limit turnovers Flashcards
(21 cards)
how does the binomial model differ from black-scholes when valuing options?
the binomial model uses:
- american-style options where consideration is open over a period of time
- the model can consider dividends without model modification
what type of risk response is buying insurance?
risk sharing
under COSO’s ERM framework, what are the 3 types of risks considered under risk assessment?
inherent, target residual and actual residual risk
what is a completeness check?
verifies that all required data has been inputted
what is a validity check?
data entered into a foreign key must match with the primary key
what is the relationship between residual risk and exceeding the risk appetite?
residual risk is risk that remains after management has taken action to mitigate negative events. if the likelihood and impact of negative events significantly surpassed residual risk, the company is considered to have exceeded their risk appetite
how can AR collection time be reduced?
cash discounts, collection agencies, factoring, electronic wire transfers
what are the 3 elements needed to determine the cost of equity?
current dividends
dividend growth rate
current stock price
dividend discount model for determining cost of capital:
(D1/P0) + g
when deciding between keeping an old machine vs. selling it to buy a new one, why is the old machine’s historical cost irrelevant?
it’s a sunk cost
why is performing a regression analysis in managerial accounting relevant?
to determine how total costs (dependent variable) are impacted by the changes of production volume (independent variable)
what is residual risk?
the risk that remains after hedging
a site with electrical connections, but no hardware and no files
cold site
a site with hardware, but no files
warm site
a site with hardware and files
hot site
define-measure-analyze-improve-control process is for what type of product?
existing
define-measure-analyze-design-verify process is for what type of product
new
what visual representation shows how documents and information flow from a logical and physical standpoint?
flowchart
what shapes an organization’s operations and business model?
corporate strategy
what is:
the overall cost of goods and services typical consumed by households in a given time
consumer price index
what is the optimal capital structure?
lowest WACC
