MSA ROE
Hello, Graham,
at MSA formula, the ROE use net income divide by equity, but at old exam, 2015 Fall #22, used the avg of equity; on the other paper, CCIR instruction, also use NI/avg equity. Should we use avg equity when we calculated ROE?
Thank You!
Comments
You raise a good point. The MSA Ratio reading and the CCIR instructions have different formulas for ROE. MSA uses just 1 year of equity, whereas CCIR uses an average of 2 years of equity. Both are acceptable, and 2015.Fall # 22 accepted both answers.
If you were only given 1 year of information, you would have to use the MSA Ratio method.