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1/28 Flashcards

1
Q

What factor is inherent in a firm’s operations if it utilizes only equity financing?

A

Business risk

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2
Q

What is the purpose of cost allocation?

A

it is essential for measuring income and assets for external reporting

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3
Q

For capital budgeting analysis, the internal rate of return uses what items for computation?

A

Net incremental investment / Net annual cash flows = Factor of IRR

Look up the factor derived to identify IRR

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4
Q

5 steps in the manufacturing process

A
  1. Product design and engineering
  2. Product development
  3. Manufacturing forecasting and scheduling
  4. Manufacturing operations
  5. Manufacturing and fixed asset accounting and reporting
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5
Q

Examples of carrying cost

A

storage costs
insurance costs
opportunity costs of inventory investment
lost inventory due to obsolescence or spoilage

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6
Q

The ability of an entity to withstand impact of large-scale events refers to

A

Organizational Stability

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7
Q

According to COSO, the four categories of entity objectives in the ERM framework include

A

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

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8
Q

Calculate the market value using the net realizable value method

A

Market value = Gross equipment sale proceeds - selling costs

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9
Q

Calculate the market value using the replacement cost method

A

Market value = cost of replacing with new equipment + cost incurred to assemble and transport

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10
Q

market capitalization equals

A

current share price times the number of shares outstanding.

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11
Q

Total value of equity using sector P/E

A

P/E = net income x P/E multiple

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12
Q

Total value of equity using DDM

A

Current dividends x (1+growth rate) / Cost of equity - Growth Rate

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13
Q

Market value of bond

A

Par value x (current market value per bond / 1,000)

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14
Q

The capital asset pricing model is calculated by

A

risk free rate + (Beta x (Market return - risk free rate))

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15
Q

The essence of responsible accounting is

A

developing performance reports emphasizing costs and revenues that managers can control.

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16
Q

The mission and vision of an organization most closely correlate with

A

Strategy

17
Q

Conversion costs do not include

A

Direct materials

conversion costs are only direct labor and overhead.

18
Q

methods of converting AR into cash

A

Collection agencies, Factoring AR, Cash discounts, EFT

19
Q

What hedge is best for an importer to fix the FC price in dollars?

A

Buying FC call options.

20
Q

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.

A

360 / 45 - 10 = 10.29
.03 / 1-.03 = .030928
10.29 * .030928 = .3181

21
Q

Calculate the intrinsic stock price using the dividend growth model

A

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

22
Q

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?

A

Audit committee members are the be members of the board but also must be otherwise independent.

Being a board member does not impair independence.

23
Q

GO PRO with ERM

A

Governance and culture
Objective setting and strategy
Performance
Review and Revision
Ongoing reporting, information, communication

24
Q

Governance and Culture

DOVES

A

Define desired culture
Oversight from board
Values demonstrated
Employees - attract, develop, retain
Structure - operating

25
Q

Objective setting and strategy

SOAR

A

Strategy - evaluate alternatives
Objectives - business
Analyze - risk severity
Risk Appetite

26
Q

Performance

VAPIR

A

View
Assesses severity
Prioritize risk
Identifies risk
risk responses

27
Q

Review and revision

SIR

A

Substantial change
Improvements
Review risk and performance

28
Q

Ongoing reporting, information, communication

TIP

A

technology - leverage
Information - communication
Performance reports

29
Q

Risk responses

Accept
Avoid
Pursue
Reduce
Share

A

accept - take no action
avoid - get out
pursue - accept and escalate
reduce - hedge
share - outsource, insurance

30
Q

Controllable margin is used as a refined measure of strategic business unit reporting that is best described as

A

contribution margin net of controllable fixed costs

BEC (10 decks)

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