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