Compute, Disaggregate, and Interpret ROE and RNOA

Headquartered in Calgary, Alberta, Husky Energy Inc. is a publicly traded, integrated energy company. Selected fiscal year balance sheet and income statement information for Husky Energy follow (Canadian $ millions).

C$ millions	2018	2017
Revenues, net	$22,252
Net income attributable to Husky	1,457
Pretax NNE	236
Operating assets	32,231	$30,222
Operating liabilities	9,864	9,520
Equity attributable to Husky shareholders	19,602	17,956
Tax rate	27.20%

a. Compute the 2018 return on equity (ROE) and the 2018 return on net operating assets (RNOA).

	Numerator	Denominator	ROE
	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders
	Answer	Answer

	Numerator	Denominator	RNOA
	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders
	Answer	Answer

b. Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT).

	Numerator	Denominator	NOPM
	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders
	Answer	Answer

	Numerator	Denominator	NOAT
	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders	AnswerRevenues netNet income attributable to HuskyPretax NNENOPATNet nonoperating expense (NNE)Average operating assetsAverage operating liabilitiesAverage net operating assets (NOA)Average Equity attributable to Husky shareholders
	Answer	Answer

c. Compute the percentage of RNOA to ROE, and compute Huskys nonoperating return for 2018.

	ROE	RNOA	RNOA/ROE
	Answer	Answer

	ROE	RNOA	Nonoperating component of ROE
	Answer	Answer