While calculating ROA and ROE for a financial firm, would it be possible to exclude any one-off non-recurring income to smoothen the net income? not sure if this would be a viable one though... any opinions?

im doing a cross-sectional data on financial firms, so it only takes the data at one point of time, so a one-time inflated earning would definitely change things a bit.

Question

While calculating ROA and ROE for a financial firm, would it be possible to exclude any one-off non-recurring income to smoothen the net income? not sure if this would be a viable one though... any opinions?

im doing a cross-sectional data on financial firms, so it only takes the data at one point of time, so a one-time inflated earning would definitely change things a bit.

anonymous · Answer

Yes it is possible.

anonymous · Answer

yes it is posisble. Given that financial institutions normal earninsg are categorized as per the business licenses and one of non recurring incoem are always categorized as extraordinary income. hence, whiel valuing a financial firm this needs to adjusted to reflect the real value. Also there might be a case where such one off extra ordinary income also required provisions. Thus it is advisable to deduct any one of non recurring incomes from valuation.