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hoangvu90

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tT
发表于 2011-7-13 16:48 | 只看该作者
Is it NI(t)/Equity(t-1)?

I remeber I saw some question which use Equity(t), but I think it really should be last year end equity, is it? Thanks
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giorgio10

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2#
发表于 2011-7-13 16:48 | 只看该作者
When in doubt, refer to CFA text Volume 2 (ratios are presented justbefore the readings begin). I think ROE was defined as NI(t) divided by AVERAGE ROE in t (end and beginning values in t)

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Analyze_This

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3#
发表于 2011-7-13 16:48 | 只看该作者
Well, residual income is defined as NI(t) - r*BV(t-1) = (ROE - r)*BV(t-1)

So for residual income, it has to be Equity(t-1).

For the DuPont model Financial Leverage is defined as (Average Assets)/(Average Equity).

That means the ROE suggested by the DuPont model uses average equity to determine ROE.


It probably just depends on what they ask, and what they give you. I suspect the question will make it obvious which one to use. Obviously if it doesn't give you enough info to calc average equity, just use (t-1).

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smuggycfa

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4#
发表于 2011-7-13 16:48 | 只看该作者
ROE = ni/avg equity

ive never seen it as ni/last years equity

Sometimes they use ni/ending equity

Use last years equity for RI models. cost of equity * last years book value = equity charge.

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economicz

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5#
发表于 2011-7-13 16:48 | 只看该作者
In equity, when calculate RI, it actually use previous year ending to get this year's earning (NI), it implys to use Equity(t-1).

in FSA, the answer of some question Equity(t) and NI (t) to get ROE.....


revisor Wrote:
-------------------------------------------------------
> When in doubt, refer to CFA text Volume 2 (ratios
> are presented justbefore the readings begin). I
> think ROE was defined as NI(t) divided by AVERAGE
> ROE in t (end and beginning values in t)

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