Sign up  |  Log in

Average of ratios

Hi!  When we use ratios between BS items and IS or CFS we must every time average the BS ratios, right??? When there is a BS item with another BS item, is it necessary to average the items?? Because in my notes I have the financial leverage as averages of Assets and Equity….

Thank you

~ The best is yet come ~

"indispensable down the final stretch and had a HUGE impact on my studies." - Christopher, USA

It’s not necessary. Averaging is method used to reduce the seasonality effect. You will find, ending values are used sometimes instead, especially for analyzing companies at its mature stage.

Divided We Stand...

But for the exam, when should average when chance given right? Between BS items and CF and IS items… afraid of making little silly mistakes

~ The best is yet come ~

No averaging on PL items, only on BS items if required.

Divided We Stand...