"Equity" clarification... include retained earnings?

Just trying to straighten some thing out here. When ratios/calc’ns “equity”, does one include retained earnings? Here are some examples. 1. Holding effects in currency translation- you include retained earnings in equity right? 2. Leverage ratios- use total shr-holders equity (inc’g retained earnings)? 3. WACC D/E use mkt value of equity? 4. RI we use BV of Equity (inc’g retained earnings??)? This seems strange to me because we should be taking a charge for required return to equity right… so shouldn’t mkt value be used to reflect true residual income, analagous to WACC in EVA calc’n being based on MKT values?? Anyone?

  1. Include RE 2. Include RE 3. Market Value of equity (usually in a question, it’s share price x # of shares o/s) 4. Include RE 90% sure…lets see what others say.

1 yes 2 yes 3 no - forget book values here you need the market price 4 yes so pretty much all the time.

cool, thanks guys. I’m so excited to kill this thing on saturday!!!

Can someone please tell me if the B0 below is = equity on the BS or share price x # of shares? B0 + (ROE-r)*B0 / (r-g)

thats beginning book value : total shareholders’ funds… (excluding minority interest i presume)