B1-B6 Deck 2

Question 1

how is IRR calculated?

Answer 1

investment/cash flows

Question 2

what would decrease the IRR?

Answer 2

decreasing tax credits would increase initial investment reducing the overall rate

Question 3

what is characteristic of a horizontal merger

Answer 3

companies within the same industry

Question 4

what is a floating rate bond?

Answer 4

produces a constant market rate automatically, no premium or discount is required

Question 5

what are the two types of acceptance tests?

Answer 5

beta and alpha

Question 6

how does globalization impact growth rates

Answer 6

it will increase growth rates due to more investment opportunities

Question 7

how does lowering discount rate raise the money supply?

Answer 7

encourages more borrowing by banks thus increasing money supply

Question 8

WACC ratio

Answer 8

debt/debt +equity + equity/debt+equity

Question 9

what does a steering committee do?

Answer 9

oversight of systems and development aquisition

Question 10

what does a JIT inventory system require?

Answer 10

more deliveries and fewer suppliers because they know the best ones

Question 11

what is a VPN

Answer 11

virtual private network that allows remote users access to the network

Question 12

why does a natural monopoly exist

Answer 12

because the conditions only permit one efficient supplier

Question 13

what is the profitability ratio?

Answer 13

present value of future cash inflows to the initial net investment. it requires long, detailed forecasts of cash flows which take time to conduct

Question 14

what is default risk premium?

Answer 14

if the issuer does not pay timely, the investors bearing the risk demand more compensation

Question 15

what type of investments are subject to translation risk

Answer 15

foreign investments

Question 16

what drives the relationship between 2 tables

Answer 16

the foreign key because it liks to the primary key

Question 17

opportunity cost

Answer 17

variable cost +alternative use

Question 18

define float

Answer 18

number of days it takes a check to clear the bank

Question 19

what costs are considered in a make/buy decision?

Answer 19

variable labor and materials and avoidable fixed costs

Question 20

what are capital budgets used for?

Answer 20

purchase of assets and their affect of depreciation and operational expenses

Question 21

is updating the audit committee a monitoring activity?

Answer 21

no, it is a report of a deficiency

Question 22

what is a control chart

Answer 22

zero defects goalpost, upper and lower limits, within acceptable range of error

Question 23

how often must internal controls be evaluated?

Answer 23

within 90 days before report

Question 24

what type of risk can be reduced by diversification?

Answer 24

unsystematic risk

Question 25

what type of risk cannot be reduced by diversification?

Answer 25

market risk/systematic risk/nondiversifiable risk

Question 26

what is a short?

Answer 26

when a company sells goods and payment is due in the foreign currency

Question 27

conformance costs include

Answer 27

prevention and appraisal costs

Question 28

prevention cost example

Answer 28

redesign processes

Question 29

appraisal cost

Answer 29

testing

Question 30

normal vs abnormal spoilage

Answer 30

normal-product cost
abnormal-period cost

Question 31

what is the budget to give info on owners equity?

Answer 31

budgeted income statement

Question 32

what principal supports performance of ERM?

Answer 32

identify risks
develop portfolio view
assess severity of risk
prioritize risk
implement risk response

Question 33

what is a semivariable cost?

Answer 33

utility costs fixed+variable characteristics over a relevant range