E3-35. Adjusting for Negative Equity ANALYST ADJUSTMENTS 3.2 Phillip Morris reported the following information in its 2018 Form I 0-K.
$millions 31-Dec-18 31-Dec-17 Stockholders' (Deficit) Equity Common stock, no par value (2, 109,316,331 shares issued in 2018 and 2017) .. . $ 0 $ 0 Additional paid-in capital. ....................... . .. .. ..... .. .. .. ..... . 1,939 1,972 Earnings reinvested in the business . ... . .......... .. .. . ....... . .. . .... . . 31 ,014 29,859 Accumulated other comprehensive losses .......... . . .. . .... . .. . . .. .... . . (10,111) (8,535)
Total stockholders' equity before treasury stock .......................... . 22,842 23,296 Less: cost of repurchased stock (554,736,610 and 556,098,569 shares in 2018 and 2017, respectively) ........ . .. .. .......... . .. ..... .. .. .. ....... . 35,301 35,382 --- ---
Total PMI stockholders' deficit . ... . .. .. .......... . • .. • ....... • ..•.... •. (12,459) (12,086)
Noncontrolling interests ........ .. . .......... . ....................... . 1,720 1,856 --- ---
Total stockholders' deficit ........................ • ..........•....... . . (10,739) (10,230)
Net earnings .................................. . .. . .......... . .... . . $ 8,286 Net earnings attributable to noncontrolling interests .. .. . .. . .. . .... . .. . .... . 375 Net earnings attributable to PMI ................... • .. • ....... • .. • .... . . $ 7,911

a. Compute ROE for 2018 using the equity numbers as reported. How do you interpret this ratio?

b. Add back treasury shares to adjust for the company's negative equity. Recompute ROE for 2018.

c. Which ratio do you bel ieve better captures the company's performance during 2018? Explain.