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Changes in return on common equity vs financing activities

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The following numbers were calculated from the financial statements for a firm for 2006 and 2005:

Return on common equity (ROCE) Return on net operating assets (RNOA) Net borrowing cost (NBC)
Average net financial obligations (millions) Average common equity (millions)

2006
15.2% 11.28% 2.9% $ 2,225 $ 4,756

2005
13.3% 12.75% 3.2% $ 241 $ 4,173

Explain how much of the change in ROCE from 2005 to 2006 is due to operating activities and how much is due to financing activities. How much of the change in ROCE from financing activities is due to a change in financial leverage, and how much is due to a change in the spread over net borrowing costs?

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Excel spreadsheet works the data and explains how much of the ROCE change in a year is due to operating activities and how much is thanks to financing activities.

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Attached is the Excel spreadsheet with explanation of the answer and the answer itself.

2006 2005 Change
Return on common equity (ROCE) ...

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