Flashcards in BEC Deck (182)
how often does an internal audit activity need to be assessed externally?
every five years.
what are the primary themes associated with internal audit attribute standards
(1) Purpose, Authority, and Responsibility; (2) Independence and Objectivity; (3) Proficiency and Due Professional Care; and (4) Quality Assurance and Improvement Program.
the 7 primary themes of the performance standards:
(1) Managing the Internal Audit Activity; (2) Nature of Work; (3) Engagement Planning; (4) Performing the Engagement; (5) Communicating Results; (6) Monitoring Progress; and (7) Resolution of Senior Management's Acceptance of Risks.
in a conventional graph, the 'intercept' is the point at which:
the dependent variable intersects the Y axis, and where the independent variable has the lowest value, usually zero
elasticity of supply?
%change in quantity supplied/%change in price
what is elasticity of demand?
the % change in quantity is greater than the % change in price
how do you prevent deflation?
you increase the money supply by lowering the reserve requirement, or lowering interest rates which stimulates demand and increases the general price level
what does an import quota do?
it restricts the quantity of a commodity that can be brought into the country from foreign providers. The biggest beneficiary is the domestic suppliers of the commodity.
3 generic strategies by Michael Porter?
cost leadership, differentiation, and focus
which framework is for gauging the attractiveness of the competitive environment of an industry?
what analysis method is for evaluating a macro-environment?
PEST analysis: political, economic, social, and technological characteristics
what are the five forces?
1-threat of new competition entering the market2-threat of substitute goods or services3-bargaining power of buyers of the industry good or service4-bargaining power of suppliers of the inputs used in the industry5-intensity of rivalry
what does SWOT stand for?
strengths and weaknesses of the entity, and the opportunities and threats faced by the entity
how is weighted avg cost of capital calculated?
the required rate of return on each source of capital weighted by the proportion of total capital provided by each source and then those amounts are summed.debt:30%x(10% 1-30% tax rate)=2.1%CS: 60%x12%= 7.2%PS: 10%x10%= 1%WACC= 10.3%
what is a compensating balance and how is the effective interest rate calculated?
an amount the borrower has to maintain in an account with a lender.the effective int rate is the cost of borrowing divided by the funds available for use.If the interest each year is 40,000 and the only amount you can actually use is 400,000, then the effective rate is 10%.
how is the required rate of return calculated?
risk free rate + Beta(expected rate - risk free rate)
basic approach to capitalize earnings to determine value of business?
annual earnings / required rate of return.
what is a time series model?
models based on extrapolation of past data to predict a future value
form of qualitative forecasting that involves consensus of a group of experts using a multi-stage process to converge on a forecast.
diff in quantitative & qualitative forecasting?
quantitative is objective and rely on math and calculations. qualitative are subjective and rely on judgement and opinion
what is the profitability index approach?
the relative economic ranking of projects by taking into account the cost & net present value of projects
average accounting rate of return?
avg annual after tax net income / avg cost of investment.the avg cost of investment is the beg book value + ending bv then divided by 2.
formula for calculating the profitability index of a project?
present value of annual after tax cash flows / original cash invested in the project
NASDAQ requires all companies have audit committees composed entirely of:
Independent directors who are also financially literate
can board of directors change the articles of incorporation?
no, only stockholders can do that
the purchase and sale of commodities for current delivery is what:
the spot market. the futures market is for delivery in the future
what is a specialist on the NYSE?
a NYSE member acting as a dealer in a small number of securities
what is a call option?
the right to purchase a security at a specified price for a defined period of time.
what factors make up the nominal risk free rate?
the real rate of interest and an inflation premium