Compute the DuPont Disaggregation of ROE

Refer to the balance sheets and income statement below for Facebook Inc.

FACEBOOK INC.
Consolidated Statement of Income
For Year Ended December 31, $ millions	2018
Revenue	$57,560
Costs and expenses
Cost of revenue	11,077
Research and development	11,995
Marketing and sales	7,846
General and administrative	5,173
Total costs and expenses	36,091
Income from operations	21,469
Interest and other income (expense), net	2,170
Income before provision for income taxes	23,639
Provision for income taxes	3,249
Net income	$20,390

FACEBOOK INC.
Consolidated Balance Sheet
At December 31, $ millions	2018	2017
Current assets
Cash and cash equivalents	$11,741	$8,079
Marketable securities	31,095	35,354
Accounts receivable, net	9,309	5,832
Prepaid expenses and other current assets	1,779	1,020
Total current assets	53,924	50,285
Property and equipment, net	24,683	15,443
Intangible assets, net	1,294	1,884
Goodwill	20,023	19,943
Other assets	2,576	2,135
Total assets	$102,500	$89,690
Current liabilities
Accounts payable	$820	$380
Partners payable	2,263	2,112
Accrued expenses and other current liabilities	5,509	2,892
Deferred revenue and deposits	1,869	98
Total current liabilities	10,461	3,760
Other liabilities	6,190	6,417
Total liabilities	16,651	10,177
Stockholders' equity
Common stock and additional paid-in capital	42,906	44,028
Accumulated other comprehensive loss	(760)	(227)
Retained earnings	43,703	35,712
Total stockholders' equity	85,849	79,513
Total liabilities and stockholders' equity	$102,500	$89,690

a. Compute return on equity (ROE).

	Numerator	Denominator	ROE
	Answer	Answer

b. Apply the DuPont disaggregation into return on assets (ROA) and financial leverage.

	Numerator	Denominator	ROA
	Answer	Answer

	Numerator	Denominator	FL
	Answer	Answer

	Ratio	Number
	ROA	Answer
	FL	Answer
	ROE

***ROE may be different from ROE calculation in part a due to rounding

c. Calculate the profitability and productivity components of ROA.

	Numerator	Denominator	PM
	AnswerRevenueTax expenseInterest expense netNet incomeNet income (adjusted)NOPATNet nonoperating expense (NNE)Average assetsAverage equityAverage operating assetsAverage nonoperating assetsAverage operating liabilitiesAverage nonoperating liabilitiesAverage net operating assets (NOA)Average net nonoperating obligations (NNO)	AnswerRevenueTax expenseInterest expense netNet incomeNet income (adjusted)NOPATNet nonoperating expense (NNE)Average assetsAverage equityAverage operating assetsAverage nonoperating assetsAverage operating liabilitiesAverage nonoperating liabilitiesAverage net operating assets (NOA)Average net nonoperating obligations (NNO)
	Answer	Answer

	Numerator	Denominator	AT
	AnswerRevenueTax expenseInterest expense netNet incomeNet income (adjusted)NOPATNet nonoperating expense (NNE)Average assetsAverage equityAverage operating assetsAverage nonoperating assetsAverage operating liabilitiesAverage nonoperating liabilitiesAverage net operating assets (NOA)Average net nonoperating obligations (NNO)	AnswerRevenueTax expenseInterest expense netNet incomeNet income (adjusted)NOPATNet nonoperating expense (NNE)Average assetsAverage equityAverage operating assetsAverage nonoperating assetsAverage operating liabilitiesAverage nonoperating liabilitiesAverage net operating assets (NOA)Average net nonoperating obligations (NNO)
	Answer	Answer

d. Confirm the full DuPont disaggregation: ROE = PM AT FL.

	Ratio	Number
	PM	Answer
	AT	Answer
	FL	Answer
	ROE

***ROE may be different from ROE calculation in part a. due to rounding