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.