Analysis and Interpretation of Profitability

Balance sheets and income statements for $3$M Company follow.

$\backslash$table$[[\backslash$table$[[$CM COMPANY$],[$For Years ended December $31($$ millions$)]],2018,2017],[$Net sales,$$21,494,$$$20,767,,],[$Operating expenses,,,,$],[$Cost of sales,$10,943,10,532,,],[$Selling$,$ general and administrative expenses,$4,987,4,347,,],[$Research$,$ development and related expenses,$1,821,1,870,,],[$Gain on sale of businesses,$(547),(586),,],[$Total operating expenses,$17,204,16,163,,],[$Operating income,$4,290,4,604,,],[$Other expense, net$*,136,94,,],[$Income before income taxes,$4,154,4,510,,],[$Provision for income taxes,$1,074,1,757,,],[$Net income including noncontrolling interest,$3,080,2,753,,],[$Less: Net income attributable to noncontrolling interest,$14,11,,],[$Net income attributable to $3$M$,$$$3,066,$$$2,742,,],[$kInterest expense, gross,$$350,$$$322,,]]$

$\backslash$table$[[\backslash$table$[[3$M COMPANY$],[$Consolidated Balance Sheets$],[$At December $31($$ millions, except per share amount$)]],2018,2017],[$Current Assets$],[$Cash and cash equivalents,$$1,872,$$$2,003],[$Marketable securities$,380,1,076],[$Accounts receivable,$3,293,3,222],[$Total inventories,$2,864,2,646],[$Prepaids$,741,937],[$Other current assets,$349,266]]\backslash$table$[[$Total current assets,$9,499,10,150],[$Property$,$ plant and equipment$-$net,$5,732,5,816],[$Goodwill$,6,593,6,897],[$Intangible assets$-$net,$1,743,1,926],[$Other assets,$1,345,1,395],[$Total assets,$$24,912,$$$26,184],[$Current liabilities$],[$Short$-$term borrowings and current portion of long$-$term debt,$$794,$$$1,216],[$Accounts payable,$1,486,1,276],[$Accrued payroll,$749,870],[$Accrued income taxes,$243,310],[$Other current liabilities,$1,820,1,777],[$Total current liabilities,$5,092,5,449],[$Long$-$term debt,$8,798,7,935],[$Pension and postretirement benefits,$1,959,2,375],[$Other liabilities,$3,010,2,962],[$Total liabilities,$18,859,18,721],[3$M Company shareholders' equity$],[$Common stock, par value,$9,9],[$Additional paid$-$in capital,$3,274,3,327],[$Retained earnings,$26,657,25,659],[$Treasury stock,$(19,435),(16,982)],[$Accumulated other comprehensive income $($loss$),(4,504),(4,609)],[$Total $3$M Company shareholders' equity,$6,001,7,404],[$Noncontrolling interest,$52,59],[$Total equity,$6,053,7,463],[$Total liabilities and equity,$$24,912,$$$26,184],[$Combined federal and state statutory tax rate,$22\%,]]$ a$.$ Compute net operating profit after tax $($NOPAT$)$ for $2018.$ Assume that the combined federal and state statutory tax rate is $22\%.$

b$.$ Compute net operating assets $($NOA$)$ for $2018$ and $2017.$

c$.$ Compute and disaggregate $3$M$\text{'}$s RNOA into net operating profit margin $($NOPM$)$ and net operating asset turnover $($NOAT$)$ for $2018.$ Demonstrate that RNOA $=$ NOPM $$ NOAT. $***$RNOA may be different from first RNOA calculation due to rounding

d$.$ Compute net nonoperating obligations $($NNO$)$ for $2018$ and $2017.$ Confirm the relation: NOA $=$NNO$+$ Total equity

e$.$ Compute return on equity $($ROE$)$ for $2018.$

f$.$ What is the nonoperating return component of ROE for $2018?$