Income statements and balance sheets follow for Snap-On Incorporated. Refer to these financial statements to answer the requirements.
Required:
a. Compute net nonoperating expenses (NNE) for 2016 and 2015. Assume that combined federal and state statutory tax rate is 37% for both fiscal years.
b. Compute net nonoperating obligations (NNO) for 2016 and 2015.
c. Compute Spread for 2016 and 2015. Return on net operating assets is 17.5% and 16.8% in 2016 and 2015, respectively. In 2014, net nonoperating obligations were $786.4 million.
d. Compute FLEV for 2016 and 2015. In 2014, net nonoperating obligations were $786.4 million and total shareholders' equity was $2,225.3 million.
e. Calculate return on equity (ROE) for both years. Show that ROE = RNOA + (FLEV × Spread) x NCI ratio. Interpret the year-over-year change in ROE. (Hint: consider the changes in both FLEV and Spread.) In 2014, shareholders' equity attributable to Snap-On was $2,207.8 and total shareholders' equity was $2,225.3.

Question

Income statements and balance sheets follow for Snap-On Incorporated. Refer to these financial statements to answer the requirements.
   Required: 
a. Compute net nonoperating expenses (NNE) for 2016 and 2015. Assume that combined federal and state statutory tax rate is 37% for both fiscal years.
b. Compute net nonoperating obligations (NNO) for 2016 and 2015.
c. Compute Spread for 2016 and 2015. Return on net operating assets is 17.5% and 16.8% in 2016 and 2015, respectively. In 2014, net nonoperating obligations were $786.4 million.
d. Compute FLEV for 2016 and 2015. In 2014, net nonoperating obligations were $786.4 million and total shareholders' equity was $2,225.3 million.
e. Calculate return on equity (ROE) for both years. Show that ROE = RNOA + (FLEV × Spread) x NCI ratio. Interpret the year-over-year change in ROE. (Hint: consider the changes in both FLEV and Spread.) In 2014, shareholders' equity attributable to Snap-On was $2,207.8 and total shareholders' equity was $2,225.3.

Quizplus · Accepted Answer

The Answer of Income statements and balance sheets follow for Snap-On Incorporated. Refer to these financial statements to answer the requirements.
   Required: 
a. Compute net nonoperating expenses (NNE) for 2016 and 2015. Assume that combined federal and state statutory tax rate is 37% for both fiscal years.
b. Compute net nonoperating obligations (NNO) for 2016 and 2015.
c. Compute Spread for 2016 and 2015. Return on net operating assets is 17.5% and 16.8% in 2016 and 2015, respectively. In 2014, net nonoperating obligations were $786.4 million.
d. Compute FLEV for 2016 and 2015. In 2014, net nonoperating obligations were $786.4 million and total shareholders' equity was $2,225.3 million.
e. Calculate return on equity (ROE) for both years. Show that ROE = RNOA + (FLEV × Spread) x NCI ratio. Interpret the year-over-year change in ROE. (Hint: consider the changes in both FLEV and Spread.) In 2014, shareholders' equity attributable to Snap-On was $2,207.8 and total shareholders' equity was $2,225.3.

Income Statements and Balance Sheets Follow for Snap-On Incorporated