All current ratio analysis

CFA Level II
#1

All “pure” ratios are unaffected by application of all current method. Got it. Then why does Schweser on page 266 of book 2 have a table that appears to indicate an appreciating or depreciating local currency changes both the current ratio and the net profit margin ratios using the a/c method? What am I missing? Just when I thought I had this crap figured out…

#2

Because it isn’t comparing the ratio to the LC statements, it is comparing All Current versus Temporal method ratios. With an appreciating LC, COGS will be higher under A/C than under Temp, so the profit margin will be lower, etc

#3

Thanks, my friend. If you are ever in Camarillo, CA, your money is no good here.

#4

you’re welcome!