All pure income statement and balance sheet ratios are unaffected by the application of the current rate method. What we mean by “pure” is that the components of the ratio all come from the balance sheet, or the components of the ratio all come from the income statement. Return on assets is a “mixed ratio” because assets come from the balance sheet and are translated at the current rate and net income is translated at the average rate. Unless the exchange rate doesn’t change during the year, the two inputs will be translated at different rates, and the local currency value of the ratio will change when translated into the reporting currency. The other ratios will always be the same using the current rate method |
