Query

[Ameet Daulat]

Sir,

I need some in understanding a problem that i faced while doing my mock exams that i had purchased from you.

In some questions, e.g 2010 afternoon session Q 83 they are using ROE= ROA x Financial leverage and ignoring NP margin. Can you please help me in this because according to the formula NP margin should be included in it. Would really appreciate your quick response

[Arif Irfanullah]

ROE = NI / Equity

ROA = NI / Assets

Financial Leverage = Assets x Equity

Multiple ROE and FL. Assets  cancel out and you are left with NI/Equity ... which is ROE

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Regards,

Arif Irfanullah

www.arifirfanullah.com