a$.$ Classify all income statement and balance sheet items as either operating or non$-$operating. Highlight all operating items in green and all non$-$operating items in yellow. For classifications that are subject to debate $($i$.$e$.,$ non$-$traditional accounts that were not covered in the textbook or videos$),$ provide arguments to support your classification. You can use a cell comment or a textbox to provide your arguments.

b$.$ Perform a complete disaggregation of ROE for each of the years in the tables. Please show Excel Calculations. Include the results of your analysis on the Summary tab of the Excel file. Use formulas in Excel to compute the components of ROE so that I can replicate your work. You should assume that the statutory tax rate $($including both federal and state taxes$)$ is $21\%$ for the last few years

Ratios Summary Sheet $($Not Comprehensive, but Pretty Close$)$ for ACCT $5263$

Profitability Ratios:

Return on Equity $($ROE$)$: Net Income $($NI$)*/$ Average Stockholders$$ Equity

Return on Assets $($ROA$)$: Net Income $($NI$)*/$ Average Total Assets $($ATA$)$

Adj ROA: Net income $+$ After$-$Tax Interest Expense $+$ Minority Interest $/$ ATA

Profit Margin $($PM$)$: Net Income $($NI$)*/$ Net Sales Revenue

Asset Turnover $($AT$)$: Net Sales Revenue $/$ Average Total Assets

$*$We sometimes Adjust the NI number above for one$-$time items and other AQ Issues.

Gross Profit Ratio $($GPR$)$: Net Sales Revenue $$ Cost of Goods Sold $/$ Net Sales Revenue

Dividend Yield $($DY$)$: Dividends Per Share $($DPS$)/$ Stock Price

Earnings Per Share $($EPS$)$: NI $$ Divs on Preferred Stock $/$ Weighted Avg. # of Common Shares Outstanding

Price$-$Earnings Ratios $($PE$)$: Stock Price $($SP$)/$ Earnings Per Share $($EPS$)$

Cash Return on Assets $($CROA$)$: Operating Cash Flows $($CFO$)/$ Average Total Assets $($ATA$)$

Cash Flows to Sale $($CFS$)$: Operating Cash Flows $($CFO$)/$ Sales

Operating Profitability Ratios:

Net Operating Profit Before Tax $($NOPBT$)$: Op Revenue $$ Op Expenses $($i$.$e$.,$ before Interest and Tax$)$

Net Operating Profit After Tax $($NOPAT$)$: NOPBT $$ Tax on Operating Profit

Tax on Operating Profit $=$ Tax Expense $+(-)*$ Pretax NonOp Expense $($Income$)*$ x Statutory Tax Rate

$*$If firms have Income $($net of Expenses$)$ from Interest then you subtract $($not add$)$ the Tax Shield

Tax Shield $=$ Pretax Nonoperating Expense x Statutory Tax Rate

Net Operating Assets $($NOA$)=$ Operating Assets $$ Operating Liabilities

Return on Net Operating Assets $($RNOA$)=$ NOPAT $/$ Average NOA

Net Nonoperating Obligations $($NNO$)=$ Nonoperating Liabilities $$ Nonoperating Assets

$*$If firms have more Nonoperating Assets than Liabilities this would be a negative number

Return on Equity $($ROE$)$: RNOA $+$ Nonoperating Return

Financial Leverage $($FLEV$)$: Average NNO $/$ Average Total Stockholders Equity

Nonoperating Return $=$ Financial Leverage $($FLEV$)$ x Spread

Net Nonoperating Expense Percentage $($NNEP$)$: NOPAT $$ Consolidated Net Income

Alt NNEP: Nonoperating Expenses x $(1-$ Statutory Tax Rate

Spread $=$ RNOA $$ Net Nonoperating Expense Percentage $($NNEP$)$

NNEP $=$ NNE $/$ Average NNO

Efficiency Ratios $($Somewhat Profitability, Somewhat Liquidity$)$:

Accounts Receivable Turnover $($ART$)$: Net Credit Sales $($or Sales$)/$ Average A$/$R

Average Collection Period: $365/$ Accounts Receivable Turnover

Inventory Turnover Ratio $($INVTR$)$: Cost of Goods Sold $/$ Average Inventory

Average Inventory Days Outstanding: $365/$ Inventory Turnover Ratio

Accounts Payable Turnover $($APT$)$: Cost of Goods Sold $+\backslash$Delta in Inventory $/$ Average Accounts Payable

Average Payment Period: $365/$ Accounts Payable Turnover

Liquidity Ratios:

Net Working Capital $($NWC$)$: Current Assets $$ Current Liabilities

Current Ratio $($CR$)$: Current Assets $/$ Current Liabilities

Acid$-$Test Ratio $($ATR$)$: Cash $+$ Current Investments $+$ Accounts Receivable $/$ Current Liabilities

$*$ATR is also known as the Quick Ratio

Cash Flow from Operations $($CFO$)$ to Current Liabilities: CFO$/$ Average Current Liabilities

Days of Working Capital Financing Needed $=$ Average Inventory Days $+$ Average Collection Period $$ Average Payment Period $($also known as the Cash Conversion Cycle$)$

Revenues to Cash Ratio: Revenues $/$ Average Cash Balance

Solvency Ratios:

Debt$-$to$-$Equity Ratio $($DER$)$: Total Liabilities $/$ Total Stockholders$$ Equity

Times Interest Earned $($TIER$)*$: Net Income $+$ Interest Expense $+$ Tax Expense $/$ Interest Expense

$*$If firm has Minority Interest in Earnings $($MIE$)$ add MIE to Numerator for TIER also

Liabilities to Assets Ratio: Total Liabilities $/$ Total Assets

Long$-$Term Debt $($LTD$)$ to Long$-$Term Capital Ratio: LTD $/$ LTD $+$ Shareholders$$ Equity

Long$-$Term Debt $($LTD$)$ to Shareholders$$ Equity Ratio: LTD $/$ Shareholders$$ Equity

Cash Flow from Operations $($CFO$)$ to Total Liabilities: CFO$/$ Average Total Liabilities

EBITDA Coverage: Earnings Before Taxes $+$ Interest Expense, net $+$ Depreciation $+$ Amortization $/$ Interest Expense

Free Cash Flow from Operations $($FCFO$)$ to Total Debt: CFO $-$ CAPEX$/$ Average Short$-$Term Debt $+$ Average Long$-$Term Debt

Total Debt$-$to$-$Equity: Long$-$Term Debt including Current Portion