Exam 4: Analyzing and Interpreting Financial Statements

The only difference between return on assets (ROA) and return on net operating assets (RNOA) is that the denominator in RNOA is typically smaller than the denominator in ROA because the former is net of operating liabilities.

The fiscal 2016 financial statements for Walgreens Boots Alliance, Inc., report net sales of $117,351 million, net operating profit after tax of $4,687 million, net operating assets of $39,502 million. The 2015 balance sheet reports net operating assets of $42,683 million. Walgreen's 2016 net operating asset turnover is:

If Company A has a higher net operating profit margin (NOPM) than Company B, then Company A's RNOA will be higher.

The 2016 balance sheet of Whole Foods Market reports operating assets of $5,489 million, operating liabilities of $2,066 million, and total liabilities of $3,117 million. Whole Food's average net operating assets are:

Liquidity refers to:

The 2016 balance sheet of The New York Times Company shows net operating profit margin (NOPM) of 3.1%, net operating asset turnover (NOAT) of 4.39, return on equity of 3.5%, and adjusted return on assets of 2.2%. What is the company's nonoperating return?

Income statements and balance sheets follow for The New York Times Company. Refer to these financial statements to answer the requirements. Required: a. Compute net operating profit after tax (NOPAT) for 2016 and 2015. Assume that combined federal and state statutory tax rates are 37% for both years. b. Compute net operating assets (NOA) for 2016 and 2015. c. Compute return on net operating assets (RNOA) for 2016 and 2015. Comment on the year-over-year change. Net operating assets are $397,299 thousand in 2014. d. Disaggregate RNOA into profitability and asset turnover components (NOPM and NOAT, respectively). What explains the year-over-year change in RNOA?

Mattel Inc.'s 2016 financial statements show operating profit before interest and tax of $519,233 thousand, net income of $318,022 thousand, provision for income taxes of $91,720 thousand and net nonoperating expense before tax of $109,491 thousand. Assume Mattel's statutory tax rate for 2016 is 37%. Mattel's 2016 effective tax rate is:

What is liquidity? Identify and discuss two ways to measure a company's liquidity.

The fiscal year-end 2016 financial statements for Walt Disney Co. report revenues of $55,632 million, net operating profit after tax of $9,954 million, net operating assets of $58,603 million. The fiscal year-end 2015 balance sheet reports net operating assets of $59,079 million. Walt Disney's 2016 net operating profit margin is:

The fiscal 2016 balance sheet for Whole Foods Market reports the following data (in millions). What is the company's current ratio?

Selected balance sheet and income statement data follow for Walgreens Boots Alliance, Inc. for the year ended August 31, 2016 (in millions). Use the data to calculate a) return on net operating assets (RNOA), b) net operating profit margin (NOPM), and c) net operating asset turnover (NOAT). Confirm that RNOA = NOPM × NOAT.

Selected balance sheet and income statement data follow for Staples, Inc. (in millions). Use the data to calculate a) return on net operating assets (RNOA), b) net operating profit margin (NOPM), and c) net operating asset turnover (NOAT) for fiscal 2015.

Income statements and balance sheets follow for Microsoft Corporation and Apple Inc. Refer to these financial statements to answer the requirements. Required: a. Compute the current ratio and quick ratio for both firms for fiscal 2016. Compare the ratios and determine which company is more liquid. b. Compute the times interest earned and liabilities-to-equity ratios for both firms for fiscal 2016. Which company is more solvent? c. Do you have any concerns about either company's ability to meet its debt obligations? Explain.

Mattel Inc.'s 2016 financial statements show operating profit before interest and tax of $519,233 thousand, net income of $318,022 thousand, provision for income taxes of $91,720 thousand and net nonoperating expense before tax of $109,491 thousand. Assume Mattel's statutory tax rate for 2016 is 37%. Mattel's 2016 tax shield is:

The 2017 balance sheet of Staples, Inc. shows total assets of $8,271 million, operating assets of $6,566 million, operating liabilities of $3,527 million, and shareholders' equity of $3,688 million. Staples' 2017 net operating assets are:

Which of the following is a measure of liquidity?

To determine tax on net operating profit, we begin with total tax expense and deduct taxes related to net nonoperating expenses.

Selected income statement data follow for Harley Davidson, Inc., for the year ended December 31, 2016 (in thousands). What is the company's times interest earned ratio?

Use the following selected balance sheet and income statement data for Valero Energy Corporation (in $ millions) to compute a) return on equity, b) profit margin (PM), c) asset turnover (AT), and d) financial leverage (FL) for fiscal 2016. Show that ROE = PM × AT × FL.