Compute and Interpret Ratios

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

$ millions $201920182017$

Net operating profit after tax $($NOPAT$)$ $$2,480$ $$2,575$

Net income $2,3952,435$

Total assets $13,56113,383$ $$15,102$

Equity $2,7232,9292,929$

Net operating profit after tax $($NOA$)7,9828,5169,080$

Treasury stock $18,03316,66814,784$

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: $0\mathrm{.}2345=23\mathrm{.}5\%).$

Metric $20192018$

RNOA Answer

$0$

Answer

$0$

ROA Answer

$0$

Answer

$0$

ROE Answer

$0$

Answer

$0$

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

$ millions $201920182017$

Assets, restated Answer

$0$

Answer

$0$

Answer

$0$

Equity, restated Answer

$0$

Answer

$0$

Answer

$0$

Using these restated numbers, recompute RNOA, ROA and ROE for both years.

Note: Round answers to one decimal place $($ex: $0\mathrm{.}2345=23\mathrm{.}5\%).$

Metric $20192018$

RNOA Answer

$0$

Answer

$0$

ROA Answer

$0$

Answer

$0$

ROE Answer

$0$

Answer

$0$

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

Answer

Of the three measures, which one is least influenced by the company$$s stock repurchase activity?