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

SALES 13482 15,568

operating income after tax 943 849

net financial expense 56 98

comprehsinve income 887 751

net operating assets 4903 4949

common equity 3503 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

On the basis of your preceding analysis, critically evaluate the factors affecting the profitability of the company.