Final answer:
ROE and RNOA are financial ratios used to evaluate a company's profitability and operational efficiency, respectively. For Husky Energy Inc., ROE is computed by dividing net income by average shareholders' equity, and RNOA is calculated as net operating profit after tax over average net operating assets.
Step-by-step explanation:
The student's question pertains to the computation, disaggregation, and interpretation of two financial ratios: Return on Equity (ROE) and Return on Net Operating Assets (RNOA). These are significant indicators of a company's financial performance, specifically Husky Energy Inc., an integrated energy company based in Calgary, Alberta. ROE measures the profitability of a company in generating profits from shareholders' equity, while RNOA assesses the efficiency of a company in generating income from its operating assets.
Computing ROE and RNOA
ROE is calculated by dividing net income by average shareholders' equity. The formula is as follows: ROE = Net Income / Average Shareholders' Equity. Disaggregation of ROE can be done by separating the net income components, such as earnings from operations and financing costs, and analyzing them against equity.
RNOA is computed by dividing net operating profit after tax (NOPAT) by average net operating assets. The formula for RNOA is: RNOA = NOPAT / Average Net Operating Assets. For further analysis, NOPAT is dissected to understand the operational income, and net operating assets are broken down to understand the operating capital employed.
Interpreting ROE and RNOA
Interpreting ROE involves understanding how effectively the company is using shareholder investment to generate profit, while interpreting RNOA involves how well the company is using its operational assets to produce operating income. Higher ROE and RNOA values typically indicate that the company is managing its financials efficiently, contributing positively to profitability and operational efficiency. In summary, to answer the student's request, one would need Husky Energy Inc.'s detailed financial data, but the student can apply the above-said formulas and concepts to calculate and interpret the company's ROE and RNOA.