CFAI Mock AM - Operating Income

CFA Level II
#1

For q14, operating income = sales - cogs- sg&a - r&d In exhibit 2 of the vignette for q’s 31-36, operating income deducts depreciation. I always thought depr. should be deducted to arrive at operating income. Which way is right?

#2

I haven’t worked the mock yet but, depr is an operating expense so it should be deducted to reach EBIT.

#3

Ya this tripped me up too, can anyone clarify?

#4

Agreed I used ebit as operating income but still chose c due to ltd ratio having more to do with credit worthiness than oi/sales. I always thought oi= ebit but I guess not

#5

Yeah I still got the q right but I was just asking for clarification of the definition. I’m still going to assume op profit = EBIT. That’s pretty much the definition everywhere else.

#6

I had the exact same question, but forgot to post it. Gotta go with EBIT = operating income The new equity/private equity section helps, too. S - cogs = GP GP - SGA = pro forma EBITDA pro forma EBITDA - depreciation = EBIT!