why consolidation equity goes up? NI and equity are same for equity, prop conso and conso, right? Did I miss something here?
ROE should be the same across all methods (eg, NI and eq should stay the same). The other one…for leverage, with prop, it should increase. Eq uses lower leverage ratios, same ROE, and higher ratios on the other stuff.
for the stock option, anyone chose black scho model? what is the effect the amortization the expense over time instead of expense it in 2006 all together. I think the chose is on ROA and Profit Margin?
By the way, on the Vignette it specifically states that he averages the effects from the past three years. I thought it was a little ridiculous, but thats exactly what it says he did, so, I did it
that amortization q was a tricky one b/c it happened in 06 but it asked about what happened in 07- so in 2007, you would’ve had better ratios if you took the full hit in 06. that;s how i did it anyways. it was tricky b/c of the year.
ahh i remember that! now so the effect would be lower return on assets as he has higher assets and lesser income?
same as banni, don’t remember the lifo part but rest same.
adjustments - I agree with maile - I put down -5 I think pension expense was -3.
if you took the full hit in 06, then your 07 ROA would’ve been better than if you had amortized. and bigger income also. that’s how i took it anyways. i could be off.
The loss was 37million, gained 22 back on the sale. So now you are at a 15 loss, 3 years, 5 per year. They had a gain of 10…the adjustment was 15 (take away the 10 gain and add the 5 loss).
McLeod81 Wrote: ------------------------------------------------------- > lxwqh Wrote: > -------------------------------------------------- > ----- > > -10 for 2007 in the restructure charge. didn’t > do > > calculation; just removed the gain. > > > I hope you are right. There’s nothing else to > adjust for right? You just remove undo what was > posted on the financials. i also just took out the unusual gain of 10 for that year. even though the vignette said the analyst averaged over 3 years, the ? said what SHOULD he do. who knows
I was appalled at how horribly worded the questions were in general, this one was a good example. Do you do adjust the way he did (avg over three years) or do it the correct way? It was unclear to me. there were so many questions elsewhere on the test like that too…rather annoying.
singlesong80 Wrote: ------------------------------------------------------- > for the stock option, anyone chose black scho > model? > what is the effect the amortization the expense > over time instead of expense it in 2006 all > together. I think the chose is on ROA and Profit > Margin? I don’t think they require any specific method right? Most companies just use BS?
black scholes is not required for stock options…just typically used.
i went with 5 mn. They mentioned the structure average part in the last line of the qn. and catching that was the trick. I went with 10 mn first, then I changed it. OK, can someone tell me what was the answer for LIFO/FIFO adjustment? I went with -15, as far as I can remember.
bannisja Wrote: ------------------------------------------------------- > if you took the full hit in 06, then your 07 ROA > would’ve been better than if you had amortized. > and bigger income also. that’s how i took it > anyways. i could be off. I remember this question - I agree, 07 and onwards would have the amortisation expense of $1m therefore lower NI. If hit taken in 06, no amortisation expense in 07 and higher NI.
Is Black Scholes the correct answer here?
CFA curriculum, page 148 of volume two states: SEC Bulletin confirms that no particular technique (options valuation) is required or preferred. That ought to put to rest that question. On a diff. note–what was the proper accounting for the increase in the value for the Held to Maturity security in the PM section? I ignored it, and included only the Available for Sale increase in the Other comprehensive income.
I knew the ratios cold, but didn’t realise company A was using the equity method. Was the question about leverage structured so that this mattered? I.e. could it have said what would have been the effect of going from consol to prop/eq or vice versa?
my answer was -5, as they it was stated that all expenses/gains should be distributed through the period equally. not sure if i’am right, but the logic was in equal distributing of 15 for each of 3 years