Direct Computation of Nonoperating Return with Noncontrolling Interest

Balance sheets and income statements for Costco Wholesale Corporation follow.

Costco Wholesale Corporation
Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)	September 2, 2018
Total revenue	$141,576
Operating expenses
Merchandise costs	123,152
Selling, general and administrative	13,876
Preopening expenses	68
Operating Income	4,480
Other income (expense)
Interest expense	159
Interest income and other, net	(121)
Income before income taxes	4,442
Provision for income taxes	1,263
Net income including noncontrolling interests	3,179
Net income attributable to noncontrolling interests	(45)
Net income attributable to Costco	$3,134

Costco Wholesale Corporation
Consolidated Balance Sheets
($ millions, except par value and share data)	September 2, 2018	September 3, 2017
Current assets
Cash and cash equivalents	$6,055	$4,546
Short-term investments	1,204	1,233
Receivables, net	1,669	1,432
Merchandise inventories	11,040	9,834
Other current assets	321	272
Total current assets	20,289	17,317
Net property and equipment	19,681	18,161
Other assets	860	869
Total assets	$40,830	$36,347
Current liabilities
Accounts payable	$11,237	$9,608
Accrued salaries and benefits	2,994	2,703
Accrued member rewards	1,057	961
Deferred membership fees	1,624	1,498
Other current liabilities	3,014	2,725
Total current liabilities	19,926	17,495
Long-term debt	6,487	6,573
Other liabilities	1,314	1,200
Total liabilities	27,727	25,268
Equity
Preferred stock, $0.01 par value:	0	0
Common stock, $0.01 par value:	4	4
Additional paid-in-capital	6,107	5,800
Accumulated other comprehensive loss	(1,199)	(1,014)
Retained earnings	7,887	5,988
Total Costco stockholders equity	12,799	10,778
Noncontrolling interests	304	301
Total equity	13,103	11,079
Total liabilities and equity	$40,830	$36,347

In 2018, Costcos return on equity (ROE) is 26.59% and its return on net operating assets (RNOA) is 26.52%. Assume that the combined federal and state statutory tax rate is 22%.

a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT). Round to the nearest whole number, if applicable. 2018 NNE $Answer

million 2018 NOPAT $Answer million

b. Compute net nonoperating obligations (NNO) for 2018 and 2017. 2018 NNO $Answer

million 2017 NNO $Answer million

c. Compute financial leverage (FLEV). Round answer to four decimal places. 2018 FLEV Answer

d. Compute NNEP and Spread. Round answers to two decimal places (example: 0.12345 = 12.35%). 2018 NNEP Answer

% 2018 Spread Answer%

e. Compute the noncontrolling interest ratio (NCI ratio). Round answer to four decimal places. 2018 NCI Ratio Answer

f. Confirm the relation: ROE = [RNOA + (FLEV Spread)] NCI ratio. 2018 ROE =Answer

% = [Answer%+(Answer X Answer%)] X Answer

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Compute and Analyze Measures for DuPont Disaggregation Analysis The 2018 balance sheets and income statement for Netflix Inc. follow. Refer to these financial statements to answer the requirements.

NETFLIX INC. Consolidated Statements of Earnings
For Year Ended December 31, $ thousands	2018
Revenues	$15,794,341
Cost of revenues	9,967,538
Marketing	2,369,469
Technology and development	1,221,814
General and administrative	630,294
Operating income	1,605,226
Other income (expense)
Interest expense	(420,493)
Interest and other income	41,725
Income before income taxes	1,226,458
Provision for income taxes	15,216
Net income	$ 1,211,242

NETFLIX INC. Consolidated Balance Sheets
in millions	2018	2017
Current assets
Cash and cash equivalents	$3,794,483	$2,822,795
Current content assets, net	5,151,186	4,310,934
Other current assets	748,466	536,245
Total current assets	9,694,135	7,669,974
Noncurrent content assets, net	14,960,954	10,371,055
Property and equipment, net	418,281	319,404
Other noncurrent assets	901,030	652,309
Total assets	25,974,400	$19,012,742
Current liabilities
Current content liabilities	$4,686,019	$4,173,041
Accounts payable	562,985	359,555
Accrued expenses	477,417	315,094
Deferred revenue	760,899	618,622
Total current liabilities	6,487,320	5,466,312
Noncurrent content liabilities	3,759,026	3,329,796
Long-term debt	10,360,058	6,499,432
Other noncurrent liabilities	129,231	135,246
Total liabilities	20,735,635	15,430,786
Stockholders equity
Preferred stock, $0.001 par value	0	0
Common stock, $0.001 par value	2,315,988	1,871,396
Accumulated other comprehensive loss	(19,582)	(20,557)
Retained earnings	2,942,359	1,731,117
Total shareholders equity	5,238,765	3,581,956
Total liabilities and shareholders equity	$25,974,400	$19,012,742

Required a. Compute ROE and ROA for 2018.

Do not round until your final answers. Round answer to two decimal places. 2018 ROE = Answer

%

2018 ROA = Answer

%

b. Confirm that ROE equals ROE computed using the component measures for profit margin, assets turnover, and financial leverage: ROE = PM AT FL.

Do not round until your final answer. Round answers two decimal places.

PM = Answer

%

AT = Answer

FL = Answer

c. Compute adjusted ROA (assume a statutory tax rate of 22%).

Round answer to two decimal places (ex: 0.03456 = 3.46%).

Adjusted ROA = Answer

%