Updating user-defined function to do subtraction

The function you worked on in the previous exercise cannot do subtraction. Have a look at this function:

def compute_ratio(df, numerator, denominator, ratio_name, 
                  addition_in_numerator = True,
                  addition_in_denominator = True):
  numerator_of_ratio = np.where(addition_in_numerator,
                             df[numerator].sum(axis=1), 
                             df[numerator[0]] - df[numerator[1:]].sum(
                               axis=1))
  denominator_of_ratio = np.where(addition_in_denominator, 
                               df[denominator].sum(axis=1), 
                               df[denominator[0]] - df[denominator[1:]].sum(axis=1))
  df[ratio_name] = numerator_of_ratio/denominator_of_ratio
  return df

This function can deal with addition and subtraction in numerators and denominators of financial ratios. Notice that the function uses np.where. This is a function from the package NumPy. np.where checks if the first argument is True; if so, it returns the second argument, else it returns the third. For example, in the above, we have:

np.where(addition_in_numerator,
                             df[numerator].sum(axis=1), 
                             df[numerator[0]] - df[numerator[1:]].sum(
                               axis=1))

If addition_in_numerator is true, np.where will return df[numerator].sum(axis=1), else it will return df[numerator[0]] - df[numerator[1:]].sum(axis=1).

In this exercise, the balance_sheet DataFrame, along with pandas and NumPy aspd and np, respectively, have been loaded for you. Use these to determine which of the following statements is correct.

Possible answers

The function subtracts random columns from the list of columns in denominator and numerator.

The function cannot handle cases where we want to add values in the numerator while subtracting values in the denominator for the ratio we want to compute.

The function subtracts the sum of the rest of the columns named in the denominator and numerator from the first column.

The function does not append the computed ratio in the returned DataFrame.

Exercise

Updating user-defined function to do subtraction

Instructions

Possible answers