answer on cfai mock contradicts text purposes, valuation, afternoon

chunty

Question 51 in the afternoon session essentially asks us to calculate FCFE from EBITDA.

In the answer key, their answer shows WCinv being calculated as the change in working capital:
[(CAt - CLt) - (CAt-1 - CLt-1)]

However, in the text on pg. 391 v.4, bottom of the page it says:

"Although working capital is often defined as current assets minus current liabilities, working capital for cash flow and valuation purposes is defined to exclude cash and short-term debt... ...when finding the net increase in working capital for the purpose of calculating free cash flow, we define working capital to exclude [continues on pg. 392] cash and cash equivalents as well as notes payable and the current portion of long-term debt."

Any ideas?

Houjichasan

The CFA mock is full of mistakes. This is one of them.
It is kind of frustrating because you can not use it to gauge where you are.

Please contact chad and ask him to remove this thread. You are not allowed to post questions from the CFA mock just like you are not allowed to post questions from the exam. You might take this lightly, but everyonce and a while someone gets baned from CFA for doing what they think is silly stuff.

I guess if you want to discuss such a question you would say.

"Does anyone think there is something wrrong with question 51 in the mock? Email me at me@me.com...."

But you can not post the question here cause people who are not candidates can see it.



Edited 1 time(s). Last edit at Wednesday, April 20, 2011 at 04:24AM by gulfcfa.

SFoyil

Yes I found a couple of mistakes too, I hope they dont make such mistakes in the real exam.

xilige

^ true.....

nevertheless if CFA wanted to nail you for it you would be out of here and posting on

accountantsforum.com