Below are some summary numbers for a firm for fiscal years 2019 and 2020 (in millions of dollars).

sales 12257 and 12867, operating income after tax 858 and 772, Net financial expense after tax 56 and 98, Net operating assest 4903, 4949 , common equity 3503 and 2149

Required:

(a)Calculate return on common equity (ROCE), return on net operating assets (RNOA), net financial obligations (NFO), and net borrowing cost (NBC) for 2019 and 2020 [Note: use year-end value for the calculation]. (6 marks)

(b)Calculate how much of the change in ROCE over the two years is due to:

(14 marks)

I.Change in financial leverage

II.Change in spread

III.Change in profit margin

IV.Change in asset turnover

(c)On the basis of your preceding analysis, critically evaluate the factors affecting the profitability of the company. (5 marks)