Selected financial information from Syntex Corporation is reproduced below: 1. NOA turnover (average NOA equals ending NOA)

Question:

Selected financial information from Syntex Corporation is reproduced below:

1. NOA turnover (average NOA equals ending NOA) is 2.

2. NOPAT margin equals 5%.

3. Leverage ratio (average NFO/average common equity) is 1.786, and the spread is 4.4%.

Required:

a. Compute return on net operating assets (RNOA).

b. Compute return on common equity using its three major components.

c. Analyze the disaggregation of return on common equity. What is the “leverage advantage (in percent return) accruing to common equity”?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...