Generally Accepted Accounting Principles and Operating Assets
P4-39 a) Net Operating profit after Taxes (NOPAT) * NOPAT2011= 2114-714-2 +(51-87)*.37 * NOPAT2011=$1389 b) Net Operating Assets (NOA)= Operating Assets- Operating Liabilities * NOA2011= (17849-1103-22) - (8663-557-441)- 1183
NOA2011= $7876
* NOA2010= (18302-1826-90) – (8978-663-35) – 1256
NOA2010= $6850 c) RNOA2011= NOPAT/ AVG NOA * RNOA2011= 1389/((7876+6850)/2)
RNOA2011= 18.86%
NOPM2011= NOPAT/SALES * NOPM2011= 1389/50272
NOPM=2.76%
NOAT2011= SALES/ AVG NOA * NOAT2011= 50272/((7876+6850)/2)
NOAT2011= 6.83
RNOA2011= NOPM*NOAT * RNOA2011=2.76%*6.83 * RNOA2011= 18.87% (0.01% rounding error)
Best Buy lower than average NOPM reveals that the company earns less profit after operating expenses and taxes for each dollar of sales than its competitors.
Best Buy superior NOAT shows that the company uses its operating assets more efficiently than its competitor. For each dollar of net operating assets, best buy generates $6.83 in sales.
Best buy has a RNOA higher than the industry average due to efficient use of operating assets.
d) Net Non-operating obligations (NNO)= Non-operating liabilities – Non-operating assets * NNO2011= 441+557+711-(1103+22)+690
NNO2011= $1274 * NNO2010= 1104+35+663- (1826+90)+644
NNO2010= $530
NOA= NNO + Stockholders’ Equity * NOA2011= 1274+6602
NOA2011= 7876 * NOA2010= 530+6320
NOA2010=6850
e) Return on Equity ( ROE)= Net Income/ AVG equity * ROE2010= 1317/( (7292+6964)/2)
ROE2010= 18.48% f) Non-operating return= ROE- RNOA * NOPAT2010= 2235-802+ (94*.37)
NOPAT 2010= 1467.78 * RNOA2010= 1467.78/((7876+6850)/2)
RNOA2010= 19.99% * Non-operating return= 18.48%-19.99%
Non-operating return= -1.59% ROE< RNOA indicates that the company borrows capital to fund operating assets that yield a return lower than the cost of debt.
P.40 a) Current Ratio= Current Assets/ Current Liabilities
NOA2011= $7876
* NOA2010= (18302-1826-90) – (8978-663-35) – 1256
NOA2010= $6850 c) RNOA2011= NOPAT/ AVG NOA * RNOA2011= 1389/((7876+6850)/2)
RNOA2011= 18.86%
NOPM2011= NOPAT/SALES * NOPM2011= 1389/50272
NOPM=2.76%
NOAT2011= SALES/ AVG NOA * NOAT2011= 50272/((7876+6850)/2)
NOAT2011= 6.83
RNOA2011= NOPM*NOAT * RNOA2011=2.76%*6.83 * RNOA2011= 18.87% (0.01% rounding error)
Best Buy lower than average NOPM reveals that the company earns less profit after operating expenses and taxes for each dollar of sales than its competitors.
Best Buy superior NOAT shows that the company uses its operating assets more efficiently than its competitor. For each dollar of net operating assets, best buy generates $6.83 in sales.
Best buy has a RNOA higher than the industry average due to efficient use of operating assets.
d) Net Non-operating obligations (NNO)= Non-operating liabilities – Non-operating assets * NNO2011= 441+557+711-(1103+22)+690
NNO2011= $1274 * NNO2010= 1104+35+663- (1826+90)+644
NNO2010= $530
NOA= NNO + Stockholders’ Equity * NOA2011= 1274+6602
NOA2011= 7876 * NOA2010= 530+6320
NOA2010=6850
e) Return on Equity ( ROE)= Net Income/ AVG equity * ROE2010= 1317/( (7292+6964)/2)
ROE2010= 18.48% f) Non-operating return= ROE- RNOA * NOPAT2010= 2235-802+ (94*.37)
NOPAT 2010= 1467.78 * RNOA2010= 1467.78/((7876+6850)/2)
RNOA2010= 19.99% * Non-operating return= 18.48%-19.99%
Non-operating return= -1.59% ROE< RNOA indicates that the company borrows capital to fund operating assets that yield a return lower than the cost of debt.
P.40 a) Current Ratio= Current Assets/ Current Liabilities