Below are summary numbers from reformulated balance sheets for 2007 and 2006 for Kimberly-Clark Corporation, the products

Question:

Below are summary numbers from reformulated balance sheets for 2007 and 2006 for Kimberly-Clark Corporation, the products company, along with numbers from the reformulated income statement for 2007 (in millions).

(a) Calculate the following for 2007 and 2006:
(1) Net operating assets
(2) Net financial obligations
(3) Shareholders' equity
b. Calculate return on common equity (ROCE), return on net operating assets (RNOA), financial leverage (FLEV), and net borrowing cost (NBC) for 2007. Use beginning-of-period balance sheet numbers in denominators.
c. Show that the financing leverage equation works with your calculations.
d. Calculate the operating profit margin (PM) and asset turnover (ATO) for 2007 and show that RNOA = PM Ã—ATO.

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...