Question

QUESTION 4 Partially correct Mark 0.33 out of 1.00 Flag question Edit question Compute, Disaggregate, and Interpret ROE Selected fiscal year balance sheet and income statement information for the computer chip maker, Intel Corporation, follows (S millions). Balance sheet information (S millions) 2014 2013 2012 91.956 s92.358 $84351 Total assets Total shareholders equity 55,865 58,256 51.203 Income statement information (S millions) 2014 2013 2012 Sales revenue $55,870 $52.708 $53.341 192 244 90 Interest expense Net income 1.704 9,620 11.005 a. Calculate Intels return on equity (ROE) for fiscal years 2014 and 2013. Round answers to one decimal place (i.e., 0.2568 25.7%). Do not round until your final answer 20.5 2014 % 2013 17.6 % b. Calculate Intel's return on assets (ROA) and return on financial leverage (ROFL) for each year Round answers to one decimal place (i.e., 0.2568 25.7%). Do not round until your final answer ROA ROFL 129 X % 7.6 % 2014 2013 11.2 X % 6.4 % c. Use the DuPont formulation in the Business Insight on page 230 to analyze the variations in Intel's ROE over this period. Calculate net profit margin, asset turnover, and financial leverage Do not round until your final answer. Round answers to one decimal place (i.e., 0.2568 25.7%). AT NPM FL 2014 21 % 0.61 X 0.35 X 2013 18.3 0.6 0.31 x %

Answer 1

Part B

ROA = net income / average total assets

Average total assets = (ending balance of assets + beginning balance of assets)/2

2014 = 11704/((91956+92358)/2) = 12.7%

2013 = 9620/((92358+84351)/2) = 10.9%

ROFL = ROE – ROA

2014 = 20.5%-12.7% = 7.8%

2013 = 17.6% - 10.9% = 6.7%

Part C

NPM = net income / sales

2014 = 11704/55870 = 20.9%

2013 = 9620/52708 = 18.3%

AT = sales / average total assets

2014 = 55870/((91956+92358)/2) = 0.6

2013 = 52708/((92358+84351)/2) = 0.6

FL = ROE/(NPM*AT)

2014 = 20.5%/(20.9%*0.6) = 1.6

2013 = 17.6%/(18.3%*0.6) = 1.6

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