404 Final Flashcards
1
Q
Cost Center
A
control over costs but not revenue,
overall profit or investments
2
Q
Revenue Center
A
control over revenue but not
costs, overall profit or investments
3
Q
Profit Center
A
control over revenue and cost
4
Q
Investment or Business Unit Center
A
control over profit and investments
5
Q
Responsibility Centers
A
cost, revenue, profit, and investment
6
Q
Jenkins Stupid Fucking Golden Four of Effective Delegation
A
- Communicate Expectations
- Provide Resources
- Monitor Performance
- Provide Feedback
7
Q
What is Net Operating Income?
A
EBIT
8
Q
What is Average Operating Assets?
A
cash, A/R, inventory, PPE
9
Q
What is Transfer Pricing?
A
evenly distributing funds, avoids suboptimization by motivating managers to act in the best interests of the company
10
Q
What are the four aspects of Cost of Quality?
A
- quality of conformance
- prevention and appraisal costs
- internal failure costs
- external failure costs
11
Q
Explain Quality of Conformance
A
costs incurred to prevent defects or that result from defects in products
12
Q
Explain Prevention and Appraisal
A
prevention supports activities that tries to reduce number of defects
appraisal is incurred to identify defective products before the products are shipped
13
Q
Explain Internal Failure Costs
A
incurred as a result of identifying defects before they are shipped
14
Q
Explain External Failure Costs
A
incurred as a result of defective products being delivered to customers
15
Q
Differential Analysis
A
focusing on the costs and benefits that differ between the alternatives, everything else is irrelevant
16
Q
Relevant Cost
A
cost that differs between alternatives
17
Q
Relevant Benefit
A
benefit that differs between alternatives
18
Q
differential cost
A
future costs that differ between any two alternatives
19
Q
differential revenue
A
future revenue that differs between any two alternatives
20
Q
incremental cost
A
increase in cost between two alternatives
21
Q
avoidable cost
A
cost that can be eliminated by choosing one alternative over another
22
Q
Sunk Costs
A
always irrelevant, cost has already been incurred and cannot be changed
23
Q
Opportunity Costs
A
must be considered in differential analysis, potential benefit that is given up when another is selected
24
Q
Rising Star
A
( high growth and high share ), invest
25
Cash Cow
( low growth and high share ) milk it and use cash to reinvest
26
Question Mark
( high growth and low share )
27
Dog
( low growth and low share ), need exit strategy
28
Vertical Integration
common ownership of activities in consumer value chain
29
Make or Buy Choice
companies with vertical integration can choose to make something or buy it
30
Special Order
one time order that is not considered part of normal ongoing business, must focus on incremental costs and benefits
31
volume-trade off decision
made when companies do not have enough capacity to produce all of their products
32
bottleneck
machine is the constraint, increase in the machines capacity leads to increased sales
33
joint-products
two or more products are produced from a single raw-material
34
split-off point
the point at which joint-products can be considered two separate products
35
Time Value of Money
A dollar today is worth more than a dollar tmrw because you have the opportunity to invest it
36
Simple Interest
interest is only compounded on the principal
37
Compound Interest
interest from a prior period is added to principal and interest is calculated for both
38
Opportunity Cost
rate of return you could earn on an investment of similar risk
39
Discounting
finding the present value of a future cash flow
40
Annuity
series of consecutive payments of equal amounts, helps compare investment decisions
41
Horizontal Analysis
shows changes between years in the financial data (trend analysis)
comparative form
42
What does quantifying dollar changes highlight?
economic changes
43
What does quantifying percentage changes highlight?
unusual changes
44
Vertical Analysis
focuses on relationships among financial statements at a given time
45
Common-Size Financial Statements
part of vertical analysis, each financial statement is expressed as a %, usually a % of sales
46
What is Financial Leverage?
Magnify ROA with inexpensive liabilities to provide a higher rate of return to our shareholders
47
Profit margin on sales (ROS)
how efficiently a company turns sales into profits
48
Gross profit percentage
evaluates profitability
49
Return on assets
shows how much profit a company generates from its assets
50
return on net worth (ROE)
how well it generates profits from shareholder investments
helps decide whether you should invest
51
Earnings per Share
indicates how much profit a company makes per stock share
52
Earnings per Share (Fully diluted)
indicates how much money a company makes per stock share, including all potential shares
53
Accounts receivable turnover
how quickly a company collects its (AR) and converts them into cash
if higher than 12 (months), then you're collecting payments late
54
Inventory turnover
rate that inventory stock is sold, or used, and replaced
55
Average collection period
amount of time it takes for a business to receive payment (A/R)
56
Fixed assets turnover
how efficiently a company generates sales from its existing fixed assets.
56
Days sales in inventory
average number of days it takes for a company to sell its entire inventory
57
Total assets turnover
efficiency with which a company uses its assets to produce sales
58
Current ratio
used to find liquidity
59
Quick, or acid test
measures a company's ability to pay its current liabilities with its HIGHLY LIQUID assets
60
Working capital
helps plan for future needs and ensure the company has enough cash and cash equivalents meet short-term obligations
61
Days to cash (Operating cycle)
the number of days it takes for a company to convert its inventory into cash by selling it and collecting payment from customers
62
Debt to total assets
how leveraged the company is, higher ratios indicate more debt is used compared to equity
63
Times interest earned
company's ability to cover the interest owed on its debt obligations
how many times you can payoff interest (7x)
64
Debt to Equity Ratio
calculates how much of a company's funding comes from debt compared to shareholder equity
looking for 1 to 1
65
Equity multiplier
measures how much of a company's assets are financed by shareholders' equity, rather than debt
66
P-E Ratio
It tells you how much you are paying for each dollar of earnings
how many years until my investment pays me back (20s-30s years)
67
Dividend payout ratio
represents how much of a company's earnings after tax are paid to shareholders
68
Book value per Share (EPS)
show how well management increases shareholder equity over time
69
Effective tax rate
share of your annual income you pay in taxes
70
Performance Measures Used in Balanced Scorecard Categories: Financial
Has our financial performance improved? / What are our goals?
71
Performance Measures Used in Balanced Scorecard Categories: Customer
Do customers recognize that we are delivering more value? / Who do we want to Serve?
72
Performance Measures Used in Balanced Scorecard Categories: Internal Business Processes
Have we improved key business processes so that we can deliver more value to customers? /
73
Performance Measures Used in Balanced Scorecard Categories: Learning and Growth
Are we maintaining our ability to change and improve?
73
Importance of the Quality Cost Report
helps manager see financial significance of defects
uses quality cost information to understand importance of large-scale quality issues
helps managers see distribution of quality costs
74
Connect Strategy to Daily Decision Making in the Context of a Balanced Scorecard
starts with defining a strategy, which utilizes performance measures to track strategy
continually test's managements theories
also can be linked to measure employee performance
75
What does an MCE of 25% mean?
Only 25% of the total throughput time it take for a unit to be completed is spent on adding value
76
Acceptability of a project based on NPV
if NPV is zero or greater, it is acceptable, if below zero then not acceptable
77
What does NPV focus on?
NPV focuses on the difference between cash inflows and outflows and not accounting income due to the time factor
78
Discount Rate
typically use required rate of return
determine discount rate by starting at the company’s
weighted average cost of capital
79
What is IRR?
discount rate that creates a zero NPV
measures a projects rate of return over its useful life
1. find discount factor using formula
2. find discount rate closest to it
80
How do you rank investment projects using IRR?
the higher the IRR, the more attractive the investment
81
Simple Rate of Return
used to evaluate capital investment proposals
does not account for change of monetary value over time (discounts)
comparing the annual increase in income to the cost of the investment
82
Hurdle Rate of Return
minimum rate of return required for an investment or project to be considered
83
Decentralization
giving multiple people the authority to make financial decisions to make faster decisions and train lower management
84
What is the payback period formula used for?
It is used for unequal cash flows from an investment project (change from year to year) and is used instead of the other payback period formula
85
What is cost of capital?
average rate of return a company must pay to its creditors and shareholders for use of their funds
projects with a rate of return less than cost of capital should not be taken on
86
Future Value
How much money will i have one year from now if i invest 100 at a 20$ return?
87
Present Value
How much money do i invest today to achieve 120 one year from now at an expected 20% return?giving multiple people the authority to make financial decisions
88
WACC (Weighted Average Cost of Capital)
firms cost of capital where each category is proportionally weighted
89
What is NPV?
translates future cash flows into today's money to determine if it is worth it
