10 free Series 86/87 practice questions in the real exam format, covering the official content areas, with an explanation for every answer.
Series 86/87 Practice Test 14Tutor mode
Question 1 of 10
Data Verification and Analysis
Exhibit 3: Larkspur Software — reconciliation of GAAP net income to adjusted EBITDA, FY2 ($ millions)
Line item
FY2
GAAP net income
40
+ Income tax expense
12
+ Interest expense
18
+ Depreciation and amortization
55
= EBITDA
125
+ Stock-based compensation
45
+ Restructuring charges (program announced in FY1, ends in FY3)
15
+ Acquisition-related transaction costs
8
+ Customer onboarding costs
22
= Adjusted EBITDA
215
FY2 revenue: $900 million. FY2 cash from operations: $105 million. Customer onboarding costs are cash costs of implementing the software for new customers and are incurred every year. All data are invented.
Larkspur's earnings release highlights adjusted EBITDA, reconciled to GAAP net income in Exhibit 3. Based on SEC Regulation G and SEC staff guidance on non-GAAP measures, which adjustment is MOST likely to be viewed as misleading?