Day 24

Question 1

Specifying objectives falls under which principle?

Answer 1

Risk Assessment

MCQ-00502

Question 2

Policy and procedure deployment falls under which principle?

Answer 2

Existing Control Activities

MCQ-00502

Question 3

Equation: CAPM

Answer 3

E = R + Beta(M - R)

MCQ-03386

Question 4

Three elements needed to estimate the cost of Equity Capital

Answer 4

1. Current dividends per share (D)
2. Expected growth rate (g)
3. Current market price per share of Common Stock (P)

MCQ-03920

Question 5

Internal Controls Acronyms - 17 Principles

Answer 5

CRIME

• EBOCA
• SAFR
• OIE
• SOD
• CATP

Question 6

Define: Lagging Economic Indicator

Answer 6

Tend to follow economic activity, or occur as a result of economic activity

EX:
1. Average duration of unemployment
2. Prime rate charged by banks
3. Consumer price index for services

MCQ-07816

Question 7

Examples of Leading Economic Indicators:

Answer 7

1. Price changes of materials
2. Building permits for residential properties
3. Orders for goods
4. Average NEW Unemployment claims
5. Average length of the workweek
6. Money Supply (M2)

Note: Manufacturing and Trade Sales = Coincident Indicators

MCQ-07858

Question 8

Factors That Shift Demand Curves:

Answer 8

WRITEN

- Wealth ↑, D↑ shift right
- Related Goods (Substitutes Price ↑, D ↑ & Complements Price↑, D↓)
- Income ↑, D↑
- Tastes
- Expectations P in future↑, buy now D↑
- Number of Buyers↑, D↑

MCQ-07836

Question 9

What would cause the demand curve for a normal good to shift to the left?

Answer 9

The price of a substitute good decreases

MCQ-07833

Question 10

A change in price of a product will result in ______

Answer 10

A change in the quantity demanded (movement along the demand curve) NOT a shift in demand

MCQ-07833

Question 11

Elasticity = 0.0

Answer 11

Perfectly inelastic - Quantity demanded stays the same no matter how the price changes
- Demand Curves are Vertical

Ex: Pharmaceuticals - Insulin for Diabetics

MCQ-07859

Question 12

Elasticity > 1.0

greater than 1.0

Answer 12

Demand = Elastic

As Price↑, Qty. D↓ and Revenue↓ - VERY SENSITIVE

MCQ-07859

Question 13

Elasticity < 1.0

less than 1

Answer 13

Demand = Inelastic

*As Price↑, Qty. D↑ and Revenue↑

MCQ-07859

Question 14

Effect on Equilibrium Quantity: D↑, S↑

Answer 14

D↑ Q↑, Increase S↑ Q↑

MCQ-07834

Question 15

Effect on Equilibrium Quantity: D↑, S↓

Answer 15

D↑ Q↑, Indeterminate S↓ Q↓

MCQ-07834

Question 16

Effect on Equilibrium Quantity: D↓, S↓

Answer 16

D↓ Q↓, Decrease S↓ Q↓

MCQ-07834

Question 17

Effect on Equilibrium Quantity: D↓, S↑

Answer 17

D↓ Q↓, Indeterminates S↑ Q↑

MCQ-07834

Question 18

When are profits maximized for Transfer Pricing?

Answer 18

When the company selling the good has a lower tax rate than the purchasing company

MCQ-08980

Question 19

What are the characteristics of Total Quality Mgmt (TQM)

Answer 19

1. Customer Needs
2. Continuous Improvement
3. Quality Circles

MCQ-06790

Question 20

Equation: Economic Value Added

Answer 20

Economic Value Added = Net Operating Profit After Taxes (NOPAT) - Required Return

• NOPAT = EBIT × (1 - Tax Rate)
• Required Return = Investment × WACC

MCQ-04818

Question 21

Equation: The Net Present Value

Answer 21

NPV = Discounted After-Tax Cash Flows - Initial Investment

MCQ-04983

Question 22

Equation: Annual Operating Cash Flows (OCF)

Answer 22

Annual OCF = Pretax Cash Flow × (1 - Tax Rate) + (Depreciation × Tax Rate)

MCQ-08558

Question 23

Equation: The Cost of Debt After-Tax

Answer 23

The Cost of Debt After-Tax = Interest Rate × (1 - Tax Rate)

MCQ-07800