Temporal vs current…
I understand the steps pretty well, but i have feeling the CFA will test and ask about a ratio and which one is higher… using temporal vs current.
Thsi will have to do with the plugin either in the balance sheet equity (CTA) or on the income statement for Temporal…
Is one going to always be higher/lower than the other?
Thanks!
Fixed Assets = Non-montary assets
I HATE THAT CFAI loves uses different terms
If the foreign currency is depreciating, fixed asset turnover ratio (Sales/ Fixed Asset) current rate method will always higher than temporal method.
One more
If the foreign currency is depreciating, gross margin in current rate method will always lower than temporal method. (Because COGS is higher in current rate method)