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ROCE decomposition using reformulated financial statements [(10 x 4) + 10 + 10 = 50 points] Leonie, Inc. had the following summary financial data for

ROCE decomposition using reformulated financial statements [(10 x 4) + 10 + 10 = 50 points]

Leonie, Inc. had the following summary financial data for the current year and the next year:

Reformulated Balance Sheet

Assets

2020 $

2021 $

Liabilities and Stockholders' Equity

2020 $

2021 $

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

Common Stockholders' Equity (CSE)

5,000

8,000

Total Assets

16,000

19,500

Total Liabilities and Stockholders' Equity

16,000

19,500

Reformulated Income Statement

Items

2020 $

2021 $

Operating Revenue

20,000.00

22,900.00

Less Operating Costs

12,500.00

13,100.00

Operating Profit (EBIT)

7,500.00

9,800.00

Add Financial Income (FI)

30.00

30.00

Less Financial Expense (FE)

900.00

750.00

Net Financial Expense (NFE)

870.00

720.00

Earnings Before Tax (EBT)

6,630.00

9,080.00

Less Tax @ 23%

1,524.9

2,088.4

Net Income

5,105.1

6,991.6

Short-term borrowing rate = 10%; Interest rate on financial obligations = 15%

  • Calculate the following:

  • Basic Earning Power: EBIT Net Operating Assets (NOA);

  • Return on Invested Capital (RNOA) = NOPAT NOA;

  • Equity Multiplier = Total assets Stockholders' equity

  • RNOA; (v) ROCE; (vi) FLEV; (vii) NBC; (viii) SPREAD; (ix) ATO; and (x) PM; and

  • Prove that ROCE = RNOA + FLEV (RNOA - NBC or NNEP)

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