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# FRA - Calculation of Equity

Posts: 653 Portfolio Manager
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

• edited April 2013
...I am getting a really weird answer...67.4% o.O
Now this is gonna bother me
• Posts: 1,980 Jr Partner
and what are the available choices of answer?
• On the movePosts: 632 Sr Portfolio Manager
I dunno - isn't it [ 944/ (1050+469) ] ?
• On the movePosts: 632 Sr Portfolio Manager
1050 being the average retained earnings, 469 being the average common stock. I might have done the math wrong.
• Posts: 29 Associate
edited April 2013
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...
• Posts: 1,980 Jr Partner
@Swift, I think ROE by definition should go with average equity to make sense as a ratio anyway...
• @sidmenon

I did 944/ ((1400+1638)/2) = 0.62
• Posts: 50 Sr Associate
@SidMenon, what were the avaialble options by the way. Do you have 62% as well as 57.x%? Then I am in trouble.
• Posts: 653 Portfolio Manager
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!
• Posts: 653 Portfolio Manager
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.
• Posts: 1,980 Jr Partner
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!
• Posts: 653 Portfolio Manager
Thanks Sophie Yeah, that's what i thought too. I'm going to throw tons of Qs at this forum! Be ready! :P
• Posts: 1,980 Jr Partner
• LondonPosts: 749 Sr Portfolio Manager
@sophie same pic u posted !! )
• Posts: 1,980 Jr Partner
Yup, when I get good questions, that's me :P