Refer to the financial statements of United Parcel Service in PS-41 to answer the following requirements.

REQUIRED:

a. Compute net operating profit after taxes (NOPAT) for 2017 and net operating assets (NOA) for 2017 and 2016. Assume a tax rate of 35%.

b. Compute the return on net operating assets (RNOA) for 2017. What percentage of UPS's ROE is generated by operations?

c. Decompose RNOA by computing net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2017.

d. What can be inferred about UPS from these ratios?

Data from PS-41:

Transcribed Image Text:

UNITED PARCEL SERVICE, INC. Income Statement Years Ended December 31 ($ millions) 2017 2016 2015 Revenue... S65,872 S60,906 $58,363 Operating expenses: Compensation and benefits.. Repairs and maintenance.. Depreciation and amortization.. Purchased transportation. 34,588 34,770 31,028 1,600 2,282 10,989 2,690 1,155 5,039 1,538 1,400 2,084 8,043 2,482 2,224 9,129 2,118 ..... Fuel...... Other occupancy 1,037 1,022 ... Other expenses. 4,623 4,636 Total operating expenses. 58,343 55,439 50,695 .... Operating profit..... Other income and (expense): Investment income and other... Interest expense... Total other income and (expense). 7,529 5,467 7,668 72 50 15 (453) (381) (341) (381) (331) (326) 5,136 1,705 Income before income taxes 7,148 2,238 7,342 2,498 ... Income tax expense. $ 4,910 $ 4,844 $ 3,431 Activa ind Net income .