Operating Liabilities - Correct Answer total liabilities - total debt
AP
Accrued Liabilities
Deferred Income Taxes
What are financial Assets? - Correct Answer assets that a company could liquidate and pay of its
shareholders without affecting its value proposition
What are financial obligations? - Correct Answer Short-term borrowings
long-term debt (in one year and longer)
leases (but remember that lease assets are operating)
Invested Capital - Correct Answer Net Working Capital + Net Fixed Assets + Intangible Assets
OR
Total Stockholders equity + financial obligations - financial assets
Net operating assets = Invested Capital
, Working Capital - Correct Answer Current Assets - current liabilites
ROIC - Correct Answer Return on Invested Capital
ROIC = Income on invested capital / Avg. Invested Capital
This is an accounting ratio. to compare income investors earned to what they have invested
NOPAT - Correct Answer Net Operating Profit After Taxes
- revenue less expenses (only operating) after tax because taxes are a cost that have to be covered
- To determine NOPAT we must adjust tax expense so that it only reflects taxes on operating activities
Operating income * (1- Tax rate)
Income on Invested Capital - Correct Answer -Income on Invested Captial = NOPAT
Net Financial Expense before tax - tax savings attributable to financing activites + consolidated net
income
Company XYZ invested $500,000 in a new project that generated a net income of $75,000 in the first
year. The average invested capital for the year was $450,000. Calculate the Return on Invested Capital
(ROIC) for the project. - Correct Answer 16.67%
Company ABC reported an operating profit of $200,000, and the tax rate is 30%. Calculate the Net
Operating Profit After Tax (NOPAT). - Correct Answer 200,000*(1-.3) = 140,000
RNOA - Correct Answer Return on Net Operating Assets
= NOPAT/Avg. Net Operating Assets
WACC - Correct Answer Weighted average cost of capital.
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