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Flashcards in BEC Deck (324):
1

The risk that a sluggish economy will affect the value of a debt instrument

Risk Management

1

Financial / Customer / Internal Business Processes / Learning and Growth

Performance Measurement

1

Operators Programmers Librarians

Information Technology

1

Budget targeted for a specific segment of a company.

Financial Planning & Analysis

1

Managing inventory & receivables (current assets & liabilities)

Financial Management

1

When the prices of an item increases supply increases- because more sellers are willing to sell.

Economics

1

Cost Accounting is a component of GAAP that records Ending Inventory on the Balance Sheet for o Direct Materials o Direct Labor o Work in Process o Finished Goods Cost Accounting also records for the Income Statement

Cost Accounting

1

To monitor management behavior.

Corporate Governance

1

Managerial Accounting technique used to evaluate different investment options Helps management make decisions Uses both accounting and non-accounting information Internal focus GAAP is not mandatory

Capital Budgeting

2

The risk that an event in the investment's business sector will harm the investment For example- the banking sector is sluggish- so even stocks of healthy banks suffer

Risk Management

2

To measure Performance.

Performance Measurement

2

Designs or purchases IT system Responsible for flowcharts Liaison between Users and Programmers Note: Think IT Manager

Information Technology

2

Budget targeted for the company as a whole Includes budgets for Operations and Cash Flows Includes set of budgeted Financial Statements

Financial Planning & Analysis

2

NWC : Current Assets - Current Liabilities

Financial Management

2

When supply changes due to something other than price.

Economics

2

Cost Accounting - External Focus- GAAP Managerial Accounting - Internal Focus- Not GAAP

Cost Accounting

2

Oversees the board Responsible for hiring new CEO

Corporate Governance

2

Capital Budgeting ONLY uses Present Value tables. Capital Budgeting NEVER uses Fair Value.

Capital Budgeting

3

The risk that a debtor will be unable to make loan payments or pay back the principal

Risk Management

3

Diagrams of Strategic Cause and Effect Relationships.

Performance Measurement

3

A Systems Administrator controls database access.

Information Technology

3

Costs independent of the level activity within the relevant range Property Tax is the same whether you produce 100-000 units or zero units However - Fixed Costs per unit vary given the amount of activity If you produce fewer units- fixed costs per unit will be greater than if you produce more units - i.e. less units to spread the cost over

Financial Planning & Analysis

3

Shorten the cash conversion cycle Don't negatively impact operations

Financial Management

3

Supply increases at each price point Higher Equilibrium GDP Number of sellers increases - market can get flooded Examples: Government subsidies or technology improvements that decrease costs for suppliers

Economics

3

Prime Costs Conversion Costs

Cost Accounting

3

The audit committee appoints and oversees the external auditor.

Corporate Governance

3

For ONE payment- ONE time.

Capital Budgeting

4

The risk that a change in interest rates will adversely affect the value of the note Example: Bond is for 10% but prevailing market rate is now 12%. If bondholder wants to sell it- they will have to sell it at a discount.

Risk Management

4

A plan to achieve goals.

Performance Measurement

4

Writes- Updates- Maintains- & Tests software- systems- and compilers

Information Technology

4

The more Direct Materials or Direct Labor used- the more Variable Costs per unit However - Variable Costs per unit don't change with the level of activity like Fixed Costs per unit

Financial Planning & Analysis

4

Average time needed to convert materials into finished goods and sell them Average Inventory : (BI + E) / 2 Inventory Conversion Period : Average Inventory / Sales Per Day

Financial Management

4

Supply decreases at each price point Lower Equilibrium GDP Cost of producing item increases Examples: Shortage of gold- so less gold watches are made; wars or crises in rice-producing countries means there is less rice on the market

Economics

4

Direct Material USED - Have become part of the product or had a direct impact on the product Direct Labor Used - Employees who worked on product and had direct impact

Cost Accounting

4

The compensation committee handles the CEO's compensation package.

Corporate Governance

4

Multiple payments made over time- where the payments are made at the START of the period.

Capital Budgeting

5

It measures the volatility of an investment.

Risk Management

5

Return on Investment Residual Income Spread Economic Value Added Free Cash Flow

Performance Measurement

5

In order to maximize internal control- a Systems Programmer should NOT have application programming duties/abilities or be an Operator on the system.

Information Technology

5

SAM: Standard Material Costs - Actual Material Costs = Material Variance

Financial Planning & Analysis

5

Average time needed to collect A/R RCP : Average Receivables / Credit Sales Per Day

Financial Management

5

When the prices of an item increases- demand for it decreases.

Economics

5

All factory costs except for DM and DL used in production- including Spoilage (except for abnormal spoilage- which is a period cost and not included in OH).

Cost Accounting

5

They require the board to be independent.

Corporate Governance

5

Multiple payments over time- where payments are made at the END of the period. Think A for Arrears.

Capital Budgeting

6

Risk that impacts the entire market and can't be avoided or reduced through diversification Example: Wars

Risk Management

6

ROI : Return / Investment Example: You Invest $100 to buy a machine that generates $60 in Operating Income $60 / $100 : 60% ROI

Performance Measurement

6

Schedules and Monitors Jobs Runs IT Help Desk

Information Technology

6

SAL Standard Labor Costs - Actual Labor Costs = Labor Variance

Financial Planning & Analysis

6

Average time between materials and labor purchase and their A/P payment Average Payables : (BP + EP) / 2 Payables Deferral Period : Average Payables / (COGS/365)

Financial Management

6

When demand changes due to something other than price.

Economics

6

FFO : Estimated Costs / Normal Capacity Uses Normal Activity Examples of Fixed Factory OH: Depreciation (SL)- Utilities- Taxes Under/Over-applied Fixed OH always goes to COGS

Cost Accounting

6

The package should ensure that the goals of management should match those of the shareholders.

Corporate Governance

6

1 / (( 1+i )^n) i : interest rate n : number of periods

Capital Budgeting

7

Relates to a particular industry or company Example: You own stocks in ethanol plants and an untimely freeze kills all of the corn in the Midwest

Risk Management

7

Operating Income - (Required Rate of Return x Invested Capital) : Residual Income

Performance Measurement

7

For internal control purposes- they should not be a Programmer on the system.

Information Technology

7

OAT Overhead Applied - Actual Overhead Cost = Total Overhead Variance

Financial Planning & Analysis

7

Amount of time it takes to receive a cash inflow (Customers) after making a cash outflow (Vendors) Inventory Conversion Period + Receivables Collection Period - Payables Deferral Period : Cash Conversion Cycle (Inventory Really (-Pays) Cash)

Financial Management

7

When demand increases at each price point Price of substitutes go up - price of beef rises- so people buy more chicken Future price increase is expected - War in Middle East- people go out and buy gas Market expands - i.e. people get new free health care plan- demand at clinic rises Expansion - more spending increases equilibrium GDP

Economics

7

VO : Estimated Activity / Actual Activity Uses Actual Activity Examples of Variable Factory OH: Deprecation (Units of Prod)- Indirect materials (supplies & insignificant items)- Indirect labor (factory foreman- janitors- machine maintenance)

Cost Accounting

7

Executive compensation should create an incentive for management to govern in a shareholder-friendly way that doesn't sacrifice the long-term success of the enterprise for short-term gain.

Corporate Governance

7

A preferred method of evaluating profitability. One of two methods that use the Time Value of Money : PV of Future Cash Flows - Investment

Capital Budgeting

8

Beta measures how volatile the investment is relative to the rest of the market. In other words- how quickly (and in what amount) does the value of the stock change when the market sways?

Risk Management

8

RROR is also called 'Cost of Capital'

Performance Measurement

8

Include Computer Logs. Control Group should review the logs.

Information Technology

8

Absorption Costing - External Use- Cost of Sales- Gross Profit- SG&A Variable Costing - Internal Use- Variable Costs- Contribution Margin- Fixed Costs

Financial Planning & Analysis

8

Liquid Safe

Financial Management

8

Demand decreases at each price point. Price of complement goes up - price of beef goes up- less demand for ketchup Boycott - Company commits social blunder- consumers boycott Consumer income rises - Demand for inferior goods drops as people have more money to spend Consumer tastes change Contraction - less spending decreases equilibrium GDP

Economics

8

If Immaterial - Goes to COGS If Material - Goes to WIP- Finished Goods- or COGS- based on their Ending Balance

Cost Accounting

8

They range from internal (Board of Directors- Audit Committee- Internal Control) to external (Creditors- SEC- IRS) These influences should not be tainted by undue influence from management or have financial ties to management such as compensation-related duties

Corporate Governance

8

NPV : PV Future Cash Flows - Investment If NPV is Negative- Cost is greater than benefits (bad investment) If NPV is Positive- Cost is less than benefit (good investment) If NPV : 0- Cost : Benefit (Management is indifferent)

Capital Budgeting

9

It compares volatility of an investment to the market average. Factors include both Systematic and Unsystematic Risk.

Risk Management

9

Cost of Capital is the weighted average of the interest rates you pay for your Capital. Includes Debt and the Rate of Return your Equity Shareholders expect Example: 45% of your Capital is supported by debt and has an interest rate of 9%. 55% of your Capital is supported by equity and shareholders expect a ROR of 12% Your Cost of Capital is: (.45 x .09) + (.55 x .12) : 10.65%

Performance Measurement

9

To assist with decision making.

Information Technology

9

Sales Price (per unit) - Variable Cost (per unit) = Contribution Margin (per unit)

Financial Planning & Analysis

9

Used for importing goods. Issued by importer's bank.

Financial Management

9

How much you spend when your income increases Calculate: Change in Spending / Change in Income

Economics

9

It always goes to COGS

Cost Accounting

9

When management doesn't act in the best interest of shareholders. It can be alleviated by tying compensation to stock performance or company profit.

Corporate Governance

9

The Discount Rate.

Capital Budgeting

10

An asset whose value is DERIVED from the value of another asset. Derivatives are measured at Fair Value.

Risk Management

10

Spread : ROI - Cost of Capital

Performance Measurement

10

A type of Management Information System (MIS) that processes accounting transactions.

Information Technology

10

Total Fixed Costs / Contribution Margin (per unit) = Break-even Point Per Unit Assumption: Total Costs & Total Revenues are LINEAR

Financial Planning & Analysis

10

No interest cost if paid timely.

Financial Management

10

How much you save when income increases Calculate: Change in Savings / Change in Income Also equals 1 - Marginal Propensity to Consume

Economics

10

Under-applied overhead. If it's Fixed OH- under-applied goes to COGS. If it's Variable OH- under-applied goes to COGS if immaterial- but is allocated to WIP- FG or COGS based on ending balances.

Cost Accounting

10

Management must submit a report on the effectiveness of Internal Control in the 10K. Management must disclose significant Internal Control deficiencies. CEO/CFO must certify that the financial statements comply with securities laws and fairly present the financial condition of the company.

Corporate Governance

10

The rate of return on an investment used. It represents the minimum rate of return required.

Capital Budgeting

11

Gives the buyer the option to buy or sell a financial derivative at a certain price Traders use them to speculate where they think the price will be at a certain point and make a profit Hedgers use them to offset risk

Risk Management

11

Investments should exceed costs- with an emphasis on stockholder value. Economic Value Added : Operating Income After Tax - (Net Assets x WACC)

Performance Measurement

11

Specialized for Company Executive needs Assists with Strategy Only No Decision-Making Capabilities

Information Technology

11

Management is concerned only with costs

Financial Planning & Analysis

11

Customer Payments are sent to a bank-managed PO box. Employees don't have access to cash. Deposits are more timely. Interest income from deposits should pay for the Lockbox fees (if they don't- lockbox is not beneficial)

Financial Management

11

(1 / 1-MPC) x Change in Spending

Economics

11

A credit balance indicates over-applied overhead. If Fixed overhead- it is corrected from COGS. If Variable overhead- it is corrected through COGS if immaterial- but if material overage is allocated to WIP- FG or COGS based on ending balances.

Cost Accounting

11

Reliable financial reporting Effective and efficient operations Compliance

Corporate Governance

11

Uses the Time Value of Money Uses all cash flows- not just the cash flows to arrive at Payback Takes risks into consideration

Capital Budgeting

12

A Forward Contract with a future value. They are sold and traded on the futures market.

Risk Management

12

Operating Income After Tax + Depreciation & Amortization - Capital Expenditures - Change in Net Working Capital : Free Cash Flow

Performance Measurement

12

Computer uses reasoning Structured No human interpretation needed

Information Technology

12

Management is concerned with both costs and profits

Financial Planning & Analysis

12

Time it takes to mail a payment and have it clear your bank account Maximize float on cash payments Minimize float on cash receipts

Financial Management

12

As spending by consumers or the government increases- the demand curve increases (shifts right).

Economics

12

Beginning Balance DR Net purchases (plus freight-in) CR Direct Materials Used : Ending balance (goes to BS)

Cost Accounting

12

Integrity & Ethics Competence The Board of Directors & Audit Committee Management's Operating Style Organizational Structure Authority & Roles of Responsibilities HR Policies

Corporate Governance

12

Not as simple as the Accounting Rate of Return.

Capital Budgeting

13

Forward Contract to swap payment agreements They are highly liquid and often valued using the Zero-Coupon method. Example: Steve pays Sally a fixed payment with a fixed interest rate. Sally pays Steve a variable payment tied to a benchmark such as LIBOR

Risk Management

13

It measures a product versus its quality goal.

Performance Measurement

13

Computer provides data Gives Interactive Support Human interpretation needed

Information Technology

13

Management is concerned with costs- profits- and assets

Financial Planning & Analysis

13

Regional bank sends enough cash to cover daily checks Advantages: Checks take longer to clear -more float Low amounts of cash tied up for compensating (minimum) balances

Financial Management

13

The increase in demand ends up being larger than the amount of additional income spent in the economy due to the multiplier effect. One consumer spends money- which: *Increases the income of a business *Increases the income of a vendor *Increases income of employees *Increases tax revenue

Economics

13

Beginning Balance (End Bal of Previous WIP) DR Direct Materials Used DR Direct Labor Used (Conversion Cost) CR COGM DR Factory Overhead Applied (Conversion Cost) : Ending Balance (Goes to BS)

Cost Accounting

13

A component of Internal Control that includes actions being taken to promote the control environment.

Corporate Governance

13

NPV includes Salvage Value because it is a future cash inflow. NPV does NOT include depreciation because it is non-cash. Exception - If a CPA Exam question says to include tax considerations- then you have to include depreciation because of income tax savings generated by depreciation.

Capital Budgeting

14

Risk that a law or regulation will void the derivative

Risk Management

14

Sales / Average Assets

Performance Measurement

14

User initiates the report. The report is created upon demand.

Information Technology

14

Forecasting technique where Data is collected and analyzed Requires judgement/consensus

Financial Planning & Analysis

14

Treasury Bills: Short term (less than one year) Think: $1 Bill Treasury Notes: Medium term (less than 10 years- more than 1) Treasury Bonds: Long term (greater than 10 years) Think: government is in long-term bondage to you; they owe you money

Financial Management

14

% Change in Quantity Demand / % Change in Price

Economics

14

Beginning Balance DR COGM : COGAS (Cost of Goods Avail for Sale) CR COGS : Ending Balance (Goes to BS)

Cost Accounting

14

Control Environment Risk Assessment Control Activities Information and Communication Monitoring

Corporate Governance

14

The minimum rate of return is used.

Capital Budgeting

15

Hedge that protects against the value of an asset or liability changing. Changes in value are reported in earnings.

Risk Management

15

Can the company pay their short-term liabilities? Current Ratio : Current Assets / Current Liabilities

Performance Measurement

15

Exception reports are produced when Edit Tests- Check Digits- or Self-Checking Digits identify a problem

Information Technology

15

A forecasting technique where Sales is the dependent variable. Simple Regression - One independent variable Multiple Regression - Multiple independent variables

Financial Planning & Analysis

15

Similar to T-Bill- but issued by corporations instead of Government Greater than 9 Months Maturity Unsecured Issued by large firms

Financial Management

15

Price increases- Revenue decreases Price decreases- Revenue increases

Economics

15

Inventory (Product) Cost Part of DM Purchases

Cost Accounting

15

Management must have access to relevant and timely information to make good decisions.

Corporate Governance

15

It calculates a project's actual rate of return through the project's expected cash flows. IRR is the rate of return required for PV of future cash flows to EQUAL the investment. Investment / After Tax Annual Cash Inflow : PV Factor

Capital Budgeting

16

A hedge that protects against a set of future cash flows changing. Changes in value are reported in OCI.

Risk Management

16

How is the company financing its capital? Debt to Equity Ratio : Total Debt / Total Equity

Performance Measurement

16

A type of Ad Hoc report- initiated by a user.

Information Technology

16

Forecast sales using Economic Data

Financial Planning & Analysis

16

Advantages: Financing at less than Prime. No compensating balances required. Disadvantages: Unpredictability of markets. Credit crisis emerges and large insurance/investment companies aren't lending.

Financial Management

16

Many substitutes (luxury items) Considered elastic if elasticity is greater than 1 10% drop in demand / 8% increase in price : 1.25 (Elastic) Price increases- Revenue decreases Price decreases- Revenue increases

Economics

16

Selling (Period) Cost Not part of inventory

Cost Accounting

16

Internal Control activities must be constantly monitored and evaluated for effectiveness.

Corporate Governance

16

Cash flows are re-invested at the rate of return earned by the original investment.

Capital Budgeting

17

A hedge that protects against the value of a foreign currency changing. For example- a foreign currency hedge might be used to protect against the following: If you have receivables denominated in a foreign currency and that currency dips in value - your receivables are worth less than before.

Risk Management

17

What proportions of the company's assets are encumbered with debt? Debt to Total Assets : Total Liabilities / Total Assets

Performance Measurement

17

The User develops and executes their own application.

Information Technology

17

Very Simplistic - Eyeball past trends and make an estimate

Financial Planning & Analysis

17

The order quantity that minimizes inventory costs. EOQ : Square Root of (2DO/C) D : Unit Demand (Annual) O : Order Cost C : Cost of Inventory

Financial Management

17

Price increases- Revenue increases Price decreases- Revenue decreases

Economics

17

Used when costs are easily connected to a specific product or product line Can also be applied to services Calculation is the same as normal cost accounting - just use your T Accounts - DM to WIP to FG to COGS - You're likely going to be solving for the last job in the queue

Cost Accounting

17

Identifies Risk Factors Promotes Risk Response Decisions Compares Management Risk vs. Shareholder Goals Aids in evaluating opportunities Promotes Quicker Capital movement Does NOT eliminate all risk

Corporate Governance

17

Rate of return for IRR is the rate earned by the investment. Rate of return for NPV is the minimum rate.

Capital Budgeting

18

How profitable is the product after COGS? Gross Margin : Gross Profit / Net Sales

Performance Measurement

18

E-commerce makes business transactions easier.

Information Technology

18

Both project estimates using average trends from recent periods Difference: Exponential Smoothing weighs recent data more heavily

Financial Planning & Analysis

18

The cost of keeping inventory.

Financial Management

18

Few substitutes (groceries- gasoline) Considered inelastic if coefficient of elasticity is less than 1 5% drop in demand / 10% increase in price : .5 (inelastic) Price increases- Revenue increases Price decreases- Revenue decreases

Economics

18

No services allocated between service departments- even if they serve each other. Only allocate to product(s)

Cost Accounting

18

Avoid or Reduce Share or Accept

Corporate Governance

18

Strengths: Uses Time Value of Money- Cash Flow emphasis Weakness: Uneven cash flows lead to varied IRR

Capital Budgeting

19

How profitable is the product after all expenses (except interest and taxes)? Operating Profit Margin : Operating Profit / Net Sales

Performance Measurement

19

Compromised data or theft. Less paper trail for auditors.

Information Technology

19

Uses Relevant Costs Only Ignore Sunk Costs Opportunity Cost is a Must

Financial Planning & Analysis

19

Cost of executing an order and starting product production.

Financial Management

19

Total revenue will remain the same if price is increased Considered unitary if coefficient of elasticity : 1

Economics

19

Services can be allocated to both other service departments and the product(s)

Cost Accounting

19

When the benefits are greater than the costs. IRR is greater than the Discount Rate

Capital Budgeting

20

Can the company make their interest payments? Times Interest Earned : Earnings Before Tax & Interest / Interest Expense

Performance Measurement

20

Uses globally-accepted standards Efficient

Information Technology

20

How low inventory should get before it should be re-ordered. IOP : Average Daily Demand x Average Lead Time

Financial Management

20

% Change Quantity Demanded / % Change in Income Normal goods greater than 1 (demand increases more than income) Inferior goods less than 1 (demand increases less than income)

Economics

20

Beginning Inventory + Units Started - Ending Inventory : No. Units Shipped

Cost Accounting

20

When Costs are greater than Benefits IRR is less than the Discount Rate

Capital Budgeting

21

What % return are the assets generating? Return on Assets : Net Income (net of interest & taxes) / Average Total Assets

Performance Measurement

21

A file server stores shared programs and documents.

Information Technology

21

Orders inventory so that you get it just in time for when it's needed JIT is valuable when Order Cost is low and Cost of Carrying Inventory is high

Financial Management

21

Interest rates increase Reduced demand for loans Reduced demand for houses- autos- etc. Value of bonds and fixed income securities decrease Inferior good demand to increase Foreign goods more affordable than domestic Demand for domestic goods decrease

Economics

21

FIFO Weighted Average

Cost Accounting

21

When benefits equal the Costs IRR : Discount Rate

Capital Budgeting

22

Market Value of Common Stock / Book Value of Common Stock

Performance Measurement

22

Located on a File Server- a Database allows users to share documents.

Information Technology

22

Receivables are sold to a financing company where they pay less than the value of the receivables due to a discount related to risk of non-collection

Financial Management

22

Overall spending increases Demand increases (shifts right) Market equilibrium price increases

Economics

22

Equivalent Units of Production

Cost Accounting

22

It measures an investment in terms of how long it takes to recoup the initial investment via Annual Cash Inflow Investment / Annual Cash Inflow : Payback Method Compare to a targeted timeframe; if payback is shorter than target- it's a good investment. If payback is longer than target- it's a bad investment.

Capital Budgeting

23

How quickly does inventory get sold? Inventory Turnover : COGS / Average Inventory

Performance Measurement

23

It connects computers in close proximity.

Information Technology

23

Buyer saves if paid early Example: 1/10 Net 30 1% Discount if paid within 10 days If not- bill is still due in 30 days

Financial Management

23

Overall production costs increase Supply decreases (shifts left) Market equilibrium price increases Note: Demand-Pull and Cost-Push Inflation BOTH result in market equilibrium price to increase

Economics

23

EFU FIFO will always be LESS than EFU Weighted Avg (unless Beginning Inventory is Zero)

Cost Accounting

23

Takes risk into consideration 2 year payback is less risky than a 5 year payback

Capital Budgeting

24

It measures short-term liquidity- and only includes assets that are quickly available (i.e. not inventory) Quick Ratio : (Current Assets - Inventory) / Current Liabilities

Performance Measurement

24

It connects computers that are far apart.

Information Technology

24

(Discount % x 365) / ((100% - Discount) x (Pay Period - Discount Period))

Financial Management

24

The price where Quantity Supplied : Quantity Demanded

Economics

24

Beginning Inventory + Current Costs / EFU WA

Cost Accounting

24

Ignores the Time Value of Money Exception: Discount payback method Ignores cash flow after the initial investment is paid back

Capital Budgeting

25

How many days does it take the company to collect payment on A/R? Average Collection Period : Average AR / Average Sales Per Day

Performance Measurement

25

Privately-owned Network Serves as 3rd Party Between 2 Companies Routes EDI Transactions Accepts wide range of Protocols Very Costly

Information Technology

25

A benchmark used for lending only to the best customers Most customers will be charged Prime + 3%- for example If the lending institution and the customer are not in the same country- the LIBOR rate is often used

Financial Management

25

When Marginal Revenue : Marginal Cost

Economics

25

Beginning Inventory + Current Costs / EFU WA

Cost Accounting

25

An approximate rate of return on assets ARR : Net Income / Average Investment Compare to a targeted return rate; if ARR greater than target- good investment. If ARR less than target- bad investment.

Capital Budgeting

26

Products have quality defects- but are caught BEFORE they leave the warehouse.

Performance Measurement

26

Prevents unauthorized access to a network.

Information Technology

26

Interest rate stated on the face of a bond.

Financial Management

26

Causes a surplus if above equilibrium price.

Economics

26

Units Shipped + EI x % Complete DM : EFU (Weighted Average Method) - Beginning Inventory x % Complete : EFU (FIFO)

Cost Accounting

26

Simple to use People understand easily

Capital Budgeting

27

Product reaches the customer- but they are not satisfied with the quality of the product. This includes recalls.

Performance Measurement

27

Takes over a computer Needs a host program to run

Information Technology

27

CY : Interest Payment / Bond Price

Financial Management

27

The annual value of all goods and services produced domestically at current prices by consumers- businesses- the government- and foreign companies with domestic interests Included: Foreign company has US Factory Not included: US company has foreign factory

Economics

27

Units Shipped + EI x % Complete CC : EFU (Weighted Average) - Beginning Inventory x % Complete : EFU (FIFO)

Cost Accounting

27

Can be skewed based on Depreciation method that is used. Ignores the Time Value of Money.

Capital Budgeting

28

Quality control- testing & inspection costs.

Performance Measurement

28

Takes over multiple computers Doesn't need a host program to run

Information Technology

28

PV of Principle + Interest : Bond Price

Financial Management

28

Sole Proprietor and Corp Income Passive Income Taxes Employee Salaries Foreign Income Adjustments Depreciation

Economics

28

Current Costs / EFU FIFO Note: FIFO method uses Current Period costs only and ignores Beginning Inventory

Cost Accounting

28

An approximate rate of return on assets.

Capital Budgeting

29

They prevent and detect hardware errors.

Information Technology

29

No interest payments made Bond sold at a discount Interest reflected when Bond matures

Financial Management

29

Individual Consumption Private Investment Government Purchases Net Exports

Economics

29

Current Costs / EFU FIFO FIFO method uses Current Period costs only and ignores Beginning Inventory

Cost Accounting

30

Random Access Memory. Internal memory in the computer used during immediate processing.

Information Technology

30

High interest rate High default risk

Financial Management

30

Measures goods/services in current prices.

Economics

30

Beginning balance (DM- DL- OH) + Current Costs (DM- DL- OH) - COGM (Goes to Finished Goods) + DM EFU x Cost per DM EFU + CC EFU x Cost per CC EFU : Ending WIP

Cost Accounting

31

Computer Processing Unit It processes commands within a computer.

Information Technology

31

Bonds unsecured by collateral

Financial Management

31

Used to convert GDP to Real GDP

Economics

31

Net Sales - Product Costs : Gross Margin - Period Costs : Operating Income

Cost Accounting

32

It schedules and allocates system resources.

Information Technology

32

Debenture Bonds that will be repaid if any assets are left after liquidation of a company

Financial Management

32

Nominal GDP / GDP Deflator x 100

Economics

32

Focuses on eliminating non-value-added activities for poor quality and inventory and things customers don't want or don't care about Inventory is expensive to store and storing something is not a value-added expenditure Uses Cost Pools - Different departments can have different OH rates Uses Several OH rates based on Activity - Cost Pool / Cost Driver

Cost Accounting

33

Keyboard Mouse Scanner Magnetic Ink Reader Magnetic Tape Reader EDI Point of Sale Scanner

Information Technology

33

Provision in Bond contract allows demand of Bond payment under certain circumstances

Financial Management

33

Like GDP; Swaps foreign production. US Firms overseas are included- Foreign firms domestically are not included

Economics

33

Cost Pools and Allocations increase compared to a traditional costing system

Cost Accounting

34

Speakers Monitors Printers

Information Technology

34

Borrower can pay off debt early

Financial Management

34

Price of goods relative to an earlier period of time- which is the benchmark. Year 1 : 1.0 ((CPI Current - CPI Last) / CPI Last) * 100

Economics

34

Connected to Just-in-Time Production- which is part of Activity-Based Costing and Total Quality Management (TQM) - Works backward to flush out COGS - Mostly GAAP

Cost Accounting

35

Sequential Access - Sorts data in order Slower data retrieval Header Label prevents Operator error by loading wrong tape External Labels prevent accidental destruction by operator

Information Technology

35

Lender can demand payment via company stock instead of money

Financial Management

35

Personal Income - Personal Taxes

Economics

35

Usually immaterial and common costs aren't allocated to them Low Market Value Can be valued at NRV Can be treated as a contra expense and netted against COGS - Can be treated as a contra sale and netted against Sales Recognition rules are very flexible with valuing and classifying by-products

Cost Accounting

36

Random Access - Finds data in random spots Faster data retrieval Uses Boundary Protection for data

Information Technology

36

Borrower deposits regular sums into an account that will eventually pay off the debt

Financial Management

36

% Increase in output / % Increase in input Greater than 1 : Increasing returns to scale Less than 1 : Decreasing returns to scale

Economics

36

Measure how costs change relative to activity levels High-Low Method Change in Cost (High-Low pts) / Change in Activity (High-Low pts)

Cost Accounting

37

Connects one network to another Note: the Internet is connected by Gateways

Information Technology

37

Common Stock is more expensive to issue than debt. Why? Investors demand a greater ROI than debtors (bondholders)

Financial Management

37

When GDP growth is negative for two consecutive quarters.

Economics

38

A control that detects internal data errors. A bit is added to each character- it checks to see if a bit was lost.

Information Technology

38

Hold dividend priority over common stock

Financial Management

38

A prolonged- severe recession with high unemployment rates No requisite period of time for the economy to officially be in a depression

Economics

39

Transmitted data is returned to the sender for verification (it echoes back to the sender)

Information Technology

39

A company uses this to determine the true cost of their capital Example: Debt costs 5%; 40% of Cap. Equity costs 12%; 60% of Cap. (5% x 40%) + (12% x 60%) WACC : 9.2%

Financial Management

39

Peak (highest) Recession (decreasing) Trough (lowest) Recover (increasing) Expansion (higher again)

Economics

40

It authorizes program changes and approves program test results.

Information Technology

40

A stock's expected performance is based on its beta (risk) compared to that of the stock market. More risk : more expected return.

Financial Management

40

Conditions that occur before a recession or before a recovery Example: Stock Market or New Housing Starts

Economics

41

Software that controls access to IT systems. Note: Don't confuse this with anti-virus software

Information Technology

41

(Interest Expense - Tax Benefit) / Carrying Value of Debt

Financial Management

41

Conditions that occur after a recession or after a recovery Examples: Prime Interest Rates- Unemployment

Economics

42

It confirms a message has not been altered.

Information Technology

42

Conditions that occur during a recession or during a recovery Example: Manufacturing output

Economics

43

PDA/Smartphone/Tablet Microcomputer - PC- Laptop (cost-effective) Minicomputer - Like a Mainframe- but smaller Mainframe - Large computer with terminals attached Supercomputer - Very powerful and very big

Information Technology

43

Only people looking for jobs

Economics

44

Bit - 1 (on) and 0 (off) Byte - 8 bits to a byte/character Field - group of related characters/bytes (i.e. Name- Zip Code- Serial #) Record - Group of related fields (i.e. Member name- address- phone number) File - Group of related records (i.e. Membership directory)

Information Technology

44

GDP doesn't grow fast enough to employ all people who are looking for work Example: People are unemployed in 2010 because there aren't enough jobs available due to the economy

Economics

45

Determine language used for a specific computer- on a computer-to-computer basis

Information Technology

45

People are changing jobs or entering the work force. This is a normal aspect of full employment. Example: A recent college graduate is looking for a job

Economics

46

Programs written in base computer language- not similar to English.

Information Technology

46

A worker's job skills do not match those necessary to get a job so they need education or training Example: A construction worker wants to work in an office- so they quit their job and get computer training

Economics

47

They are written in a language close to English.

Information Technology

47

High Unemployment : Low Inflation (Vice Versa)

Economics

48

Takes Source language (English) and converts to Object (Computer) Language

Information Technology

48

The rate a bank pays to borrow from the Fed.

Economics

49

It uses a Data Warehouse to support management decision making.

Information Technology

49

The rate a bank charges their best customers on short-term borrowings.

Economics

50

Using artificial intelligence and pattern recognition to analyze data stores within a Data Warehouse.

Information Technology

50

Inflation-adjusted interest rate

Economics

51

To process a company's routine transactions.

Information Technology

51

Rate that uses current prices

Economics

52

Data held- updates multiple files all at once Leaves a better audit trail Uses Grandfather-Father-Son backup (3 levels of backup kept in 3 locations)

Information Technology

52

Rate for a loan with 100% certainty of payback. Usually results in a lower rate. US Treasuries are an example.

Economics

53

Checks to see if output data is valid- distributed and used in an authorized manner.

Information Technology

53

Currency- Coins- and Deposits

Economics

54

Checks if data processing produced proper output

Information Technology

54

Highly liquid assets other than currency- coins or deposits

Economics

55

An input control number- a meaningless sum of values included in the input. Example would be summing a list of SSNs to make sure the data is the same once entered as it was prior to input into the system.

Information Technology

55

Increased spending levels without increased tax revenue. Lower taxes without decrease in spending Gamble that the multiplier effect will take over and boost economy

Economics

56

Checks to see if data in existing tables or files belongs in the set For example- is there a # in an alpha-only field or a letter in a numeric-only field

Information Technology

56

By buying and selling the government's securities.

Economics

57

Checks to see if numbers surpass a certain limit- i.e. in an age field is the number greater than 110.

Information Technology

57

By adjusting the discount rate charged to banks

Economics

58

An input control that adds an identification number to a set of digits - usually at the end

Information Technology

58

A tax on imported goods

Economics

59

An input check that prevents invalid characters- i.e. checks for alphabetic letters in a SSN field

Information Technology

59

A limit on the number of goods that can be imported

Economics

60

A disaster recovery system where if the main system goes down- a Hot Site is ready to take over immediately.

Information Technology

60

They are good for domestic producers. Demand curve shifts right Fewer substitutes They can charge higher prices

Economics

61

If a main system goes down- a Cold Site will take time to get set up and running.

Information Technology

61

They are bad for foreign producers Demand curve shifts left Fewer buyers They must charge lower prices

Economics

62

SQL - Standard Query Language

Information Technology

62

They are good for foreign consumers Supply curve shifts right Goods purchased at lower prices in the foreign markets

Economics

63

Defines SQL Database Controls SQL Tables

Information Technology

63

They are bad for domestic consumers Supply curve shifts left Fewer goods bought due to higher prices

Economics

64

Queries SQL Database tables

Information Technology

64

Explicit (Actual) cost of operating a business Implicit costs are opportunity costs

Economics

65

Controls Access to SQL Database

Information Technology

65

Revenue - Accounting Cost

Economics

66

Logical structure Uses rows and columns similar to spreadsheet

Information Technology

66

Explicit + Implicit Cost

Economics

67

Has various levels Uses trees to store data

Information Technology

67

Revenue - Economic Cost

Economics

68

Data is more accessible Reduced redundancy

Information Technology

69

Cost of installation Skilled personnel required to maintain

Information Technology

70

Desktop client Application Server Database Server Think: Your desktop computer runs applications and saves to a database

Information Technology