Income statements and balance sheet follow for The New York Times Company. Refer
ID: 2652775 • Letter: I
Question
Income statements and balance sheet follow for The New York Times Company. Refer to these financial statements to answer the requirements.
$96,309.36 NOPAT 2013
$202,459.95 NOPAT 2012
$791,748 NOA 2013
$871,371 NOA 2012
7.80% RNOA 2013
21.19% RNOA 2012
8.65% ROE 2013
23.24% ROE 2012
Required:
a.What is the nonoperating return component of ROE for 2013 and 2012?
b.Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?
Please answer all parts of the question. written essay and math. Thank You!
Explanation / Answer
(a)
ROE = Operating Return + Non-Operating Return
(1) 2012
Operating Return (RNOA) = 21.19%
So, Nonoperating Return = ROE - Operating Return = 23.24% - 21.19% = 2.05%
(2) 2013
Operating Return = 7.80%
So, Nonoperating Return = ROE - Operating Return = 8.65% - 7.80% = 0.85%
(b)
Difference between ROE & RNOA is the nonoperating return. In 2012, 8.8% of total ROE is nonoperating return, implying more than 91% of the ROE is contributed by the core operating business.
In 2013, 10.9% of total ROE is nonoperating return, implying about 90% of the ROE is contributed by the core operating business.
This indicates a healthy "Core business" result, because, while ROE just measures the overall return on equity for a firm, this seggregation of returns from core and non-core business activities assume importance in assesing the business health regarding its main line of operations, which isolates any extraordinary or infrequent item's impact on overall return on equity. The lower the nonoperating return, the more robust the company's returns are.