I have finished 2, got 80% and 73%, how about your folks? still confused about some questions, among them is the test 2 question 11 it asks you to use all current to calculate ROE, which is bloody easy, but it got me the answer actually translated NI with average rate, which is no brainer then translated equity with historical rate, for which I have fking no clue can anyone help me understand this? P.S. under all current, asset and liability all translated with current rate, which means equity as a whole (including adjustment) should be equivalent to translating with current rate as well, am I right?
Common stock is translated under the historical rate under both the current and temporal methods. Best, TheChad
you mean the equity in ROE means stock? I never understood it in this way. I think the equity means book value = asset - liability, am I wrong?
you are right in saying that equity incl. adjustment due to translation would be translated at a current rate.
ndzhai Wrote: ------------------------------------------------------- > you mean the equity in ROE means stock? > I never understood it in this way. > > I think the equity means book value = asset - > liability, am I wrong? You are right that Equity is calculated as A - L, however it is made up of different components: 1. Shareholder Equity (Common Stock) 2. Other Comprehensive Income 3. Retained Earnings Since shareholder equity is translated at the historical rates and Assets and Liabilities are translated at current rates, there will be a difference, which is the ‘adjustment due to translation’ that cpk mentioned. This amount falls under the Other Comprehensive Income category. Best, TheChad PS. If I am wrong I apologize, but this is how I understand it to be.
I totally agree with the components of equity. the question now is about ROE, which equals net income / equity what does the equity in denominator mean? does it simply mean stockholder’s equity or total book equity which is asset - liability? I always believe it to be the later one. if so, how to address my very original question of translating equity at historical rate?
I thought you didn’t translate equity - it was a plug in value to balance the accounts once you had translated all the assets and liabilities
ROE under Secret Sauce says ‘uncertain’