CFA CFA Level 1 FRA – Calculation of Equity

FRA – Calculation of Equity

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    • Snippy
      Participant
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      Okay, this might be quite simple for most of you, but i just couldn’t get the calculation of equity from the given values in the problem, for the calculation of ROE.

      So shoot away the solution please 🙂

    • Sarah
      Participant
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      …I am getting a really weird answer…67.4% o.O
      Now this is gonna bother me

    • Sophie Macon
      Keymaster
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      and what are the available choices of answer?

    • christine
      Participant
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      I dunno – isn’t it [ 944/ (1050+469) ] ?

    • christine
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      1050 being the average retained earnings, 469 being the average common stock. I might have done the math wrong.

    • Swift
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      Yeah thats what I would have done. Giving 2 years of balance sheet data is usually the give away for needing to use an average for the balance sheet item in a formula. Schweser can be a bit inconsistent with it though…

    • Sophie Macon
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      @Swift, I think ROE by definition should go with average equity to make sense as a ratio anyway…

    • lulu123
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      @sidmenon

      is the answer 62%?

      I did 944/ ((1400+1638)/2) = 0.62

    • Vijay
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      @SidMenon, what were the avaialble options by the way. Do you have 62% as well as 57.x%? Then I am in trouble. 🙂

    • Snippy
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      Ah, sorry for the late response guys. I put this up and went to sleep 🙂

      Actually, i was looking to get just the calculation of equity. Because finding ROE wasn’t my concern here, once i know the value of equity, i could calculate the rest. So thanks @christine, the value of equity is (1050 + 459) making it 1519. I just couldn’t figure out how to arrive at that value (stupid me :S). So, the answer is 944/1519 is 62.15%.

      Thanks everyone!

    • Snippy
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      Also, last night i tried doing questions for Income Tax under FRA after revising from the Elan guide, and man, i did not expect getting killed. For some reason, i just couldn’t get anything into my head. IMO, i find the last sections of FRA, i.e., Inventories, Income Taxes, Long-lived Assets and Non-current liabilities the toughest.

    • Sophie Macon
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      No worries @sidmenon! I’m with the view that you actually learn the most in the last month, because that’s when your knowledge is properly tested. It’ll get easier over next few weeks. Any questions, you know where to come to discuss! There’s a lot of brainy and friendly people that’ll help you out. You’re gonna get past this!

    • Snippy
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      Thanks Sophie 🙂 Yeah, that’s what i thought too. I’m going to throw tons of Qs at this forum! Be ready! 😛

    • Sophie Macon
      Keymaster
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      @sidmenon

    • vincentt
      Participant
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      @sophie same pic u posted !! :))

    • Sophie Macon
      Keymaster
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      Yup, when I get good questions, that’s me 😛

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