I just did an exercice for the CFA®
level 2 where they ask me to compute operating income / sales.
So quickly I computed EBIT / Sales .. but NOOOOOOOO, the answer was :
Sales - COGS - SG&A + Deprec / Sales
So EBITDA/Sales.
Anybody knows why they define op income as EBITDA? and not EBIT as usual.
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It's not unusual for the books and practice tests to make mistakes.
Yeah I guess so... this is coming from one of the CFA practice exam too.
Which question and which book is this?
It's the 2010 CFA official practice exam LEVEL 2 Morning session.
http://www.scribd.com/doc/55413564/Level-II-Mock-Exam-Morning-2010a-Ans
See question 14 please. Thanks :)
Pretty sure it's an ethics violation to post that.
It would be an ethics violation to talk about the actual test, not a practice.
Actually it would be an ethics violation to post that link with last years mock exam as it is only available to students who sign up for the exam. He would be violating Standards I-A, I-D, and VII-A.
'Sales - COGS - SG&A + Deprec / Sales' doesn't make sense. You are double counting depreciation. They said '(Sales – COGS – SG&A expense – R&Dexpense)/Sales' which didn't include depreciation and was an error on their part. Either way, the answer shouldn't change as even with Dep added, the ratio is decreasing over the yeras.
Have you tried looking at the errata for the mock exam?
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