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 $54,163 Costs and expenses Cost of revenue Research and development Marketing and sales General and administrative Total costs and expenses Income from operations Interest and other income (expense), net Income before provision for income taxes Provision for income taxes 9,355 10,273 7,846 3,451 30,925 23,238 448 23,686 3,249 $20,437 Net income 2018 2017 FACEBOOK INC. Consolidated Balance Sheet At December 31, $ millions Current assets Cash and cash equivalents Marketable securities Accounts receivable, net Prepaid expenses and other current assets Total current assets Property and equipment, net Intangible assets, net Goodwill $10,019 $8,079 31,095 33,632 7,359 5,832 1,779 1,020 50,252 48,563 24,683 13,721 1,294 1,884 18,301 18,221 $2,576 $2,135 $97,106 $84,524 Other assets $820 $380 541 390 Total assets Current liabilities Accounts payable Partners payable Accrued expenses and other current liabilities Deferred revenue and deposits Total current liabilities Other liabilities Total liabilities Stockholders' equity Common stock and additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 5,509 2,892 147 98 7,017 3,760 6,190 6,417 13,207 10,177 42,906 40,584 (760) (227) 41,753 33,990 83,899 74,347 $97,106 $84,524 a. Compute return on equity (ROE). Note: Round percentage to one decimal place (for example, enter 6.7% for 6.6555%). 25.9 X % b. Apply the DuPont disaggregation into return on assets (ROA) and financial leverage. Note: For FL, round amount to three decimal places (for example, enter 6.776 for 6.77555). Note: For ROA and ROE, round percentages to one decimal place (for example, enter 6.7% for 6.6555%). ROA X FL = ROE 22.5 % x 114.8 X = 29.9 % X C. Calculate the profitability and productivity components of ROA. Note: For AT, round amount to three decimal places (for example, enter 6.776 for 6.77555). Note: For PM and ROA, round percentages to one decimal place (for example, enter 6.7% for 6.6555%). PM x AT = ROA 0% X X 29.82 X = 0 % d. Confirm the full DuPont disaggregation: ROE = PM * AT * FL. Note: For AT and FL, round amounts to three decimal places (for example, enter 6.776 for 6.77555). Note: For PM and ROE, round percentages to one decimal place (for example, enter 6.7% for 6.6555%). PM X AT X FL = ROE 0% X X 0 X 0 X = 0 % x
