Share
Explore BrainMass

Three measures of return on average total equity is most useful

China Petroleum & Chemical Corp (Sinopec) provides two sets of financial statements in its annual report. One set of financial statements is prepared in accordance with Chinese (PRC) accounting rules and regulations and another is prepared in accordance with IFRS. The company also provides a reconciliation of IFRS net income and net assets to US GAAP. Sinopec reported the following amounts under three different sets of accounting rules in its 2006 annual report:

RMB millions PRC IFRS US GAAP
Net profit attributable to equity
shareholders 2006 50,664 55,408 54,862

Total equity attributable to equity
shareholders 12-31-2006 254,875 262,297 262,297

Total equity attributable to equity
shareholders 12-31-2005 215,623 222,803 222,803

Determine the % difference in net profit attributable to share holders and average total equity attributable to equity shareholders for 2006 under the three different sets of accounting rules.

Calculate return on average total equity for 2006 under the three different sets of accounting rules.

Determine the % difference in return on average total equity under the three sets of rules.

Which of the three measures of return on average total equity is most useful in assessing Sinopec's profitability?

Solution Summary

The three measures of return on average total equity which is the most useful is determined.

$2.19