Compute and Interpret Ratios

Selected balance sheet and income statement information from Illinois Tool Works follows.

$ millions	2019	2018	2017
Net operating profit after tax (NOPAT)	$2,688	$2,792
Net income	2,597	2,640
Total assets	14,164	13,978	$15,773
Equity	2,844	3,059	3,059
Net operating profit after tax (NOA)	8,337	8,894	9,484
Treasury stock	19,551	18,071	16,029

a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%).

Metric	2019	2018
RNOA	Answer	Answer
ROA	Answer	Answer
ROE	Answer	Answer

b. Adjust equity and total assets for the amount of treasury stock.

$ millions	2019	2018	2017
Assets, restated	Answer	Answer	Answer
Equity, restated	Answer	Answer	Answer

Using these restated numbers, recompute RNOA, ROA and ROE for both years. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%).

Metric	2019	2018
RNOA	Answer	Answer
ROA	Answer	Answer
ROE	Answer	Answer

c. Which profitability measures (from part a or part b) better reflect the companys profit levels during the two years? Answerpart

a. - using reported numberspart

b. - using restated numbers

Of the three measures, which one is least influenced by the companys stock repurchase activity? Answer

ROA

ROE

RNOA