Below are selected ratios for Manufacturers Corporation.

Use this information answer the following questions.

Year 1 Year 2 Year 3

Net operating asset turnover 1.4 1.31 1.25

Inventory turnover 5.6 5.0 4.6

Accounts receivable turnover 12.1 11.9 12.1

Fixed assets turnover 1.3 1.29 1.29

Net operating profit margin 4.5% 4.6% 4.8%

Net operating assets/equity 2.10 1.98 1.77

EBIT/revenues 8.9% 8.6% 8.6%

Gross margin 20.1% 19.9% 19.8%

Income tax rate 35% 35% 35%

a. Calculate return on net operating assets for all three years.Identify reasons for any changes.

b. Calculate return on equity for all three years. Comment on changes.