If given data for two years say 1999 and 2000 and asked to calculate the ROE are we supposed to divide the net income by the beginning bal sheet value (99) or the ending bal sheet value (00). I’ve seen it done both ways in the CFA text, Schweser says to use beginning, so i’m confused which to use. Anyone?
I would always use beginning, but if that answer doesn’t come up then use ending. If both come up, I would stick to beginning. If neither come up, try average. I would go in that order.
beggininng also apprlicable to RI valuation RI(t) = BV (t-1) + BV(t-1)*(ROEt -r / r-g) 1luv free tibet