Reading 44, Question 33, p382 in the CFA Level II text asks to calculate Debt-to-Capitalization.
Can someone please explain to me why the current liabilities are rolled into debt for the solution to this problem? I thought debt should be interest bearing debt only (i.e. the 850)?
I had the same question…I’m an analyst and don’t do that…but just look at the specific question and like edupristine said there may be cases when you do. I just know for the exam if I see current liabilities I’ll probably add them in after reviewing the problem.
In any literature I have ever read, ‘Debt’ is interest bearing debt. When you read “Current Liabilities”, this can imply things like A/P which should not be classified as Debt (I’ll admit it might include the Current Portion of L/T Debt). This makes it confusing when you go to write the exam, especially since other parts of the curriculum classify debt as interest bearing debt only. For example, look at the solution to Question 2 on p.246. Debt = S/T Debt and Current Portion of L/T Debt + L/T Debt.
I’m almost wondering if the solution I referenced in my OP is incorrect.
I have emailed CFAI to get their input.