MOck PM Q29 they calculate ROE by NI/ last year equity plus this yrs earning plus adjustment i thought ROE we are checking how much this yrs NI is returing on what we had as equity at the start. why add current retained earings for the current year?
Did they take the average equity maybe? I’m too lazy to look it up. If nothings specified you should take NI/Average equity not sure if that helps
no it was not averages. pls stop being too lazy check and help a freind inneed.
ahhaah. yea come on justin…stop being too lazy and help me on this question with a full answer explanation provided in the answer key. 1) its all current method adjustment. 2) Normally we need average equity in computation of ROE (remember level 1…use average equity. justin is correct) BUT the question specifically asks for ROE using year end balances. beginning equity is translated at historical rate (easy enough) Add to that NI, which is translated at average rate (as is the whole IS) since its all current method, the CTA is not on IS, but put into equity (its a plug figure used to make the BS balance), so compute it. I’ve never heard of computing ROE on previous year’s equity balance. Year end or average balances. questions asks for year end. Pretty straight forward
thanks June, i reckon its yr end balances by why add the NI to equity? thats the part i don’t understand.
begining equity + ni = ending equity right? (assuming no divs) the question is really just asking you to compute ending equity under all current method. So take old equity (old rates) and add to it the new NI (average rates) and compute the CTA (plug figure is a bit tricky) to get ending equity.