I’ve come across an item set on Intercorporate Investments namely a Consolidation v Prop v Equity question. The question asked which one one would have the highest/lowest/middle leverage.
Thinking about the table in Schweser which lists that ratios are generally better in equity method I decided off the whim without doing any calculations that the D/E would be better under Equity.
I was wrong however, in the answer it stated that the Equity account was greater under consolidation due to the minority interest so D/E was lowest?
In the real exam would we have conflicting scenario’s/tricks like this?