Temporal vs. All-Current For 1) net profit margin 2) ROE and 3) ROA… …The reason we cannot determine which (ratio for temporal or all current) will be higher/lower between Temporal and All Current under appreciating/depreciating currency scenarios… …is because net income and equity will be “mixed” balances due to different rates used under Temporal? Is that understanding correct? Thanks in advance.
Yes you can’t tell which ones will always be higher or lower because depending on whether you use Temporal or All-Current and depending on how exchange rates have moved over the life of the assets and the past year, you will wind up with different total assets, equity, and net income. Sales will always be the same on either mtehod though.