Question One: ROCE decomposition using reformulated financial statements Leonie, Inc. had the following summary financial data for the current year and the next year: Reformulated Balance Sheet Assets 2019 S 2020 $ Liabilities and 2019 2020 S Stockholders' Equity Operating Assets (OA) 15,000 18,500 Operating Liabilities (OL) 5.000 6,500 Financial Assets (FA) 1.000 1,000 Financial Obligation (FO) 6,000 5.000 5,000 8,000 Common Stockholders' Equity (CSE) Total Assets 16,000 16,000 19,500 19,500 Total Liabilities and Stockholders' Equity Reformulated Income Statement Items 2019 $ 2020 $ Operating Revenue Less Operating Costs Operating Profit (EBIT) Add Financial Income (FI) Less Financial Expense (FE) 20,000.00 12,500.00 7,500.00 22,900.00 13,100.00 9,800.00 30.00 30.00 900.00 750.00 Net Financial Expense (NFE) 870.00 720.00 Earnings Before Tax (EBT) 6,630.00 9,080.00 1,524.9 2,088.4 Less Tax @ 23% Net Income 5.105.1 6,991.6 Short-term borrowing rate = 10%; Interest rate on financial obligations = 15% (a) Calculate the following: Basic Earning Power: EBIT = Net Operating Assets (NOA) Return on Invested Capital (ROIC)=NOPAT = NOA (111) Equity Multiplier (iv) RNOA; (v) ROCE; (vi) FLEV; (vil) NBC: (viii) SPREAD: (ix) ATO: (x) PM; (xi) ROOA; (xii) OLLEV; and (xiii) OL SPREAD; (6) Prove that ROCE = RNOA + FLEV (RNOA - NBC), and (c) Prove that RNOA = ROOA + OLLEV*OL SPREAD Question One: ROCE decomposition using reformulated financial statements Leonie, Inc. had the following summary financial data for the current year and the next year: Reformulated Balance Sheet Assets 2019 S 2020 $ Liabilities and 2019 2020 S Stockholders' Equity Operating Assets (OA) 15,000 18,500 Operating Liabilities (OL) 5.000 6,500 Financial Assets (FA) 1.000 1,000 Financial Obligation (FO) 6,000 5.000 5,000 8,000 Common Stockholders' Equity (CSE) Total Assets 16,000 16,000 19,500 19,500 Total Liabilities and Stockholders' Equity Reformulated Income Statement Items 2019 $ 2020 $ Operating Revenue Less Operating Costs Operating Profit (EBIT) Add Financial Income (FI) Less Financial Expense (FE) 20,000.00 12,500.00 7,500.00 22,900.00 13,100.00 9,800.00 30.00 30.00 900.00 750.00 Net Financial Expense (NFE) 870.00 720.00 Earnings Before Tax (EBT) 6,630.00 9,080.00 1,524.9 2,088.4 Less Tax @ 23% Net Income 5.105.1 6,991.6 Short-term borrowing rate = 10%; Interest rate on financial obligations = 15% (a) Calculate the following: Basic Earning Power: EBIT = Net Operating Assets (NOA) Return on Invested Capital (ROIC)=NOPAT = NOA (111) Equity Multiplier (iv) RNOA; (v) ROCE; (vi) FLEV; (vil) NBC: (viii) SPREAD: (ix) ATO: (x) PM; (xi) ROOA; (xii) OLLEV; and (xiii) OL SPREAD; (6) Prove that ROCE = RNOA + FLEV (RNOA - NBC), and (c) Prove that RNOA = ROOA + OLLEV*OL SPREAD
