Do the assigned questions using Malimash, Inc.'s 2014 financial data below:
Malimash, Inc.
2014 Financial Data ($ millions)
Income Statement Data
Sales Revenue
$7,120.00
Depreciation
$230.00
Interest Expense
$10.00
Pretax Income
$2,550.00
Income Taxes
$900.00
Net Income
$1,650.00
Balance Sheet Data
Current Assets
$4,850.00
Fixed Assets, Net
$2,400.00
Total Assets
$7,250.00
Current Liabilities
$3,290.00
Long-Term Debt
$100.00
Shareholders' Equity
$3,860.00
Total Liabilities and Shareholders' Equity
$7,250.00
Required:
- Calculate return on common equity for 2014 using year-end amounts and assuming no preferred dividends.
- Disaggregate the ROCE into operating (RNOA) and non-operating components.
- Comment on Merck's use of leverage. (Assume all assets and current liabilities are operating at a 35% tax rate).