Deck 16 Flashcards Preview

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Flashcards in Deck 16 Deck (23):
1

Difference between futures and forward hedge?

Futures hedge: small transactions; forward hedge: large transactions

2

Best cost provider strategy

Change a company's value chain to achieve the lowest cost among competitors

3

Characteristics of short-term financing

Interest rates are lower and greater liquidity

4

Advantages of short-term financing

Increased liquidity, increased profitability, and decreased financing costs

5

Disadvantages of short-term financing

Increased interest rate risk and decreased capital availability

6

Junk bunds are characterized by

High default risk and high return; frequently used to raise capital for acquisitions

7

Characteristics of Debt (bonds)

Fixed cost and maturity; decrease creditworthiness; not considered owners

8

Characteristics of Equity (common stock)

Variable cost and no maturity; improve creditworthiness; considered owners

9

Debt Covenant

Used to protect interests by limiting or prohibiting the actions the actions of debtors (may be positive or negative)

10

Present value of perpetuity (price) =

Dividends (D) / Required rate of return (R)

11

Constant Growth Dividend Discount Model (DDM), P =

Future dividend / (R - G)

12

Constant Growth Dividend Discount Model assumes that

Stock price will grow at same rate as dividend and required rate of return is greater than growth rate

13

Price-earnings ratio (P/E) =

Price today / expected EPS; Expected EPS = E x (1+G)

14

Is a lower or higher PEG ratio more attractive?

Lower PEG ratio; = (P/expected earnings)/Growth rate

15

Price to sales ratio (P/S) =

Price today / expected sales

16

Definition of ERM Integrated framework

Process effected by an entity's board of directors, management, and other personnel; takes a risk-based approach

17

Balanced scorecard perspective that is concerned with the capture of increased market share?

Financial perspective

18

Engaging in EDI provides what benefit?

Reduced stock out costs

19

High-low method

Difference in cost / units

20

What would cause a firm to increase its debt?

An increase in the corporate income tax rate

21

If product demand is significantly elastic, then

Quantity increases proportionally more than the price declines

22

Difference between System analyst and system programmer

Analyst: design the system, prepares specifications and requirements; Programmer: select, implement, and maintain the system software

23

Change in GDP =

Spending / (1-MPC)