While doing different mock questions, I’ve noticied that there are three diffirent formulas used to calculate ROE. These are:
ROE = NI / Current Total Equity
ROE = NI / Averate Total Equity)
ROE = NI / Previous Total Equity.
To me, the second and the third formula make sense, but not the first one. In the CFAI mocks the first one is constantly used to calculate suistanable growth rate. Certainly, all of them give different results.
The question is which one to use during the exam?