1/28 Flashcards
What factor is inherent in a firm’s operations if it utilizes only equity financing?
Business risk
What is the purpose of cost allocation?
it is essential for measuring income and assets for external reporting
For capital budgeting analysis, the internal rate of return uses what items for computation?
Net incremental investment / Net annual cash flows = Factor of IRR
Look up the factor derived to identify IRR
5 steps in the manufacturing process
- Product design and engineering
- Product development
- Manufacturing forecasting and scheduling
- Manufacturing operations
- Manufacturing and fixed asset accounting and reporting
Examples of carrying cost
storage costs
insurance costs
opportunity costs of inventory investment
lost inventory due to obsolescence or spoilage
The ability of an entity to withstand impact of large-scale events refers to
Organizational Stability
According to COSO, the four categories of entity objectives in the ERM framework include
Strategic: High level goals aligned with company mission
Operations: Efficient use of entity resources
Reporting: Reliability of financial reporting
Compliance: compliance with applicable laws and regulations
Calculate the market value using the net realizable value method
Market value = Gross equipment sale proceeds - selling costs
Calculate the market value using the replacement cost method
Market value = cost of replacing with new equipment + cost incurred to assemble and transport
market capitalization equals
current share price times the number of shares outstanding.
Total value of equity using sector P/E
P/E = net income x P/E multiple
Total value of equity using DDM
Current dividends x (1+growth rate) / Cost of equity - Growth Rate
Market value of bond
Par value x (current market value per bond / 1,000)
The capital asset pricing model is calculated by
risk free rate + (Beta x (Market return - risk free rate))
The essence of responsible accounting is
developing performance reports emphasizing costs and revenues that managers can control.
The mission and vision of an organization most closely correlate with
Strategy
Conversion costs do not include
Direct materials
conversion costs are only direct labor and overhead.
methods of converting AR into cash
Collection agencies, Factoring AR, Cash discounts, EFT
What hedge is best for an importer to fix the FC price in dollars?
Buying FC call options.
If a retailer’s terms are 3/10 net 45, what is the cost on an annual basis of not taking a discount? Assuming 360 year.
360 / 45 - 10 = 10.29
.03 / 1-.03 = .030928
10.29 * .030928 = .3181
Calculate the intrinsic stock price using the dividend growth model
the dividend growth model is d1 / (req. rate of return (RRR) - internal growth rate(g))
the required rate of return will be calc’d using CAPM
RRR = Rf + beta (Rm -Rf)
the internal growth rate is calc’d
g = (return on assets x retention rate) / (1 - (return on assets x retention rate))
to calc d1 = D0 x (1 + g )
if they don’t give you d0 you can do earnings per share (e0) x payout rate
now you have d1, RRR and g
Sarbanes Oxley Act of 2002 requires members of the audit committee be independent with regard to the issuer. Within the meaning of the law, which of the following corporate officer would be considered independent?
Audit committee members are the be members of the board but also must be otherwise independent.
Being a board member does not impair independence.
GO PRO with ERM
Governance and culture
Objective setting and strategy
Performance
Review and Revision
Ongoing reporting, information, communication
Governance and Culture
DOVES
Define desired culture
Oversight from board
Values demonstrated
Employees - attract, develop, retain
Structure - operating
