Hi everybody,
Just a quick question about some ECO questions I just answered to. Book 2 FRA, Session 7, Reading 22, EOC number 2:
It is asked what was the primary driver of the increase of the firm’s EBIT in 2010 as compared to 2009. The total rise in EBIT was 370m (about +36.4%), of which 12m were explained by the sale of receivables (3.2% of the increase), 83m by the change in the expected life of fixed assets (22.4% and the increase) and the rest, since EBIT margins stayed stable, must have been explained by the growth in revenues (275m i.e. 74.3% of the increase). So according to me the answer would be “revenues growth”.
But it turns out the correct answer is “the change in expected life of foxed assets”. I think the rationale behind that is that growth in EBIT from 2008 to 2009 was 28%, and that it would be about the same thing without the decrease in depreciation, so most of the change in revenue growth in 2010/2009 as compared to 2009/2008 is due to this. But that is not how the question is formulated, they actually ask what is the primary reason for the 36% increase in EBIT , and not the reason for the increase in the growth rate…
I spotted inaccuracies like this several times, is it likely to happen at the actual exam ?
Thanks in advance !