Investments in Associates - Change on Leverage? investment, existing, question, change, assets

Mechanic

Pertinent Info:
Total Assets: 56,396
Investment in Associate: 5,504
Stockholder’s Equity: 30,371
We’re adjusting ratios for the effects of removing an investment in an associate accounted for using the equity method.
My question, if existing Leverage (Assets/Equity) was 1.86, wouldn’t we need to remove the associate asset from assets and equity, thereby increasing leverage to 2.04?
Schweser says Leverage doesn’t change.

SeanWest

I vaguely recall this question - if I’m not mistaken, you’ve left out a few key details. In this case, I believe the adjustment to remove the investment in an associate is being made because the analyst had determined that comparable industry participants account for similar investments as available-for-sale. So while you’re removing the investment in an associate from both assets and equity … equity will be increased by any unrealized gain on the investment.
Though, I could be remembering wrong…
Given your basic set of facts - if you are simply “removing” an investment altogether, and not accounting for it some other way (which begs the question… why not?) - then your adjustment would be correct - reduce assets and equity.

firat

So, looks like the answer from source is correct. TA/E does not change.