Calculate return on common equity

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Reference no: EM133002875

Below are some summary numbers for a firm for fiscal years 2019 and 2020 (in millions of dollars).

Required:

(a) Calculate return on common equity (ROCE), return on net operating assets (RNOA), net financial obligations (NFO), and net borrowing cost (NBC) for 2019 and 2020 [Note: use year-end value for the calculation].

(b) Calculate how much of the change in ROCE over the two years is due to:

I. Change in financial leverage

II. Change in spread

III. Change in profit margin

IV. Change in asset turnover

(c) On the basis of your preceding analysis, critically evaluate the factors affecting the profitability of the company.

Reference no: EM133002875

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