Simple FRA question 2010, into, question, average, balance

pacmandefense

I’m sorry to ask something so basic… Mind is going into meltdown.
For ratios, whenever we use a balance sheet item - we always take the average of the period… ie. (2009 value + 2010 value) / 2

profil

Whoops im losing it too, blended ratios yes i see in the post. FML.

dandman

So Ive seen this 2 different ways so i think i must have forgotten already. Inventory turnover is COGS/Avg Inv. so you average the inventory for the 2 years, at least one thats the way i do it for work.

mkytz15

Thanks. I think I’m getting stupider as we get closer to the exam!

dvilayphet

nope - for blended ratios (such as ROE), you can use the average. For pure balance sheet ratios, just use the balances.
I/S gives you a year’s activity, while a B/S gives you a point in time snapshot.
So when calculating ratios that rely on both B/S and I/S accounts, use the average on the B/S.