Analysis and Interpretation of ROE and RNOA with No Noncontrolling Interest Balance sheets and income statements for Johnson & Johnson follow. Refer to these financial statements to answer the requirements.

JOHNSON & JOHNSON, INC. Consolidated Statement of Earnings
Years Ended ($ millions)	2008	2007	2006
Sales to customers	$63,747	$61,095	$53,324
Cost products sold	18,511	17,751	15,057
Gross profit	45,236	43,344	38,267
Selling, marketing and administrative expenses	21,490	20,451	17,433
Research expense	7,577	7,680	7,125
Purchase in-process research and development	181	807	559
Restructuring	--	745	--
Interest (income)	(361)	(452)	(829)
Interest expense, net of portion capitalized	435	296	63
Other (income) expense, net	(1,015)	534	(671)
	28,307	30,061	23,680
Earnings before provision for taxes on income	16,929	13,283	14,587
Provision for taxes on income	3,980	2,707	3,534
Net earnings	$ 12,949	$ 10,576	$ 11,503

JOHNSON & JOHNSON, INC. Consolidated Balance Sheets
($ millions)	December 28, 2008	December 30, 2007
Assets
Cash and cash equivalents	$10,768	$7,770
Marketable securities	2,041	1,545
Accounts receivable trade, net	9,719	9,444
Inventories	5,052	5,110
Deferred taxes on income	3,430	2,609
Prepaid expenses and other receivables	3,367	3,467
Total current assets	34,377	29,945
Marketable securities, noncurrent	4	2
Property, Plant and equipment, net	14,365	14,185
Intangible assets, net	13,976	14,640
Goodwill, net	13,719	14,123
Deferred taxes on income	5,841	4,889
Other assets	2,630	3,170
Total assets	$ 84,912	$ 80,954
Liabilities and Shareholders' Equity
Loans and notes payable	$3,732	$2,463
Accounts payable	7,503	6,909
Accrued liabilities	5,531	6,412
Accrued rebates, returns and promotions	2,237	2,318
Accrued salaries, wages and commissions	1,432	1,512
Accrued taxes on income	417	223
Total current liabilities	20,852	19,837
Long-term debt	8,120	7,074
Deferred taxes on income	1,432	1,493
Employee related obligations	7,791	5,402
Other liabilities	4,206	3,829
Total liabilities	42,401	37,635
Shareholders' equity
Preferred stock-without par value (authorized and unissued 2,000,000 shares)	--	--
Common stock-par value $1.00 per share	3,120	3,120
Accumulated other comprehensive income	(4,955)	(693)
Retained earnings	63,379	55,280
	61,544	57,707
Less: common stock held in treasury, at cost	19,033	14,388
Total Shareholders' equity	42,511	43,319
Total liability and shareholders' equity	$ 84,912	$ 80,954

(a) Compute net operating profit after tax (NOPAT) for 2008. Assume that the combined federal and statutory rate is: 37.1%.

Treat other (income) expense, net as non-operating. Round your answer to the nearest whole number. 2008 NOPAT = $Answer

(b) Compute net operating assets (NOA) for 2008 and 2007. 2008 NOA = $Answer 2007 NOA = $Answer

(c) Compute RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2008. Do not use NOPM x NOAT to caculate RNOA. (Do not round until your final answers. Round answers to two decimal places.) 2008 RNOA = Answer% 2008 NOPM = Answer% 2008 NOAT = Answer

(d) Compute net nonoperating obligations (NNO) for 2008 and 2007. Confirm the relation: NOA = NNO + Stockholders' equity. 2008 NNO = $Answer 2007 NNO = $Answer

(e) Compute return on equity (ROE) for 2008. (Round your answers to two decimal places. Do not round until your final answer.) 2008 ROE =Answer%

(f) Infer the nonoperating return component of ROE for 2008. (Use answers from above to calculate. Round your answer to two decimal places.) 2008 nonoperating return = Answer%

(g) Comment on the difference between ROE and RNOA. Which of the following statements best describes the inference from the difference between JNJ's ROE and RNOA?

ROE>RNOA implies that JNJ's equity has grown faster than its NOA. The faster increase of equity compared to NOA allows higher dividends to be paid to JNJ's stockholders.

RNOA greater than ROE implies that JNJs stockholders are funding a significant amount of liquidity in the form of cash and investments in marketable securities.

ROE>RNOA implies that JNJ has taken on too much financial leverage. The high financial leverage results in a higher interest rate on JNJ's debt, therefore the cost of debt is greater.

ROE>RNOA implies that JNJ has increased its financial leverage during the period. The increase in financial leverage also increases JNJ's risk, therefore increasing the expected ROE by JNJ's stockholders.