Compute and Interpret Ratios

Selected balance sheet and income statement information from Illinois Tool Works follows.

$ millions	2019	2018	2017
Net operating profit after tax (NOPAT)	$2,610	$2,711
Net income	2,521	2,563
Total assets	15,068	14,870	$16,780
Equity	3,026	3,254	3,254
Net operating profit after tax (NOA)	8,869	9,462	10,089
Treasury stock	18,982	17,545	15,562

a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company.

Note: Round answers to one decimal place (ex: 0.2345 = 23.5%).

Metric	2019	2018
RNOA	Answer	Answer
ROA	Answer	Answer
ROE	Answer	Answer

b. Adjust equity and total assets for the amount of treasury stock.

$ millions	2019	2018	2017
Assets, restated	Answer	Answer	Answer
Equity, restated	Answer	Answer	Answer

Using these restated numbers, recompute RNOA, ROA and ROE for both years. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%).

Metric	2019	2018
RNOA	Answer	Answer
ROA	Answer	Answer
ROE	Answer	Answer

c. Which profitability measures (from part a or part b) better reflect the companys profit levels during the two years? Answer

Of the three measures, which one is least influenced by the companys stock repurchase activity? Answer