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a. 2016 2015 Income from operations $         20,182.00 $ 18,161.00 Provision for income taxes $            2,953.00...

a. 2016 2015
Income from operations $         20,182.00 $ 18,161.00
Provision for income taxes $            2,953.00 $    6,314.00
Other Income (expense) $             (431.00) $       346.00
a. NOPAT 2016 2015
20182-(2953+(431*.37)) $17,069.53
18161-(6314+(-346*0.37)) $ 11,975.02
b. 2016 2015
OPERATING ASSETS $         80,454.00 $ 77,946.00
OPERATING LIABILITIES $         61,569.00 $ 57,002.00
b. NOA 2016 2015
$         18,885.00 $ 20,944.00
c. 2016 2015
NOPAT $17,069.53 $ 11,975.02
Average NOA              19,914.50      23,832.00
RNOA 85.71% 50.25%
d. 2016 2015
Net Income $         16,798.00 $ 12,193.00
Average Stockholders' Equity $         76,040.00 $ 84,933.50
ROE 22.09% 14.36%

A. How do you interpret Net Opearting Profit after Tax for 2016 and 2015? What is the performance on the calculations based on your analysis?

B. How do you interpret Net Opearting Assets for 2016 and 2015? What is the performance on the calculations based on your analysis?

C. How do you interpret Retun on Net Operating Assets for 2016 and 2015? What is the performance on the calculations based on your analysis?

D. How do you interpret Return on Equity for 2016 and 2015? What is the performance on the calculations based on your analysis?

Solutions

Expert Solution

a) Net operating profit after tax is similar to EBIT adjusted for taxes.

Now as we can see that income from operations and consequently NOPAT is increasing from 2015 to 2016. This means that company has become more operationally efficient. Also, the company may have changed the capital strucuture to its advantage as even after a considerable increase in operating income, it has reduced the tax liability to less than half. Therefore company is going strong.

b)

Operating assets an well as liabilities have increased a little. NOw NOPAT has increased a lot as compared to increase in operation assetes. This means that assets are being utilized properly and more efficiently.

c) Return on net operating assets=Net Income / Average of the Operating Assets
This percentage has increased considerably from 50.25% to 85.71% following our analysis of previous two parts of increased efficiency from assets.

d) ROE= Net Income/ Shareholder's equity.

Return on equity is the income to equity holders from their investment. It has increased from 14.36% to 22.09%. This is a considerable increase to equity holders. This results mostly from increase in Net Income. This means that net income has increase much more given per unit equity.

jeff jeffy answered 1 year ago
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