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	$32,265
Net income attributable to Husky	2,113
Pretax NNE	342
Operating assets	46,735	$43,822
Operating liabilities	14,303	13,804
Equity attributable to Husky shareholders	28,423	26,036
Tax rate	27.20%

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

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

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

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

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

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

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

	ROE	RNOA	RNOA/ROE

	ROE	RNOA	Nonoperating component of ROE