Compute ROA and Adjusted ROA
The following information was reported by Yum Brands in its form 10-K. Use this information to answer the requirements.
\$ millions Dec. 31, 2019 Dec. 31, 2018
Net income \$1,716 \$1.964
Interest expense, net 906 918
Average total assets 5,103 5.143
a. Which ratio removes the effect of the company's financing decisions from the ratio?
b. Compute (i) return on assets, (ii) the adjusted return on assets, and (iii) the percentage difference in the measures for each year. Assume a statutory tax rate of 22%.
i. Compute return on assets (ROA) for 2018 and 2019
Note: 1. Select the appropriate numerator and denominator used to compute ROA from the drop-down menu options. 2. Enter the numerator and denominator amounts to compute ROA for each year.
Year Numerator Denominator ROA
2018 \$ 0 \$ 0 %
2019 \$ 0 \$ 0 %
ii. Compute adjusted return on assets (ROA) for 2018 and 2019
Note: 1. Select the appropriate numerator and denominator used to compute adjusted ROA from the drop-down menu options. 2. Enter the numerator and denominator amounts to compute adjusted ROA for each year.
Year Numerator Denominator adjusted
ROA
2018 \$ 0 \$ 0 %
2019 \$ 0 \$ 0 %
iii. Compute the percentage difference between ROA and adjusted ROA for 2018 and 2019
Year % Difference
2018 0%
2019 0%
Are the two ratios materially different from each other?
