Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Exam > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

In six sigma, what is DMAIC?

RED

A

EXISTING product and business process improvements (DMAIC):

  1. Define the problem
  2. Measure key aspects of current process
  3. Analyze the data
  4. Improve or optimize current processes
  5. Control
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

In Six Sigma, what is DMADV?

RED

A

NEW product or business process development (DMADV):

  1. Define design goals
  2. Measure CTQ (Critical to Quality issues)
  3. Analyze design alternatives
  4. Design optimization
  5. Verify the design
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define: Project MANAGEMENT

(RED)

A

Project management consists of five major processes carried out by a project manager tasked with balancing the needs and expectations of various stakeholders against the organization’s constraints.

The processes include authorization, planning, implementation, monitoring, and closing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define: Project CHARTER

(RED)

A

Project charter is a document that contains a business justification to fulfill the needs and expectations of initial stakeholders by carrying out a statement of work that will achieve the project objectives.

It formally establishes a partnership between the requesting organization and the receiving organization.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Define the roles of project members

(RED)

A

Project members perform the project tasks, and their roles generally include:

  1. Carrying out the work and producing the deliverables that have been defined by the project manager. (Project members may be either individuals or organizations.)
  2. Understanding the work that must be completed; planning out the assigned activities in more detail if needed; completing the work within the budget, time, and quality expectations; and proactively communicating the status of their work to the project manager
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Identify the project sponsor and that role

RED

A

An INDIVIDUAL at the executive level of management who is responsible for allocating funding as well as resources to the project.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Identify the executive steering committee and its role

RED

A

A steering committee is to a project what the board of directors is to a company; both groups direct, but they do not manage on a daily basis.

A group of executive level people or external organizations charged with regular oversight of a project and taking responsibility for the business issues associated with a project.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The quality of deliverables should be SMART. Define SMART

RED

A 
Specific
Measurable
Attainable
Relevant 
Time based
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Describe the impact of globalization

RED

A

Globalization results in deeper integration of the world’s individual national economies and makes those economies more interdependent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a frequently used statistical measure for globalization?

(RED)

A

World trade expressed as a percentage of GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is Six Sigma?

RED

A

Six Sigma anticipates the use of rigorous metrics in the evaluation of goal achievement.

The program is a continuous quality-improvement program that requires some specialized training.

Six Sigma expands on the Plan-Do-Check-Act model of process management and logically anticipates methodologies to improve current processes and develop new processes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the difference between NOMINAL GDP and REAL GDP?

RED

A

NOMINAL GDP–measures the value of all final goods and services produced within the borders of a nation in terms of current dollars (prices prevailing at time of production).

REAL GDP–measures the value of all final goods and services produced within the borders of a nation in terms of constant prices (value of goods and services adjusted for changes in the price level).

Specifically, REAL GDP= Nominal GDP/GDP deflator x100
Where the GDP deflator is the price index used to adjust nominal GDP for changes in the overall prices of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

List the five business process management activities

A
  1. Design
  2. Modeling
  3. Execution
  4. Monitoring
  5. Optimization
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

List the elements of PDCA

A
  1. Plan
  2. Do
  3. Check
  4. Act
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

List the benefits of process management

A
  1. Efficiency
  2. Effectiveness
  3. Agility
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Define Outsourcing

A

Outsourcing is generally defined as the contracting of services to external providers

Examples might include a payroll service or even a call center to provide support or back office services for a fee

A contractual relationship exists between the business and its outsource provider

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Describe business process reengineering (BPR) and explain how it is different from business process management (BPM)

A

BPR represents the techniques used by an organization to help rethink how work should be done to significantly improve customer satisfaction and service, reduce operating costs, and enhance competitiveness

BPR seeks radical change, while BPM seeks incremental change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Define JIT and the underlying concept of JIT

A

Just-in-time (JIT) management anticipates achievement of efficiency by scheduling the deployment of resources just in time to meet customer or production requirements

The underlying concept of JIT is that inventory does not add value

The maintenance of inventory levels purely produces wasteful costs

Reducing inventory by ensuring that resources arrive only if they are needed (just in time for use) is the idea behind JIT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Differentiate between conformance costs and nonconformance costs as it pertains to achieving quality standards

A

The costs associated with maintaining existing quality standards are termed conformance costs, and include both prevention and appraisal costs

The costs associated with correcting nonconformance with existing quality standards are called nonconformance costs, and include both internal failure and external failure costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Define TQM

A

Total quality management (TQM) represents an organization’s commitment to a customer-focused performance that emphasizes both quality and continuous improvement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Define Kaizen

A

Kaizen is a term for continuous improvement efforts that improve the efficiency and effectiveness of organizations through greater operational control

Kaizen occurs during the manufacturing stage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Define demand flow

A

Demand flow manages resources using customer demand as the basis for resource allocation

Demand flow contrasts with resource allocations based on sales forecasts or master scheduling

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Define theory of constraints

A

Theory of constraints anticipates that organizations are impeded from achieving objectives by the existence of one or more constraints

The organization or project must be consistently operated in a manner that either works around or leverages the constraint

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are the five steps in the theory of constraints?

A
  1. Identification of the constraint
  2. Exploitation of the constraint
  3. Subordinate everything else to the above decisions
  4. Elevate the constraint
  5. Return to the first step
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is Six Sigma?

A

Six Sigma anticipates the use of rigorous metrics in the evaluation of goal achievement

Six Sigma expands on the Plan-Do-Check-Act model of process management and logically anticipates methodologies to improve current processes and develop new processes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

In Six Sigma, what is DMAIC?

A

EXISTING product and business process improvements (DMAIC):

  1. DEFINE the problem
  2. MEASURE key aspects of current process
  3. ANALYZE data
  4. IMPROVE or optimize current processes
  5. CONTROL
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

In Six Sigma, what is DMADV?

A

NEW product or business process development (DMADV):

  1. DEFINE design goals
  2. MEASURE CTQ (Critical to Quality issues)
  3. ANALYZE design alternatives
  4. DESIGN optimization
  5. VERIFY the design
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Define project management

A

Project management consists of five major processes carried out by a project manager tasked with balancing the needs and expectations of various stakeholders against the organization’s constraints

The processes include initiating, planning, executing, monitoring and controlling, and closing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Define project charter

A

A project charter is a document that contains a business justification to fulfill the needs and expectations of initial stakeholders by carrying out a statement of work that will achieve the project objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Define the roles of project members

A

Project members perform the project tasks, and their roles generally include:

  1. Carrying out the work and producing the deliverables that have been defined by the project manager
  2. Understanding the work that must be completed; planning out the assigned activities in more detail if needed; completing the work within the budget, time, and quality expectations; and proactively communicating the status of their work to the project manager
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Identify the project sponsor and that role

A

An individual or group, that is internal or external to the project’s organization, who is responsible for allocating funding as well as resources to the project

32
Q

Identify the executive steering committee and its role

A

A group of executive level people or external organizations charged with regular oversight of a project and taking responsibility for the business issues associated with a project

Although the steering committee provides direction, it does not manage the project on a daily basis

33
Q

What is a scope baseline

A

A scope baseline is the formal, written, approved statement of the project scope and work breakdown structure (WBS), outlining both the end product (product scope) and the project scope

34
Q

Name the seven quality control (7QC) tools used to solve quality related problems pertaining to project quality management

A
  1. Flowcharts
  2. Check sheets
  3. Cause-and-effect diagrams
  4. Histograms
  5. Pareto diagrams
  6. Scatter diagrams
  7. Control charts
35
Q

Describe the impact of globalization

A

Globalization results in deeper integration of the world’s individual national economies and makes those economies more interdependent

36
Q

What is a frequently used statistical measure for globalization?

A

World trade expressed as a percentage of GDP

37
Q

List four primary factors that drive globalization

A
  1. Improvements in transportations
  2. Technological advancements
  3. Deregulation of international financial markets
  4. Organizational/operational options for international business
38
Q

What is meant by shift in economic balance of power?

A

The ability of the world’s emerging nations to contend with the economies of the industrialized world for power, resources, influence, etc., is a change or shift in the economic balance of power from previous decades where the U.S. dominated as the lone superpower

Although the United State’s absolute strength is not likely to decline, its relative power is expected to decline

39
Q

List the motivations for developing international business operations

A
  1. COMPARATIVE ADVANTAGE: Creating economic advantage through specializations
  2. IMPERFECT MARKETS: Work around resource or legal barriers to trade
  3. PRODUCT CYCLE: Establishment of foreign subsidiaries to more efficiently capitalize on foreign demand for domestic products
40
Q

What methods are used by multinational firms to conduct international business?

A
  1. International trade
  2. Licensing
  3. Franchising
  4. Joint ventures
  5. Direct foreign investment (purchasing a foreign company or starting up a foreign subsidiary)
  6. Global sourcing (synchronized all levels of production, R&D, and marketing on an international basis)
41
Q

Identify three inherent risks of international business operations

A
  1. Exchange rate fluctuation
  2. Operating in foreign economies
  3. Political risk
42
Q

Identify three categories of exchange rate risks

A
  1. Transactional risk (exposure)
  2. Economic risk (exposure)
  3. Translation risk (exposure)
43
Q

Name the factors influencing exchange rates

A

TRADE-RELATED FACTORS:

  1. Relative inflation rates
  2. Relative income levels
  3. Government controls

FINANCIAL FACTORS:

  1. Relative interest rates
  2. Capital flows
44
Q

Distinguish between diversifiable and nondiversifiable risk

DUNS

A

DIVERSIFIABLE RISK:

  1. UNSYSTEMATIC risk (Nonmarket/firm specific)

NONDIVERSIFIABLE RISK:

  1. SYSTEMATIC risk (Market)
45
Q

Describe the various types of investment risks

A

INTEREST RATE RISK: Change in the value of a security due to changes in interest rates

MARKET RISK: Fluctuations in the value of a security or firm due to market exposure; this risk is nondiversifiable

CREDIT RISK: Represents the inability to secure financing on favorable terms due to the firm’s poor credit history/ratings

DEFAULT RISK: The risk that the debtor will not pay interest or principal on a timely basis

LIQUIDITY RISK: The risk that a security cannot be sold on a timely basis of that a sale will require the need to make material price concessions

46
Q

Compare and contrast transaction exposure, economic exposure, and translation exposure

A

TRANSACTION EXPOSURE: the potential that an entity could experience economic loss or gain upon settlement of individual transactions as a result of changes in exchange rates

ECONOMIC EXPOSURE: the potential that the present value of an entity’s cash flows could increase or decrease due to changes in exchange rates

TRANSLATIONAL EXPOSURE: the risk that an entity’s assets, liabilities, equity, or income will change as a result of changes in exchange rates

47
Q

How is a futures hedge transaction used to mitigate exchange rate risk on accounts payable or accounts receivable applications?

A

A future hedge contract is used to buy a foreign currency at a specific price and time (when the accounts payable is due) in order to mitigate the risk of a weakening domestic currency

48
Q

How does a money market hedge work?

A

A money market hedge uses international money markets to plan to meet future currency requirements by either investing internationally in a manner that matches investment maturities with settlement of foreign payables or borrows against foreign receivables in a manner that matches the maturity of borrowings with the collection of receivables

49
Q

Name the currency option hedge used to mitigate transaction exposure to exchange rate risk for payables

Name the currency option hedge used to mitigate transaction exposure to exchange rate risk for receivables

A

CALL OPTION: Option to BUY a foreign currency (for currency hedges) at a pre-negotiated price; mitigates payable exchange rate risk

PUT OPTION: Option to SELL a foreign currency (for currency hedges) at a pre-negotiable price; mitigates receivable exchange rate risk

50
Q

What is selective hedging and how does it differ from cross-hedging?

A

SELECTIVE HEDGING: a process of reducing the uncertainty of the value of a transaction or position by entering into an offsetting derivative transaction

CROSS-HEDGING: involves hedging one derivatives instrument’s risk with a different instrument by taking another position in a related derivatives contract

51
Q

Name the primary objective of transfer pricing between foreign and domestic subsidiaries and their parent companies

A

Minimization of taxation

52
Q

What are the advantages and disadvantages of short-term financing?

A

ADVANTAGES:

  1. Increased liquidity
  2. Increased profitability
  3. Decreased financing costs

DISADVANTAES:

  1. Increased interest rate risk
  2. Decreased capital availability
53
Q

What are the advantages and disadvantages of long-term financing?

A

ADVANTAGES:

  1. Decreased interest rate risk
  2. Increased capital availability

DISADVANTAGES:

  1. Decreased liquidity
  2. Decreased profitability
  3. Increased financing costs
54
Q

Differentiate between a line of credit and a letter of credit

A

LINE OF CREDIT: a revolving loan with a bank that is for a defined term and renewable prior to or upon expiration

LETTER OF CREDIT: a third party guarantee (usually by a bank) of obligations incurred by a company
A letter of credit is a type of external credit enhancement (whereas a line of credit is not)

55
Q

Compare an operating lease to a capital lease (as it pertains to a lessee)

A

In an OPERATING LEASE, the lessee makes rent (expense) payments to a lessor in exchange for the use of an asset for an insignificant portion of its useful life
An operating lease is a form of off-balance sheet financing

In a CAPITAL LEASE, the lessee essentially acquires the assets from the lessor either in substance or in legal form with the asset and liability recorded on the lessee’s balance sheet

56
Q

Define a debenture and a distinguishing characteristic of a subordinated debenture

A

A DEBENTURE is an unsecured obligation of the issuing company

A SUBORDINATED DEBENTURE is a bond issue that is unsecured and ranks behind senior creditors in a bankruptcy or liquidation scenario

57
Q

Why do creditors use debt covenants in lending agreements and how could this impact the issuer?

A

Debt covenants are stipulated in lending agreements to protect the creditor’s interests by limiting or prohibiting certain actions of the debtors that may be harmful to the creditors’ interests (i.e., issuing more debt)

Debt covenants are disadvantageous to the issuer (the debtor) as they may restrict certain management activities (i.e., selling assets)

58
Q

What is the primary assumption of the Gordon growth dividend discount model and how is it calculated?

A

The primary assumption of the Gordon growth DDM is that a stock will pay future dividends that growth at a constant rate through perpetuity

P(sub t) = D(sub t+1) / (R - G)

Where:

P(sub t) = current price (price at period “t”)

D(sub t+1) = dividend one year after period “t”

R = required return

G = (sustainable) growth rate

59
Q

Explain how price multiples are used in valuation and list four price multiple ratios used for stock valuation

A

A price multiple represents a ratio of a stock’s market price to another measure of fundamental value on a per share basis

Investors use price multiples to determine the intrinsic (true) value of stock and ultimately to decide whether the stock is undervalued, fairly valued, or undervalued

Commonly priced multiples include:

  1. Price-to-earnings (P/E) ratio
  2. Price-to-sales ratio
  3. Price-to-cash flow ratio
  4. Price-to-book ratio
60
Q

Explain how discounted cash flow analysis is used in valuation and list several DCF absolute models used

A

Discounted cash flow analysis attempts to determine the intrinsic (true) value of a stock by determining the present value of its expected future cash flows

Once the DCF stock price is determined, it is compared to the stock’s market value to determine if it is undervalued, fairly valued, or overvalued

Absolute DCF models used for valuation include:

  1. Dividend discount model (DDM)
  2. Free cash flow to the firm (FCFF)
  3. Free cash flow to equity (FCFE)
  4. Residual Income (RI)
61
Q

List the behavioral issues that potentially distort decisions

A
  1. Assuming stereotyped characterizations are accurate
  2. Adjusting from presumed baselines
  3. Using intuition rather than analysis
  4. Excessive optimism
  5. Confirmation bias or using only data that supports conclusions
  6. Overconfidence
  7. Illusion of control
62
Q

What decision context or environment is considered the most distracting?

A

Losses are considered the most distracting backdrop for decisions (far more distracting than gains)

63
Q

What is the implication of an “aversion to a sure loss”?

A

A manager’s fears of accepting a known or guaranteed loss may actually increase losses as projects are continued and losses are sustained longer than appropriate in hopes that the project will become profitable

64
Q

How does the International Professional Practices Framework define Internal Auditing?

A
  1. Internal auditing is an independent and objective assurance and consulting activity designed to add value and improve an organization’s operations
  2. Internal auditing adds value and helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the following:
    a. Risk management
    b. Control
    c. Governance processes
65
Q

Describe the attributes standards of the International Standards for the Practice of Internal Auditing

A

Attribute standards are general standards regarding engagement definition, auditor independence and objectivity, auditor proficiency and professional care, and quality assurance

66
Q

Describe the performance standards of the International Standards for the Practice of Internal Auditing

A

Performance standards are field work standards that address planning and supervision of the engagement, defining engagement scope, and documenting work in a matter that supports conclusions

67
Q

Describe the implementation standards of the International Standards for the Practice of Internal Auditing

A

Implementation standards are embedded within the attribute and reporting standards to address the requirement of implementing both assurance and consulting activities

68
Q

Identify and describe the four elements of the Code of Ethics adopted by the International Standards for the Practice of Internal Auditing

A
  1. INTEGRITY: Internal auditors are to perform work with honesty, diligence, and responsibility, observing both law and organization objectives
  2. OBJECTIVITY: Internal auditors exhibit professional objectivity in gathering, evaluating, and communicating information and should not participate in relationships that represent conflicts of interest
  3. CONFIDENTIALITY: Internal auditors do not disclose information without appropriate authority or use information for personal gains
  4. COMPETENCY: Internal auditors apply the knowledge, skills, and experience needed in the performance of internal auditing services
69
Q

Attribute Standards are defined by what four major headings?

A
  1. Purpose, authority, and responsibility
  2. Independence and objectivity
  3. Proficiency and Due Professional Care
  4. Quality Assurance and Improvement Program
70
Q

Performance Standards are defined by what seven major headings?

A
  1. Managing the internal audit activity
  2. Nature of work
  3. Engagement planning
  4. Performing the engagement
  5. Communicating results
  6. Monitoring progress
  7. Management’s acceptance of risk
71
Q

What are the two primary features of managing the internal audit activity?

A
  1. EFFECTIVE MANAGEMENT: Effective management is characterized by ensuring that activities are contemplated by the internal audit charter and that activities conform to the definition of internal audit, the Standards and the Code of Ethics
  2. ADDED VALUE: Added value is characterized by objective and relevant assurance and contributions to the effectiveness and efficiency of governance, risk management, and control processes
72
Q

What major features of an internal audit engagement must be documented as part of planning?

A
  1. Engagement objectives
  2. Engagement scope
  3. Engagement resource allocation
  4. Engagement work program
73
Q

Communication of the results of an internal audit engagement must generally include what elements?

A

Communications must include the following:

  1. Engagement objectives
  2. Engagement scope
  3. Conclusions
  4. Recommendations
  5. Action plans
74
Q

List and define the three parties involved in assurance services provided by an internal audit engagement

A
  1. AUDITEE: The person or group directly involved with the entity, operation, function, process, system, or other subject matter
  2. INTERNAL AUDITOR: The person or group making the assessment
  3. USER (Sponsor): The person or group using the assessment
75
Q

List and define the two parties involved in consulting services provided by an internal audit engagement

A
  1. INTERNAL AUDITOR: The person or group offering the advice

2. USER (Sponsor): The person or group seeking and receiving the advice

Business Exam (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions