P3-51. Analysis and Interpretation of ROE and RNOA with No Noncontrolling Interest The 2018 balance sheets and income statement for Netflix Inc. follow. Refer to these financial statements to answer the requirements. NETFLIX INC. Consolidated Statement of Earnings For Year Ended December 31, $ thousands 2018 $15,794,341 9,967,538 2,369,469 1,221,814 630.294 Revenues. Cost of revenues Marketing Technology and development General and administrative.. Operating income.. Other income (expense) Interest expense. Interest and other income. Income before income taxes Provision for income taxes. 1,605,226 (420,493) 41,725 1,226,458 15,216 Net income. $ 1,211,242 NETFLIX INC. Consolidated Balance Sheets in thousands, except par value 2018 2017 $ 3,794,483 5,151,186 748,466 Current assets Cash and cash equivalents. Current content assets, net. Other current assets ... Total current assets ... Noncurrent content assets, net. .... Property and equipment, net Other noncurrent assets.. Total assets 9,694, 135 14,960,954 418,281 901,030 $ 2,822,795 4,310,934 536,245 7,669,974 10,371,055 319,404 652,309 $19,012,742 $25,974,400 $ 4,173,041 359,555 315,094 618,622 $ 4,686,019 562,985 477,417 760,899 6,487,320 3,759,026 10,360,058 129,231 Current liabilities Current content liabilities. .. Accounts payable. Accrued expenses Deferred revenue . Total current liabilities... Noncurrent content liabilities Long-term debt.... Other noncurrent liabilities Total liabilities. ... Stockholders' equity Preferred stock, $0.001 par value Common stock, $0.001 par value. . . Accumulated other comprehensive loss. Retained earnings . Total stockholders' equity.... Total liabilities and stockholders' equity. ... 5,466,312 3,329,796 6,499,432 135,246 15,430,786 20,735,635 0 2,315,988 (19,582) 2,942,359 0 1,871,396 (20,557) 1,731,117 5,238,765 3,581,956 $25,974,400 $19,012,742 Required a. Compute net operating profit after tax (NOPAT) for 2018. Assume that the combined federal and state statutory tax rate is 22%. b. Compute net operating assets (NOA) for 2018 and 2017. c. Compute RNOA and disaggregate it into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2018; confirm that RNOA = NOPM > NOAT. d. Compute net nonoperating obligations (NNO) for 2018 and 2017. Confirm the relation: NOA = NNO + Shareholders' equity. e. Compute return on equity (ROE) for 2018. f. Infer the nonoperating return component of ROE for 2018. g. Comment on the difference between ROE and RNOA. What does this relation suggest about Netflix's use of equity capital