Mega-hospital MNO recently reported and published its RONA (return on net assets) for the fiscal year...

Mega-hospital MNO recently reported and published its RONA (return on net assets) for the fiscal year ending 06/30/2020. Among others, its RONA was meant to offer increasingly wary investors an updated metric of financial performance that takes into account MNO's earnings with regard to fixed assets and net working capital. If RONA = 0.22, then that means _________________________________________________.

Group of answer choices

- Hospital MNO, on average, generated a $0.22 loss for every $1.00 spent on its working capital combined with its fixed assets.

- Hospital MNO spent, on average, 22% more time to realize earnings with regard to its working capital combined with its fixed assets.

- Hospital MNO realized a higher rate of return of 22% more than the prior fiscal year with regard to its working capital combined with its fixed assets.

- Hospital MNO generated a 22% return on its working capital combined with its fixed assets.

- Hospital MNO generated $0.22 more for every $10.00 spent on its working capital combined with its fixed assets.

Solutions

Expert Solution

RONA measures the firm ability to generate returns on its revenue generating asset which consist of fixed asset and working capital.

The formula for RNOA is = income/ (working capital + fixed asset) * 100

Here if the RNOA is 0.22, that means the company is able to generate 0.22 dollar for every 1 dollar of fixed asset and working capital, that means 22% return on the (working capital + fixed asset).

Hence the correct answer is

Hospital MNO generated a 22% return on its working capital combined with its fixed assets.

The number 0.22 is positive that means the return is positive not negative, we can not say anything about previous year by the given data and it is 0.22 dollar for every 1 dollar not 10 dollar.

jeff jeffy answered 2 years ago

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