ISMChapter05.docVIP

CHAPTER 5 RISK ANALYSIS Solutions to Questions, Exercises, and Problems, and Teaching Notes to Cases Interpreting the Alternative Decomposition of ROCE with Negative Financial Obligations. Because the firm has more financial assets than financial obligations, the net financial obligations will be negative. The reformulated balance sheet equation will still balance: Net Operating Assets = Net Financial Obligations + Common Equity. However, Net Operating Assets will exceed Common Equity because Net Financing Obligations are negative. In computing Operating ROA, NOPAT will exclude any