Hi I’m hoping that somebody could clear this up for me.
I understand that pure ratios are unaffected by application of the current rate method.
A source of confusion for me is when the local currency is appreciating/depreciating. In the Schweser notes they state that if the foreign currency is appreciating, the reporting currency statements will show a lesser ratio and vice versa (I’ve remembered this relationship as being inverse)
I came past a Schweser practise exam question where the local currency was appreciating.
“will total asset turnover (calculated using end-of period balance sheet figures) likely be larger when calculated from the Rho (local currency) financial statements or the financial statements translated into the reporting currency (US$)
Are there general rules for this for e.g?
Foreign currency appreciates
- reporting ratios less
- functional currency (local currency) greater
Or is this purely based on the scenario that is given in the item set?