BEC Flashcards
(231 cards)
1
Q
What is the primary role of the board of directors?
A
Safeguard the company’s assets and to maximize shareholder return
2
Q
What are the three categories of objectives within COSO (internal control framework)?
A
Operations Objectives, Reporting Objectives, Compliance Objectives
3
Q
Effectiveness and efficiency of an entity’s operations=
A
Operations Objectives
4
Q
Reliability, Timeliness and Transparency=
A
Reporting Objectives
5
Q
EBOCA (Control Environment)=
A
Ethics and Integrity, Board Independence, Organizational Structure, Commitment to Competence, Accountability
6
Q
Event ID, Assess Risk, Respond to Risk=
A
Risk Assessment
7
Q
Communicate and Report Deficiencies, ongoing evaluations=
A
Monitoring
8
Q
Mitigate Risk, Detect or prevent, segregation of duties=
A
Existing Control Activities
9
Q
Is a board member or independent auditor independent?
A
Board member
10
Q
What does the effective system of internal control require?
A
Present (Included in Design and Implementation) and Functioning (Operating as Designed)
11
Q
ERM includes ORC, plus what?
A
Strategic-High level goals designed to achieve the mission
12
Q
What are the components of ERM?
A
IS EAR AIM (pg. 19)
13
Q
risk to an entity in the absence of any actions management might take to alter either the risk’s likelihood or impact=
A
inherent risk
14
Q
EBOCA + HR=
A
Internal Environment for ERM
15
Q
The principle that protects corporate directors from personal liability for acts performed in good faith on behalf of the corporation is known as what?
A
Business judgment rule
16
Q
Effective information must be what?
A
Fair, Timely, Current, Accurate
17
Q
Pareto Diagram or Histogram is used for what?
A
Determine the quality control issues that are most frequent and demand the greatest attention
18
Q
What is the Case and Effect (Fishbone) Diagram used for?
A
Identify sources of problems in the production process by resource and take corrective action
19
Q
Nonfinancial measures are more easily associated with what?
A
Operational Objectives
20
Q
What are the three objectives for cost accounting?
A
Product costing, Income Determination, Efficiency Measurements
21
Q
Manufacturing costs=
A
Product Costs (Direct and Indirect)
22
Q
Nonmanufacturing costs=
A
Period Costs
23
Q
Freight IN and Normal Scrap and added to what?
A
Direct raw materials
24
Q
Prime Costs=
A
DL + DM
25
Conversion Costs=
DL + Manufacturing Overhead
26
Calculated overhead rate=
Budgeted overhead costs/Estimated Cost Driver
27
Applied overhead=
Actual cost driver * Overhead rate
28
Semi variable cost=
Manufacturing Overhead
29
Cost of goods manufactured=
Beg. WIP Inventory + DM+DL+MOH - End WIP Inventory
30
COGS=
Beg. FG Inventory + Cost of goods manufactured (or purchases)- End FG Inventory
31
Job order costing is applied how?
Sequentially
32
If overhead applied (credit balance) is greater than actual costs:
Favorable
33
Units completed + Ending WP * % Complete=
Weighted Average
34
Beg WIP * % to be completed + Units completed-Beg. WIP +Ending WIP * % Complete=
FIFO
35
Surplus Inventory=
Non-value-added activities (Don't increase product value)
36
Step down approach=
More sophisticated approach
37
Incurred in producing products up to the split-off point=
Joint Product Costs
38
Incurred on a product after the split-off point=
Separable Costs
39
A causal factor that increases the total cost of a cost objective=
Cost driver
40
Breakeven point in units=
Total Fixed Costs/CM per unit
41
What is the contribution margin calculation?
Sales-Variable Cost(Includes shipping)
42
When production is greater than sales, the income for absorption costing method is ____ than variable costing
higher
43
When sales are greater than production, the income for absorption costing is ____ than variable costing
lower
44
Target cost=
Market price-Required Profit
45
How is absorption Costing different from variable (contribution) costing?
Absorption includes fixed manufacturing overhead as product costs
46
At breakeven, fixed costs equals what?
Contribution margin
47
Total sales-breakeven sales=
Margin of safety
48
What CVP approach is better for external reporting?
Absorption costing
49
Under the variable costing method, fixed selling and administrative expenses are what?
Used in computing operating income but not in computing contribution margin
50
increase in production levels within a relevant range most likely would result in what?
Increasing total costs
51
When is absorption net income greater than variable net income?
Increase in inventory
52
When is variable net income greater than variable net income?
Decrease in inventory
53
For special order decisions with presumed excess capacity, price must be what?
Greater than VC/unit
54
Unavoidable costs and sunk costs (cost of old equipment) are what?
Not relevant
55
Keep a segment if what?
Cost to give up (lost CM) > benefit
56
Are joint costs or separable costs relevant?
Separable
57
R squared=
Percentage of variation in the dependent variable explained by the variation in the independent variables
58
y=Dependent variable=
Total cost
59
x=Independent variable=
Units produced
60
a=y-axis intercept=
Fixed cost
61
B=slope of regression line=
VC/unit
62
What does a regression equation do?
Predicts the value of the dependent variable
63
Direct materials usage budget=
BI+Purchases-EI
64
Cash disbursement budgets eliminate what?
Noncash operating expenses
65
What is the order of budgets?
Sales, Production, DM, Cash, Budgeted Income Statement, Budgeted Balance Sheet
66
What are the critical success factors the balanced scorecard gathers information on?
Financial, Internal Business Processes, Customer Satisfaction, Advancement of innovation and HR development
67
VOH rate (spending) variance=
Actual hours * (Actual rate-Standard rate)
68
VOH efficiency variance=
Standard rate * (Actual hours-Standard hours allowed for actual production volume)
69
FOH budget (spending) variance=
Actual fixed overhead-Budgeted fixed overhead
70
FOH volume variance=
Budgeted fixed overhead-Standard fixed overhead cost allocated to production (actual production * standard rate)
71
DM price variance=
Actual quantity purchased * (Actual price-standard price)
72
DM usage (efficiency) variance=
Standard price * (Actual quantity used-standard quantity allowed)
73
DL rate variance=
Actual hours worked * (Actual rate - Standard rate)
74
DL efficiency variance=
Standard rate * (Actual hours worked - Standard hours allowed)
75
Price variance=
(Standard price-actual price) * Actual units
76
Profit/Costs=
Sales
77
Increase in production levels within the relevant range would cause variable costs to increase. While fixed costs would remain constant, what else would increase?
Total cost
78
Ending inventory=
Unites produced-Units sold
79
Capital intensive industries=
High operating leverage
80
Labor intensive industries=
Low operating leverage
81
What are the three methods of computing the cost of RE?
Capital asset pricing model, Discounted cash flow, bond yield plus risk premium
82
Cost of retained earnings formula (CAPM)=
Risk-free rate + (Beta * (Market return-risk free rate))
83
The higher the financial leverage (Average total assets/Equity), the higher the what?
Risk
84
Abandoned asset's book value is considered a ____ cost, and not relevant
sunk
85
____ allows interest rate to change, IRR (discounted cash flows) doesn't
NPV
86
If IRR > discount rate, what is the result?
Profit
87
Profitability Index=
PVFCF / PV of Net initial investment
88
______ _____ focuses decision makers on both liquidity and risk
payback period
89
If the payback period is low, the ____ is low
risk
90
Time value of money is ignored for what method?
Payback period method
91
High operating leverage (more fixed costs)=
Greater risk but greater returns
92
Capital budgeting is based on what?
Predictions of an uncertain future
93
Cost of debt=
Effective interest rate * (1-tax rate)
94
Discounted cash flow method for cost of common equity=
Dividend next period/Stock price +% Growth Rate
95
Cost of capital=
Rate of return on assets that covers the costs associated with the funds employed
96
ROI=
Income/Investment Capital(Average Assets Includes Working Capital and PP&E)
97
ROA=
Net Income/Average Total Assets(Debt+Equity)
98
Financial Leverage=
Average total assets/Equity
99
Excess of actual income earned by an investment over the return required by the company=
Residual Income
100
If the debt to assets ratio is low, the risk is what?
Low
101
If the debt to total capital ratio is high, the risk is what?
High
102
After tax income/(1-tax rate)=
Pretax income
103
EBIT=
Pretax income+Interest
104
Lockbox=
Minimized collection float
105
If the working capital is low, the risk is what?
High
106
If the working capital is high, the risk is what?
Low
107
Inventory Conversion Period + Receivables Collection Period - Payables Deferral Period=
Cash Conversion cycle (should be shorter)
108
What is the objective of EOQ?
Minimize total inventory costs (ordering and carrying costs)
109
What does EOQ assume?
Demand is known and is constant throughout the year
110
ESOC=
Order Size= Square Root of (2*Annual Sales*Order Cost)/Carrying Cost per unit
111
Marketable Securities: Least Risky= , Most Risky=
Treasury Bills/ CDs, Equity Securities of Public Companies (Stocks)
112
Financial leverage increases when what?
Debt to Equity Ratio increases
113
What are the steps in the SDLC?
A DITTO (Systems Analysis, Design both Conceptual and Physical, Implementation and Conversion, Training, Testing, Operations and Maintenance
114
What are the four primary roles in business operations?
To process detailed data, provide information for making daily decisions, provide information for developing business strategies, to take orders from customers
115
Master files only updated periodically (daily)=
Batch processing
116
What are the advantages of centralized processing?
Enhanced data security, consistent processing
117
What are the disadvantages of decentralized processing?
Possible high cost, delay in response time, bottlenecks, increased vulnerability, reduction in local accountability
118
Demand report=
Pull, user tells system
119
Provides users predefined reports that support effective business decisions (more board)=
Management Information Systems
120
What are the seven criteria for COBIT?
Integrity, Confidentiality, Efficiency, Reliability, Availability, Compliance, Effectiveness (ICE RACE)
121
Optimization of knowledge and infrastructure=
Resource Management
122
What are the four domains of the COBIT?
Plan and Organize, Acquire and Implement (solution), Deliver and Support (service), Monitor and Evaluate (PO AIDS ME)
123
Who is responsible for scheduling and running processing jobs?
Computer Operator
124
Who is responsible for the definition, planning, and control of the data within a database?
Data Administrator
125
When the system can be shut down for backup and maintenance, files or databases that have changed since the last backup can be what?
Backed up
126
When the system cannot be shut down, recovery includes what?
applying a transaction log and reapplying the transactions to get back tot he point before the failure
127
System and processes used to issue and manage asymmetric keys and digital certificates?
Public key infrastructure
128
Mission statement for the IT security program=
Program-Level Policy
129
Electronic completion of exchange (buying and selling) transactions=
E-Commerce
130
Any use of information, particularly networking and communications technology, to perform business processes in electronic form=
E-Business
131
Process of determining the correspondence between data elements in an organization's terminology and data elements in standard EDI terminology=
Mapping
132
EDI driven by VAN=
More expensive, more secure and slower
133
E-Commerce driven by Internet=
Less expensive, less secure and faster
134
What is the greatest risk of an organizations use of EDI?
Unauthorized access to the organization's systems
135
What are the challenges faced in business process reeingineering?
Tradition, resistance, time and cost requirements, lack of management support, skepticism, retraining, controls
136
Analysis and redesign of business processes and information systems to achieve significant performance improvements=
Business Process Reengineering
137
B2B transactions=
More complex products, faster transactions, safer, no opportunity for human errors
138
Supply Chain Management Functions=
Planning, Sourcing, Making, Delivery
139
Application Service Providers=
Provide access to application programs on a rental basis, provide more flexibility and lower costs, risk to security and possible poor support
140
Communications (Transfer) Protocol used to transfer web pages on the world wide web=
HTTP
141
Risk of choosing inappropriate technology=
Strategic risk
142
Risk of doing the right things in the wrong way=
Operating risk
143
Risk of loss of data integrity, incomplete transactions, or hackers=
Information risk
144
One computer or group of computers bombards another computer with a flood of network traffic=
Denial-of-Service Attack
145
Can run independently and cannot attach itself to other programs=
Worm
146
What are the steps in a disaster recovery plan?
Assess risks, identify mission-critical applications and data, develop a plan, determine the responsibilities of the personnel involved, test the disaster recovery plan
147
Involves copying only the data items that have changed since the last backup (shortest)=
Incremental backup
148
copies all changes made since the last full backup (middle)=
Differential backup
149
Exact copy of the entire database (longest)=
Full backup
150
What is a disadvantage of batch processing?
Stored data are current only after the update process
151
What are the components of a Business Information System?
Hardware, Software, Data, People, Network
152
a manual total will be calculated for each transaction file and compared to a computer-generated batch control total=
batch processing
153
Symmetric encryption=
both parties use the same private key to encrypt and decrypt the message so that the key must be shared
154
Preventive control=
Access control software
155
What are the five focus areas for IT governance for COBIT?
strategic alignment, value delivery, resource management, risk management, performance measurement
156
What is the simplest type of firewall configuration?
Packet filtering
157
What happens in an expansionary phase?
GDP, Profits and Prices Rise, Unemployment Falls
158
Increase in oil prices or nominal wages (AS decreases)=
Cost-Push Inflation
159
Inflation has an ____ relationship with purchasing power
Inverse
160
Money used for purchases of goods and services=
M1
161
Unused productive capacity and an unwillingness to risk investments are characteristics of what?
Trough of a business cycle
162
A significant decline in the exchange rate of the U.S. dollar generally will have what affect?
benefit U.S. exporters
163
Is nominal GDP or real GDP adjusted for inflation?
Real GDP
164
When real GDP is below the potential level of output=
Recession
165
Appreciated currencies (goods will become more expensive for foreigners, while foreign goods will become less expensive for residents)=
AD goes down, GDP goes down, unemployment goes up, price goes down
166
Depreciated currencies (goods will become less expensive for foreigners, while foreign goods will become more expensive for residents)=
AD goes up, GDP goes up, unemployment goes down, prices goes up
167
What are the factors that shift aggregate demand?
Taxes, Wealth, Interest Rates, Consumer Confidence, Exchange Rates, Government Spending
168
Under the expenditure approach, GDP is the sum of what components?
Government, Investment (Business), Personal Consumption (Households), Net Exports (Exports minus Imports)
169
Under the income approach, GDP is the sum of what components?
Income of proprietors, Profits of corporations, Interest, Rental Income, Adjustments for net foreign income, Taxes, Employee compensation, Depreciation (Capital consumption allowed)
170
What is cyclical unemployment caused by?
Decreases in AD or SRAS
171
What is the measure of the overall cost of a fixed basket of goods and services purchased by an average household?
Consumer Price Index
172
What type of inflation is caused by increases in aggregate demand?
Demand-Pull inflation
173
As the price level rises, the value of what declines?
Money (Purchasing power)
174
M1+CDs less than $100,000, money market accounts, mutual fund accounts savings accounts=
M2
175
M2+CDs of more than $100,000=
M3
176
An increase in money supply will cause interest rates to what?
Fall
177
What are the factors that shift the demand curve
Changes in Wealth, Prices of Related Goods, Consumer Income, Consumer Tastes or Preferences for a Product, Changes in Consumer Expectations, Changes in Number of Buyers served by the market
178
Frictional unemployment refers to unemployment resulting from what?
The time needed to match qualified job seekers with available jobs
179
What would lead to a reduction in inflation?
Decreasing aggregate demand and increasing aggregate supply
180
Nominal Interest Rate-Inflation=
Real Interest Rate
181
What are the factors that shift the supply curve?
Changes in Price Expectations of the supplying firm, changes in production costs, changes in the price or demand for other goods, changes in subsidies or taxes, changes in production technology
182
If the price is set below the equilibrium price, the quantity demanded will exceed what?
Quantity supplied (Price ceiling)
183
If the price is set above the equilibrium price, the quantity demanded will be ____ than quantity supplied
Less (Price floor)
184
If the price elasticity of demand is less than 1, it is what?
Inelastic (greater than 1 is elastic)
185
If price is inelastic, total revenue what?
Rises (Positive Relationship)
186
Change in total cost associated with a change in output quantity over a period=
Marginal Cost
187
Few sellers dominate the sales of a product and entry of new sellers is difficult or impossible, strongly interdependent firms=
Oligopoly (kinked demand curve)
188
Many sellers compete to sell a differentiated product in a market into which the entry of new sellers is possible, highly elastic=
Monopolistic Competition
189
Minimum wage set above the equilibrium wage results in what?
Decrease in quantity demanded of labor, increase in quantity supplied of labor, decrease in total employment
190
If demand increases and supply decreases, equilibrium price will what?
Increase
191
What pricing policies results in establishment of a price to external customers higher than the competitive price for a given industry?
Collusive Pricing
192
If product demand increases and product supply decreases, price will ____ and quantity will _____
Increase, Uncertain
193
What are the 5 factors that affect the competitive environment of the firm (Porters 5 Forces)?
Barriers to market entry, market competitiveness, existence of substitute products, bargaining power of the customers, bargaining power of the suppliers
194
What are the two ways cost leadership can be an advantage?
Build market share (lower the prices of it's product), match the prices of rivals
195
strategic tool that assists a firm in determining how important its value is with respect to the market in which the firm operates=
value chain analysis
196
What does purchasing federal securities do?
Increases the money supply and expands the economy
197
% Change in quantity demanded / % Change in price=
Price elasticity of demand
198
(New supply-Old supply)/Old supply=
% Change in quantity
199
When output increases by less than the proportional change in inputs, the firm is exhibiting what?
Decreasing returns to scale
200
If domestic currency appreciates, new outflows (exports) ______ and net inflows (imports) ________
depreciates, increases
201
If domestic currency depreciates, new outflows (exports) ______ and net inflows (imports) ________
increase, depreciates
202
Stated coupon rate>market interest rate=
Premium
203
Approach that seeks to coordinate the functions of an organization toward an ultimate goal of continuous improvement in customer satisfaction=
Business Process Management
204
What are some examples of prevention costs (conformance)?
Employee training, inspection, equipment maintenance, redesign, search for higher quality suppliers
205
What are some examples of appraisal costs (conformance)?
Quality checks, testing, inspection, maintenance of laboratory
206
What are some examples of internal failure costs (nonconformance)?
Rework costs, scrap, tooling changes, costs to dispose, cost of the lost unit, downtime
207
What are some examples of external failure costs (nonconformance)?
Warranty costs, cost of returning the good, liability claims, lost customers, reeingineering an external failure
208
If conformance costs increase and nonconformance costs decrease by more, the program is what?
A success
209
No quality focus=
Lean manufacturing
210
What is the responsibility of the project manager?
Project administration on a day-to-day basis including identifying and managing internal and external stakeholder expectations
211
What are the five processes in project management?
Initiating, Planning, Executing, Monitoring and Controlling, Closing
212
Cooperation amongst nations to control emissions and participation of nations in worldwide institutions (WTO, UN) is a demonstration of what?
Functional Interdependence
213
With globalization and opening markets to foreign investments, what will happen?
Decrease in cost of capital and increase in investment growth rates, reduced volatility
214
political risk, economic risk, transfer risk, sovereign risk, and exchange rate risk associated with engaging in business with foreign countries=
Country risk
215
Weak local currency reduces demand for what?
Imported goods
216
What does global sourcing anticipates?
Multiples sources for materials and multiple exchange rates
217
Increase in level of risk results in an increase in management's required rate of return=
Risk-Averse Behavior
218
Increase in level of risk results in a decrease in management's required rate of return=
Risk-Seeking Behavior
219
Risk that is nonmarket, unsystematic, nonmarket or firm-specific=
Diversifiable Risk
220
Risk that is market or systematic (impacts everyone),can't be eliminated through a portfolio=
Nondiversifiable Risk
221
As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency ____
falls
222
What are the risk premiums added to calculate the required rate of return?
Maturity Risk Premium, Purchasing Power Risk or Inflation Premium, Liquidity Risk Premium, Default Risk Premium
223
Sell a foreign currency at a higher rate at fixed conditions of price and time=
Put option (option to buy=call option)
224
Dividend/discount rate(return-growth rate)=
Price
225
What are the advantages of short term financing (opposite for long-term)?
Increased liquidity, increased profitability, decreased financing cost
226
What are the disadvantages of short term financing (opposite for long-term)?
Increased Interest Rate Risk, Decreased capital availability
227
What are the characteristics of debentures and bonds?
Fixed cost+maturity date, decreased credit worthiness, no new owners-EPS goes up, increased financial risk, tax deductibility
228
What are the characteristics of equity?
Variable cost, improved credit worthiness, increase in new owners-EPS goes down, more flexibility
229
Uses domestic currency to purchase a foreign currency at current spot rates and invest them in securities timed to mature at the same time as related payables=
Money market hedge
230
Hash total and Echo Check=
Detective Control
231
_______ does not require any payment, it does not mature and, because it increases equity while having no effect on debt, it decreases the debt equity ratio and increases the credit-worthiness of the firm.
Common stock
