Adjusting for Negative Equity

Phillip Morris reported the following information in its $2018$ Form $10-$K$.$

$ millions Dec. $31,2018$ Dec. $31,2017$

Stockholders' $($Deficit$)$ Equity

Common stock, no par value $(2,109,316,331$ shares issued in $2018$ and $2017)$ $$0$ $$0$

Additional paid$-$in capital $2,7152,761$

Earnings reinvested in the business $43,42041,803$

Accumulated other comprehensive losses $(14,155)(11,949)$

Total stockholders' equity before treasury stock $31,98032,615$

Less: cost of repurchased stock $(554,736,610$ and $556,098,569$ shares in $2018$

and $2017,$ respectively$)49,42149,535$

Total PMI stockholders' deficit $(17,441)(16,920)$

Noncontrolling interests $1,7201,856$

Total stockholders' deficit $(15,721)(15,064)$

Net earnings $$11,600$

Net earnings attributable to noncontrolling interests $375$

Net earnings attributable to PMI $$11,225$

a$.$ Compute ROE for $2018$ using the equity numbers as reported.

Note: $1.$ Select the appropriate numerator and denominator used to compute ROE from the drop$-$down menu options. $2.$ Enter the numerator and denominator amounts to compute ROE.

Numerator Denominator ROE

Answer

Answer

Answer

Answer

How do you interpret this ratio? Answer

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

Numerator Denominator ROE

Answer

Answer

Answer

Answer

Does the adjusted ratio better captures the company$$s performance during $2018?$ Answer