I used the standard 10% when calculating the economic profit for Novogen Limited. I searched through the firm’s financial reports to see if they stated this figure anywhere and was unable to find it. Novogen’s economic profit figures are largely negative figures. I feel that this is due to the firm conducting research and clinical trials and therefore has no goods or stock that it sells and relies on equity from shareholders and grants to keep operating.
As shown in the ratios calculated using 10% economic profit, the return on net operating assets (RNOA) are large negative numbers. Although this has slowly improved over the past few years. I believe the reason that 2015 was such a high figure is due to the value of their operating assets – in particular property, plant and equipment being low which in turn has given Novogen low net operating assets (NOA).
The CRC-P Federal Government grant that Novogen was to receive for three years from 2017 will boost their economic profit and hopefully they will see positive figures in the near future.
Mandy's blog 