Flashcards in Becker Deck (67)

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## Compute calculation of net cash outflow at beginning of 1st year

###
Initial investment

+shipping

+installation

+training

+increase in working capital

-cash proceeds on sale of old (net of tax)

=net initial outflow

1

## Calculation for economic value added

###
Cost of investment x capital=required return

Income after required economic taxes - return=value added

2

## Calculation for expected cost savings

###
1)budgeted cost of sales/current inventory turnover=current average inventory

2)budgeted cost of sales/expected inventory turnover=expected average inventory

3)current average inventory - expected average inventory=inventory increase/decrease

4)inventory increased/decrease x interest rate=cost savings

3

## Calculation for margin of safety percentage

### Margin of safety in dollars/total sales

4

## Calculation for margin of safety (in dollars)

### Total sales (in dollars) - break even sales ( in dollars)

5

## Formulas for return on investment

###
Income/investment capital

Or

Profit margin x investment turnover

6

## Calculation for APR of quick payment discount

### Disc % x 365/(100-disc%) x (pay period-disc period)

7

## Overhead variances

###
Actual vs. Budget on actual hours

Budget on actual hours vs. Budget on standard hours

Budget on standard hours vs. Overhead applied

8

## What are the 4 strategic business units?

###
Cost

Revenue

Profit

Investment

9

## What are the 4 designs for financial scorecards

###
"AT US"

Accurate, timely, understandable, specific accountability

10

## Calculation for market size variance

### Actual market size - Expected market size x budgeted marketed share% x budgeted CM (weighted average)

11

## Calculation for sales price variance

### (Actual SP/Unit - Budgeted SP/Unit) x actual sold units

12

## Calculation for sales volume variance

### Actual sold units - Budgeted sales x CM

13

##
Calculation for profit margin?

Investment turnover?

###
Income/sales

Sales/invested capital

14

## Formula for bond yield plus risk premium (BYRP) for cost of retained earnings

### KDT(pretax cost of long-term debt) + PMR(risk premium)

15

## Formula for cost of retained earnings

###
kre=krf + [bi x (km - krf)]

krf=risk free rate

Bi=beta

Km=market rate

Krf=risk free rate

16

##
What are the formula notations for the following

Risk free rate?

Risk premium?

###
Krf

Stocks beta coefficient ( bi) x the market risk premium (PMR)

17

## What are the 3 methods of computing cost of retained earnings (kre)

###
Capital asset pricing model

Discounted cash flow

Bond yield plus risk premium

18

## Calculation for return on assets

### Net income / average total assets

19

## Formula for dividend per share expected at the end of one year: D1

###
D0 x (1+g)

Annual stock dividend

20

## Formula for cost of retained earnings using discounted cash flow

###
(Div1 / P0) + g

Div1=dividend per share expected at end

P0=current market value or price of common stocks

G=constant rate of growth

21

## Formula for cost of preferred stock

### Preferred stock cash dividends / net proceeds of preferred stocks

22

##
What letters express

Cost of preferred stock?

Net proceeds of preferred stocks?

Preferred stock cash dividend?

###
Kps

Nps

Dps

23

##
What letters express

Cost of long-term debt?

Pre-tax cost of debts?

After-tax cost of debt?

###
Kdx

Kdt

Kids

24

## Formula for weighted average interest rate

### Effective annual interest payments / debt cash available

25

## Formula for weighted average cost of capital

### Cost of equity multiplied by the percentage equity in capital structure + weighted average cost of debt multiplied by the percentage debt in capital structure

26

## Formula for degree of combined leverage

###
% change in EPS / % change in sales

Or

DOL x DFL

27

## Formula for degree of financial leverage

### % change in EPS / % change in EBIT

28

## Formula for degree of operating leverage (DOL)

### % change in EBIT / % change in sales

29