标题: Inflation and emerging market [打印本页] 作者: jcfa2011 时间: 2011-7-11 19:26 标题: Inflation and emerging market
Just a quick question regarding inflation in valuating emerging markets. The book mentioned that emerging econ typically experiences high inflation therefore on the balance sheet inventory, plant, proper, etc may be shown at values well below their current cost. Also solvency ratios would be too high since assets are understated. Can someone please explain those two items for me ? Thank You作者: zephyranalyst 时间: 2011-7-11 19:26
good explanation gangsta作者: llxx 时间: 2011-7-11 19:26
I am struggling with this, you say assets in the denominator (Debt/Assets) would be lower (worth less than market) but so would debt
Isnt LTD recorded at amortized cost (add discount/less premium) so wont Debt also be understated so how can you be sure that Debt/Assets will be understated
In fact your NOPLAT is higher which will make Retained Earnings and hence Equity higher so wont D/E be understated?作者: President1988 时间: 2011-7-11 19:26
ah good argument, i don't know the right answer sorry. My inclination is that debt/equity is understated with inflation because the debt value goes down too so that we owe back less (what all governments want to do)作者: OmarAdnan 时间: 2011-7-11 19:26
D/A should be lower because D is included in A. In other words, A is bigger than D so that means A is MORE understated than D is, so D/A overall is higher than it should be.
