Faculty of Business Management & Globalization

BBK3513 Financial Statement Analysis

Individual Assignment 60 %

Submit to the lecturer by the 24 October 2014.

Answer all questions.

1.

How is return on invested capital used as an internal management tool?

2.

Why is return on invested capital one of the most relevant measures of company
performance? How do we use this measure in our analysis of financial statement?

3.

Why is interest expense ignored when computing return on net operating assets (RNOA)?

4.

Discuss the motivation for excluding nonproductive assets from invested capital when
computing return. What circumstances justify excluding assets from invested capital?

5.

Why must income used in computing return on invested capital be adjusted to reflect the
capital base (denominator) used in the computation?

6.

What is the purpose of measuring asset turnover for different asset categories?

7.

What factors (limitations) enter into our evaluation of return on net operating assets?

8.

How is the equity growth rate computed? What does it measure?

9.

How do return on net operating assets and return on common differ?

10.

What are the components of return on common shareholders equity?

components measure.

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