Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following data relate to Nucor for four years. In 2017, Nucor’s net income was higher by $175.2 million because of a one-time effect of the Tax Cuts and Jobs Act. Nucor Corporation ($ in millions) 2015 2016 2017 2018 Total assets $ 14,327.0 $ 15,223.5 $ 15,841.3 $ 17,920.6 Common stockholders’ equity 7,849.9 8,254.7 9,084.8 10,202.0 Total debt 4,388.5 4,357.1 3,795.1 4,291.1 Sales 16,208.1 20,252.4 25,067.3 Net income 900.4 1,380.6 2,481.1 Interest expense 169.2 173.6 135.5 Assumed marginal income tax rate 0.37 0.37 0.23 Source: Nucor Form 10-Ks for 2015–2018. Required: In the following analyses, eliminate the one-time net income effect of the Tax Cuts and Jobs Act on 2017’s results. Calculate Nucor’s ROA for 2016, 2017, and 2018. Decompose ROA into operating profit margin and asset turnover components. Has Nucor’s profitability changed over the three years? Calculate the rate of return on common stockholders’ equity for 2016, 2017, and 2018. 2016 2017 2018 ROA % % % 2016 2017 2018 Operating profit margin % % % Asset turnover Has Nucor’s profitability changed over the three years? _____ 2016 2017 2018 Rate of return on common stockholders’ equity % % %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following data relate to Nucor for four years. In 2017, Nucor’s net income was higher by $175.2 million because of a one-time effect of the Tax Cuts and Jobs Act.

Nucor Corporation
($ in millions)	2015	2016	2017	2018
Total assets	$	14,327.0		$	15,223.5	$	15,841.3	$	17,920.6
Common stockholders’ equity		7,849.9			8,254.7		9,084.8		10,202.0
Total debt		4,388.5			4,357.1		3,795.1		4,291.1
Sales					16,208.1		20,252.4		25,067.3
Net income					900.4		1,380.6		2,481.1
Interest expense					169.2		173.6		135.5
Assumed marginal income tax rate					0.37		0.37		0.23

Source: Nucor Form 10-Ks for 2015–2018.

Required:

In the following analyses, eliminate the one-time net income effect of the Tax Cuts and Jobs Act on 2017’s results.

Calculate Nucor’s ROA for 2016, 2017, and 2018.
Decompose ROA into operating profit margin and asset turnover components.
Has Nucor’s profitability changed over the three years?
Calculate the rate of return on common stockholders’ equity for 2016, 2017, and 2018.