An Unconventional Users Guide To The GMAT Exam

testIt’s the part of applying to a business school that causes the most anxiety. It’s the $250 GMAT exam, a computer adaptive test which throws one question after another at test takers based on their ability level.

The organization that administers the test, the Graduate Management Admission Council, says that the total score of the test, which ranges from a low of 200 to a high of 800, is “an extremely precise measure of an individual’s ability.”

Some 238,356 GMAT exams were taken in the year ended June 30, 2013, down 16.8% from the record 286,529 a year earlier. Test takers sent 675,733 GMAT score reports to nearly 5,600 graduate-level management programs around the world.

Here are some common questions and not-so-common answers about the test:

How much money does GMAC make from the test?

At $250 a pop, the GMAT exam is a cash-generating machine. It’s only competition is the Graduate Record Exam, which some admission consultants discourage MBA candidates from taking. GMAC says it collected $87.7 million in fees in 2012, yet it cost the organization only $45.7 million to administer the test. The effective profit on the actual exam is roughly 47.9%, nearly 11 points higher than Apple’s current gross profit margins on iPhones and iPads.

What is the average GMAT score?

Total GMAT scores range from 200 to 800; two-thirds of test takers score between 400 and 600, though the average GMAT score for test takers in the past three years is 545.6. Only 8% of test takers score 710 or above on their exams. Most applicants who want to get into one of the best MBA programs aim to score at least a 700 which is the 89th percentile.

Verbal and Quantitative scores range from 0 to 60; scores below 9 and above 44 for the Verbal section and below 7 and above 50 for the Quantitative section are rare.

The mean score on the verbal portion of the GMAT is 27.3, while the mean quant score is 37.5. The mean score on the analytical writing assessment section of the test is 4.3, according to GMAC. The average score for the newest section of the test on integrated reasoning is 4.34.

What country’s GMAT scores are the highest? What about the lowest?

The Kiwis have it. In New Zealand, where test takers averaged the highest score, the mean GMAT is 608, a formidable 76 points higher. New Zealand is the only country to have posted average GMAT scores above 600 in three of the past five years. In fact, only one country has had a higher average score in recent years and that is Monaco. But there’s a catch: only seven GMAT tests were recorded in the 2010-2011 testing year when the country averaged a GMAT score of 621.

In Singapore, the average GMAT was 605 in the 2012-2013 testing year. The top five highest scoring nations include Argentina, Austria and Belgium (all averaging a hefty 591 each–59 points higher than the U.S.). The U.S. average, moreover, is even below the entire worldwide GMAT score of  545.6 over the past three years, an average significantly dragged down by U.S. test takers.

The lowest? For the 2012=2013 testing year, it was Afghanistan test takers who had the lowest average score of any country in the world: a miserable 307 for the 18 tests taken. Saudi Arabia was not far behind with a lowly score of 311, though the GMAT was taken 2,663 times. Saudi’s average, moreover, was much improved from the 301 mean for the country a year earlier, which made it dead last in the 2011-2012 testing year.

Does the GMAT do a good job of predicting an applicant’s future success? 

Not really. The exam only predicts the likelihood of a candidate’s successful completion of the core curriculum of a graduate management program. GMAC concedes that the standard “measurement error” of the test is 41 points. So despite the effort of many test takers to score over 700, there is no meaningful score difference between a candidate who gets a 680 on the GMAT and one who gets a 720. GMAC tells business schools that “if you must compare scores of two applicants directly, remember that even scores of 40-50 points apart could garner the same performance in your program.”