Compute the DuPont Disaggregation of ROE

Refer to the balance sheets and income statement below for Facebook Inc.

FACEBOOK INC.

Consolidated Statement of Income

For Year Ended December $31,$ $ millions $2018$

Revenue $$57,449$

Costs and expenses

Cost of revenue $10,966$

Research and development $11,884$

Marketing and sales $7,846$

General and administrative $5,062$

Total costs and expenses $35,758$

Income from operations $21,691$

Interest and other income $($expense$),$ net $2,059$

Income before provision for income taxes $23,750$

Provision for income taxes $3,249$

Net income $$20,501$

FACEBOOK INC.

Consolidated Balance Sheet

At December $31,$ $ millions $20182017$

Current assets

Cash and cash equivalents $$11,630$ $$8,079$

Marketable securities $31,09535,243$

Accounts receivable, net $9,1985,832$

Prepaid expenses and other current assets $1,7791,020$

Total current assets $53,70250,174$

Property and equipment, net $24,68315,332$

Intangible assets, net $1,2941,884$

Goodwill $19,91219,832$

Other assets $2,5762,135$

Total assets $$102,167$ $$89,357$

Current liabilities

Accounts payable $$820$ $$380$

Partners payable $2,1522,001$

Accrued expenses and other current liabilities $5,5092,892$

Deferred revenue and deposits $1,75898$

Total current liabilities $10,2395,371$

Other liabilities $6,1906,417$

Total liabilities $16,42911,788$

Stockholders' equity

Common stock and additional paid$-$in capital $42,90642,195$

Accumulated other comprehensive loss $(760)(227)$

Retained earnings $43,59235,601$

Total stockholders' equity $85,73877,569$

Total liabilities and stockholders' equity $$102,167$ $$89,357$

a$.$ Compute return on equity $($ROE$).$

Numerator Denominator ROE

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b$.$ Apply the DuPont disaggregation into return on assets $($ROA$)$ and financial leverage.

Numerator Denominator ROA

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Numerator Denominator FL

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Ratio Number

ROA Answer

FL Answer

ROE

$0$

$***$ROE may be different from ROE calculation in part a due to rounding

c$.$ Calculate the profitability and productivity components of ROA.

Numerator Denominator PM

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Numerator Denominator AT

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d$.$ Confirm the full DuPont disaggregation: ROE $=$ PM $\backslash$times AT $\backslash$times FL$.$

Ratio Number

PM Answer

AT Answer

FL Answer

ROE

$0$

$***$ROE may be different from ROE calculation in part a$.$ due to rounding