Below are some summary numbers for a firm for fiscal years 2014 and 2015 (in millions of dollars). [3+2]
Calculate return on common equity (ROCE), return on net operating assets (RNOA), and net borrowing cost (NBC) for the two years.
How much of the change in ROCE over the two years is due to:
(I) Change in profit margin
(II) Change in asset turnover
Change in financial leverage
Change in borrowing costs?