Analyze the disaggregation of return on common equity

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Question - Disaggregating Return Measures for Analyzing Leverage

Selected financial information from Syntex Corporation is reproduced below:

1. NOA turnover (average NOA equals ending NOA) is 2.

2. NOPAT margin equals 5%.

3. Leverage ratio (average NFO/average common equity) is 1.786, and the spread is 4.4%.

Required -

a. Compute return on net operating assets (RNOA).

b. Compute return on common equity using its three major components.

c. Analyze the disaggregation of return on common equity. What is the "leverage advantage (in percent return) accruing to common equity"?

Reference no: EM132738507

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