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Flashcards in Notes 1 Deck (38):
1

Profitability Index

PV Benefits /
Cost

2

Dollars to break even

Annual Fixed Costs /
Contribution Margin Ratio

3

Contribution Margin Ratio

(Sales - Variable Cost) /
Sales

4

Payback

Investment /
Annual CF

OR

Investment /
(CF * (1+t%)) + (Investment / N * t%)

Discounted Payback = 1st discount CF to PV then above operation

5

Payback Period

Initial Investment/
Increase in after-tax CF or Annual CF

6

Accounting Rate of Return

Annual Net Income /
Average Investment or Initial Investment

OR

Net Cash inflow - Depreciation /
Investment

7

Net Present Value

PV of Future CF - Required Investment

Includes Salvage, NOT Depreciation unless taxes apply, then include the tax benefit

8

Internal Rate of Return

PV of Investment today = TVMF * Cash Flows

OR

PV Factor = Investment / Cash Flows

9

Interest

Principal * Rate * Time

10

Gross Domestic Product (GDP)

~GICE~

Gov't Spending
+ Investment by Private Industry
+ Consumption (Consumer Spending)
+ Exports

OR

Net Income
+ Indirect Business Taxes
+ Capital Consumption Allowance
+ Foreign Factor Income

DOES NOT INCLUDE:
Financial Transactions
Second-hand Sales

11

Net Domestic Product (NDP)

GDP
- Capital Consumption Allowance
- Depreciation

12

Net National Income

Net Domestic Product (NDP)
- Foreign Factor Income
- Indirect Business Taxes
+ Net Income Earned Abroad

13

National Income

Compensation of Employees
+ Rental Income
+ Interest Income
+ Proprietor's Income
+ Corporate Profits

OR

Business Income
+ Passive Income
+ Taxes
+ Employee Salaries
+ Depreciation
+ Foreign Income Adjustments

14

Objectives of COSO Internal Controls (IC)

1. Operations
2. Reporting
3. Compliance

NOT Strategic

15

Objectives of COSO Enterprise Risk Management (ERM)

1. Operations
2. Reporting
3. Compliance
4. Strategic

16

Components of COSO Internal Controls (IC)

~ Control Activity Risk through Information & Monitoring of the Control Environment ~

~CRIME~

1. Control Activities
2. Risk Assessment
3. Information & Communication
4. Monitoring Activities
5. Control Environment

17

Components of COSO Enterprise Risk Management (ERM)

~ Risk Assessment Internally & Objectively Controls the Risk Response through Information & Monitoring of Event Identification ~

~RIO CRIME~

1. Risk Response
2. Internal Environment
3. Objective Setting
4. Control Activities
5. Risk Assessment
6. Information & Communication
7. Monitoring
8. Event Identification

18

Marginal Propensity to Save

Change in Savings /
Change in Income

19

Marginal Propensity to Consume

Change in Spending /
Change in Income

20

Price Elasticity of Demand

% Change in Quantity Demanded /
% Change in Price

21

Income Elasticity of Demand

% Change in Quantity Demanded /
% Change in Income

22

Difference between
Demand Pull Inflation
Cost Push Inflation

Demand Pull = increased spending, demand increasing (shifts right)

Cost Push = increased cost of production, supply decreases (shifts left)

23

Calculate GDP using the Income Approach

National Income
+ Indirect Taxes
- Other & statutory discrepancy
= Net National Product (NNP)
+ Consumption of Fixed Capital
= Gross National Product (GNP)
+ Payments of factor income to other countries
- Receipts of labor income from other countries
= Gross Domestic Product (GDP)

24

Calculate GDP using the Expenditure Approach

Personal Consumption Expenditures
+ Gross private domestic fixed investment
+ Government Purchases
- Net Exports
- Changes in business inventories
= Gross Domestic Product

25

Economic Cost

Explicit + Implicit Cost
AKA
Lateral Cost + Opportunity Cost

26

Economic Profit

Revenue - Economic Cost

27

Accounting Profit

Revenue - Accounting Cost

28

Accounting Cost

Explicit Cost (aka Actual Cost)

29

Balanced Scorecard

~ CLIFf ~
~ The Balanced Scorecard can jump off a CLIFF ~

1. Customer
2. Learning & Growth
3. Internal Business Processes
4. Financial

30

Business Risk

~ MICS ~

1. Market Risk
2. Interest Rate Risk
3. Credit/Default Risk
4. Sector Risk

31

How is Abnormal Spoilage treated

Charged against Period Income (i.e. expensed) as a separate component of COGS

32

Types of Conforming Cost vs Non-conforming costs

~ CPA NIcE ~

Conforming:
Prevention = employee training, preventative maintenance, supplier education
Appraisal = quality inspectors, materials inspection

Non-conforming:
Internal = scrap
External = product recalls, processing product returns

33

Relative Level of Risk

Standard Deviation /
Expected Return

34

R Squared

Coefficient of determination

Proportion of the total variation of the dependent variable explained by the independent variable

35

P Value

Likelihood that tested data could have occurred by chance

36

Standard Error

Measure of the standard deviation

Average variability of a sampling distribution

37

T Statistic

Used in hypothesis testing

Used in computation of confidence levels

38

Economic Rate of Return on common stock

(Dividends + Change in price) /
Beginning price