Compute and Compare ROE ROA and RNOA Selected balance sheet

Compute and Compare ROE, ROA, and RNOA Selected balance sheet and income statement information for Oracle Corporation follows. (Perform the required computations from the perspective of an Oracle shareholder. S millions Operating assets Nonoperating assets Total assets May 31, 2015 May 31, 2014 $52,091$47,003 38,819 85.822 54,368 106,459 Operating habilities Nonoperating liabileies Total liabilinies Total Oracle stockholders\' equity Toral revenues Operating income before tax Nonoperating expense before tax Tas expense Net income 19,725 41,958 18,600 24,097 61,683 42,697 44.776 43,125 38,104 13,538 037 3,520 8,981 a. Compute return on equity (ROD Round answer to two decimal places (ex: 0.12345 . 12.35%) b. Compute return on net assets (ROA) Round answers to two decimal places (percentage ex: 0.12345-12.35%) c. Compute return on net operating assets (RNOA) Round answers to two decimal places (percentage ex: 0.1 2345-1 2.35%)

Solution

Answer a.

Average Stockholders’ Equity = ($44,776 + $43,125) / 2
Average Stockholders’ Equity = $43,950.50

ROE = Net Income / Average Stockholders’ Equity
ROE = $8,981 / $43,950.50
ROE = 20.43%

Answer b.

Average Total Assets = ($106,459 + $85,822) / 2
Average Total Assets = $96,140.50

ROA = Net Income / Average Total Assets
ROA = $8,981 / $96,140.50
ROA = 9.34%

Answer c.

NOA, 2015 = Operating Assets - Operating Liabilities
NOA, 2015 = $52,091 - $19,725
NOA, 2015 = $32,366

NOA, 2014 = Operating Assets - Operating Liabilities
NOA, 2014 = $47,003 - $18,600
NOA, 2014 = $28,403

Average NOA = ($32,366 + $28,403) / 2
Average NOA = $30,384.50

RNOA = Net Income / Average NOA
RNOA = $8,981 / $30,384.50
RNOA = 29.56%