Random Concepts BEC Flashcards
(148 cards)
1
Q
4 “ critical success factors “ in balanced scorecard
A
- Learning & growth
- Customer satisfaction
- Financial
- Production (most relevant)
2
Q
Oligopoly characteristics
A
- Few firms
- Significant barriers to entry
- Differentiated products
- Kinked demand curves
- Fixed prices
3
Q
Required rate of return
A
Net book valve (total assets) x hurdle rate (required rate of return)
4
Q
Residual income formula
A
Net income - required rate of return
5
Q
Advantages & disadvantages of using debt relative to equity
A
Advantage of using debt:
Interest tax shield - interest costs associated with debt are tax deductible
Debt holders must be paid interest before stockholders receive dividends
Advantage of Equity:
Debt must be paid where dividends are optional if cash is constrained this could be an issue
High debt levels indicate risk to lenders
WACC: tax advantages of debt
6
Q
Prevention costs
A
Employee training, inspection expenses-pre-production, process redesign, product redesign
7
Q
Appraisal costs
A
Inspection expenses- post production , laboratory maintenance, product testing
8
Q
Conformance costs
A
Appraisal & prevention
9
Q
Internal failure costs
A
Rework, scrap, tooling changes
10
Q
External failure costs
A
Cost of returning goods, lability claims, warranty costs
11
Q
Nonconformance costs
A
Internal & external failure costs
12
Q
If internal rate of return > hurdle rate… Is a project accepted or rejected?
A
Accepted because it will provide positive net returns and a positive net present value
13
Q
What 3 items does a voucher include?
A
- Purchase order
- Receiving report
- Supplier invoice
14
Q
3-way match
A
1-Supplier invoice
2-purchase order
3- receiving report
15
Q
What is risk order of commercial paper, US treasury bills, bankers acceptances, and negotiable CDs ( starting with riskiest)
A
- Commercial paper
- Bankers acceptances
- Negotiable CDs
- U.S treasury Bills
16
Q
Business cycle
A
Expansion, peak, contraction, trough
17
Q
Effective interest rate
A
Annual interest / Net cash available
18
Q
Economic value added
A
Excess of income after taxes earned by an investment / cost of capital
19
Q
How many prison years for altering or destroying documents under Sox
A
20 years
20
Q
Capital asset pricing model (cost of retained earnings) CAPM formula
A
Risk-free rate + (Beta x (market return- risk free rate))
21
Q
In order to maximize shareholder wealth, a company should invest in all projects with a net present value…..
A
greater than zero … unless there is a better project, if they have unlimited wealth, all projects with NPV > 0 should be accepted
22
Q
Price elasticity of demand formula
A
% Change in quantity/ % change in price
23
Q
Price elasticity > 1
A
Price elastic
24
Q
Price elasticity < 1
A
Inelastic
25
SCOR model
Source, plan, make, deliver → supply chain analysis
26
Relevant cost
Does it change as a result of selecting different alternatives? If yes, it is relevant
27
Market capitalization
Number of common shares outstanding x FMV per share
28
Price to earnings ratio
Price / earning anticipated for the coming year
29
SOX requires officers of a corporation include representation in their financial statements that internal control is the responsibility of…
The signing officers
30
Payback period
Net initial investment / annual after tax cash flows
31
Economic order quantity formula
Square root of (2x annual sales in units x cost per purchase order / carrying cost per unit)
32
Beta formula
Change in stock value / change in market value
33
Effective annual interest rate formula
1+ stated interest rate / interest periods ^ compounding periods
(For semi annual interest divide stated rate by 2)
34
Firm specific / non-market / diversifiable risk
Unsystematic
35
Operating leverage
Fixed costs / variable costs….allows a small change in sales to produce a larger relative change in profits
36
Futures contract
Designed for specific transactions rather than large groups of transactions
37
Forward contracts
Used for larger groups of transactions (such as large volume accounts recievable)
38
How many years should auditors retain work papers for
7-Years, failure to do so results in fines & imprisonment for not more than 10 years
39
What is an issuer
Public company that Must file their financial statements with the SEC
40
Audit committee members [may/may not] accept compensation from the issuer for consulting or advisory services
May not
41
Audit committee members [may /may not] be an affiliated person of the issuer (affiliation means having the ability to influence financial decisions)
May not
42
Who does the auditor report to
Directly to the audit committee
43
Who is responsible for resolving disputes between the auditor and management
Audit committee
44
CEO & CFO sign report and assume responsibility for internal controls including WHAT assertions
1- Internal controls have been designed to ensure material information has been made available
2- Internal controls have been evaluated within 90 days prior to report
3- Report includes conclusions as to effectiveness of internal controls based on their evaluation
45
Issuers must disclose whether the issuer has adopted a code of conduct for senior officers, if no code of conduct has been adopted …..
Issuer must disclose why
46
What is a Pareto diagram
Represents an individual and cumulative graphical analysis of errors by type. Individual errors are represented on a histogram (bar graph) and cumulative errors are presented on a line graph. It is used to prioritize process improvement efforts
47
Asset turnover ratio
Net Sales / average total assets
48
The ability of an organization to withstand impact of large - scale events refers to what
Organizational sustainability
49
Six sigma
Quality improvement program that uses metrics to evaluate the achievement of goals ( such as reducing rate of defective products )
50
Theory of constraints
Organizations are impeded from achieving objectives by the existence of One or more constraints
51
Direct materials price variance
Actual quantity purchased x (actual price - standard price)
52
Direct materials quantity usage variance
Standard price x (actual quantity used - standard quantity allowed )
53
Direct labor rate variance
Actual hours worked x (actual rate - standard rate )
54
Direct labor efficiency variance
Standard rate x (actual hours worked- standard hours allowed)
55
VOH rate (spending) variance
VOH rate (spending) variance = actual hours x (actual rate - standard rate)
56
VOH efficiency variance
= standard rate x (actual hours -standard hours allowed for actual production volume)
57
FOH budget (spending) variance
Actual fixed overhead - budgeted fixed overhead
58
FOH volume variance
Budgeted fixed Overhead - standard fixed overhead cost allocated to production**
**based on actual production x standard rate
59
Sales price variance
[Actual SP / Unit - Budgeted SP / Unit] x actual sold units
60
Sales volume variance
[actual sold units - budgeted sales units] x standard contribution Margin per unit
61
Price elasticity of demand formula
% Change in quantity demanded/ % change in price
62
Price elasticity of supply formula
% Change in quantity supplied / % change in price
63
Cross elasticity of demand (supply)
% Change in number of units of x demanded (supplied) / % change in price of y
***substitutes (positive) complementary (negative)
64
Material efficiency variance
Standard unit price x ( actual units - standard units)
65
Flow of units in a process cost system
Beginning Units in process + units transferred in = units transferred out + ending inventory
66
Cost of goods manufactured formula
DM + DL + OVH + beg WIP - end WIP
67
Total current manufacturing costs formula
DM + DL + OVH
68
Total manufacturing costs formula
DM + DL + OVH + BEG WIP
69
A relevant range is range where relationship between a cost and it's driver remain valid, within this range, which cost does not change?
Total fixed costs
70
Fishbone diagram
Describes a process, the contributions to the process, and potential problems that could occur at each phase, the chronological sequence of events is represented by a single horizontal line while the contributions are diagonal
71
Inventory turnover formula
Cost of goods sold / average inventory
72
Minimum acceptable selling price
Only the incremental costs associated with the order
73
High-low method of budgeting fixed and variable costs
Variable costs= difference in highest & lowest production month / difference in number of units produced
74
Net realizable value in joint costing
(Selling price per unit x units produced) - SEPARABLE COSTS = NRV (then take percentage out of total NRV
75
Equivalent units of production formula
EQU: % complete ending WIP + EQU completed - Completed beginning WIP
76
Cost of preferred stock
Cost of preferred stock dividends/ net proceeds of preferred stock
77
4 big data types (V)
Volume, velocity, veracity, variety
78
Veracity
Veracity represents reliability, quality, or integrity of the data
79
ETL process (IT)
Extract, transfer, load
80
Deflation
Continuous decline in overall price level
81
Debt to equity ratio
Total liabilities / total equity
82
Total debt ratio
Total liabilities / total assets
83
Times interest earned ratio
EBIT / interest expense
84
Equity multiplier
Total assets / total equity
85
Porter's five forces
1. Barriers to entry
2. Market competition
3. Existing substitute products
4. Bargaining power of customers
5. Bargaining power of suppliers
86
How many characters should passwords be
At least 7 or 8
87
How long in between changing passwords
90 days
88
Lock- box system
These expedite cash, bank receives payments directly from a companies customers via mailboxes to which the bank has access & they're deposited into companies account immediately
89
Concentration banking
Each store can deposit into a local bank and those balances are immadiately consolidated into one bank or account
90
Letter of Credit
Guarantees obligations of a company - usually from a bank
91
To decrease money supply… do you buy or sell government securities
Sell… when the feds sell securities the banks buy them which causes the banks to have less money which decreases money supply
92
Consumer price index
Measures how much a fixed basket of goods and services purchased by households costs to purchase in each & every year
93
If domestic currency appreciates, it benefits (AR or AP) and harms (AR or AP)
Benefits AP & harms AR
94
If domestic currency depreciates, it benefits (AR or AP) and harms AR or AP)
Benefits AR and harms AP
95
A futures hedge contract to BUY at a specific price at time PAYABLE is due will mitigate risk of
Weakening currency
96
A futures hedge contract to SELL the foreign currency received in satisfaction of receivable at specific price when A/R is due mitigates risk of
Strengthening currency
97
WACC usually equals hurdle rate but adjusts for what
Risk premium
98
Cost of retained earnings is AKA
CAPM
99
Optimal capital structure is highest/lowest WACC
Lowest
100
Net income is the numerator for which 3 profitability ratios
ROI, ROA, ROE
101
Higher or lower operating leverage better
Higher
102
Carrying cost formula (EOQ)
Average inventory (inventory / 2) x price
103
Economic order quantity formula
Square root of (2 x total sales x fixed costs / carrying cost)
104
Most widely used price multiple when valuing equity securities
Price to earnings ratio
105
Ratio used to estimate current stock price
Price to sales ratio
106
Black-scholes assumptions
1- no dividends paid out during life of option
2- no transaction costs
3- markets are random
4- risk free rate of underlying asset are known and constant
107
Het present value method does not provide
True rate of return
108
Profitability index
PV of net future cash flows / initial investment …. Projects < 1 are rejected
109
Projects with an IRR > hurdle rate should be
ACCEPTED
110
Price to earnings ratio
Current price / expecting earnings
111
Internal control is the responsibility of
The signing officers
112
CAPM = risk free rate + risk premium … risk premium equals
Beta (market- risk free rate)
113
Effective annual interest rate
1+ (stated rate/2) ^2
114
PDCA model
Plan do check act model with process management IT
115
DSS
Provides interactive tools to support day-to-day decision making
116
EIS
Provides senior executives with internal & external information to assist in strategic decision making
117
3 word SQL pattern
SELECT…. FROM…. WHERE
118
5 steps in à disaster recovery plan
1. Assess risk
2. Identify mission critical applications and data
3. Develop a plan for handing mission critical applications and data
4. Determine responsibilities of personnel involved in disaster recovery
5. Test disaster recovery plan
119
3 types of divestures
Sell-offs, spin offs, equity carve outs
120
Inflation
Increase in overall price level
121
Perfect competition characteristics
1- many firms
2- no barriers to entry
3- no product differentiation
4- price is set by market
5- perfectly elastic
Strategy: maintain market share and responsiveness of sales price to market conditions
122
Monopolistic competition characteristics
1. Many firms
2. Low barriers to entry
3. Some product differentiation
4. Price is set by market for the most part
5. Highly elastic
Strategy: maintain market share, enhance product differentiation, allocate resources to advertising and research
123
Monopoly characteristics
1. One firm
2. No entry is possible
3. No product differentiation
4. Total control over price and quantity
5. Inelastic
Strategy: focus on profitability
124
Examples of perfect competition
Milk, paper, coffee shops
125
Examples of monopolistic competition
Restaurants, hair salons
126
Oligopoly example
Airlines and pharmaceuticals
127
Monopoly example
Public utilities ( the Grid)
128
Bridge table is used for which SQL relationship
Many to many
129
A row in a relational database Is A
Record
130
Product costs are (inventoried or expensed)
Inventory
131
Period costs are (inventoried or expensed)
Expensed
132
FIFO equivalent units 3 components
1. Completion of units on hand at beginning of period
2. Units started and completed during the period
3. Units partially complete at the end of the period
133
Weighted average equivalent unit components (2)
1. Units completed during the period
2. Units partially complete at the end of the period
134
Normal spoilage is a standard inventory cost, abnormal spoilage is…
A period expense
135
Strategic business units (SBU's) 4 financial measures
1. Cost SBU
2. Revenue SBU
3. Profit SBU
4. Investment SBU
136
Return on investment (ROI) two equations
1. Income/ invested capital
2. Profit margin x investment turnover
137
What is DuPont model
Breaks down ROE into three ratios
1. Net profit margin
2. Asset turnover
3. Financial leverage
Extended DuPont model adds tax and interest
138
Residual income (conceptually)
Measures excess of actual income earned by an investment over the target or hurdle rate
139
Residual income formula
=Net income - required return
Where required return = net book value (equity) x hurdle rate
140
Economic value added formula
= net operating profit after taxes (nopat) - required return
Where required return = investment x WACC
141
Coefficient of correlation (r) measures what
The strength of the linear relationship between the independent & dependent variable
(-1 is perfect inverse +1 is perfect direct)
142
If there is an increase in inventory, absorption net income is
Greater than variable costing net income
(Because with absorption fixed OVH is inventoried)
143
Margin of safety
Excess of sales / breakeven sales
144
Example of cost that is not relevant
Sunk cost
145
Special order should be accepted when
Selling price per unit > variable cost per unit
146
Master budget order
1. Sales budget
2. Production budget (DM DL and OVH)
3. COGS budget
4. SG&A budget
5. Capital budget
6. Financial budget (cash budget and proforma)
147
Variance analysis overhead: debit balance is what and credit balance is what
Debit balance → unfavorable & underapplied
Credit balance - favorable & overapplied
148
Variance analysis nuemonic
SAD
Price. DA
Usage. DS
Rate. DA
Efficiency. DS
