,522
	Average Net Operating Assets	HAL	SLB
	Average Operating Assets	23,361	67,836
	Average Operating Liability	5,888	16,499
B	Average Net Operating Assets	17,473	51,337
C	RNOA = Net Operating Income after tax / Average Net Operating Assets (A/B)	12.40%	4.91%
(b)	Net Operting Profit Margin = (Net Operating Profits after tax/ Total Revenue *100)
	Particulars	HAL	SLB
	Net Operating Income after tax (Refer A)	2,166	2,522
	Total Revenue	23,995	32,815
	Net Operting Profit Margin = (Net Operating Profits after tax/ Total Revenue *100)	9.03%	7.69%
	Net Operting Asset Turnover = (Total Revenue/ Average Net Operating Assets)
	Particulars	HAL	SLB
	Total Revenue	23,995	32,815
	Average Net Operating Assets (Refer B)	17,473	51,337
	Net Operting Asset Turnover = (Total Revenue/ Average Net Operating Assets)	1.37	0.64
		Times	Times