1A Flashcards
Reliability
Information Must be:
Faithful Representation
Verifiable
Neutral
5 components of COSO ERM
1)Governance and culture
2)Strategy and objective setting
3)Performance
4)Review and revisions
5)Information, communication, and reporting
Limitations of the Model
1)Human Judgement and human error
2)Cost vs benefit limitations
3)simple errors can lead to big mistakes
4)Circumvention of controls or procedures due to collusion
5)Management Override
5 Internal Control components of COSO
1)Control Environment
2)Risk assessment
3)Information and communication
4)Monitoring
5)Control activities
4 Stages of Economic/Business Cycle
1)Expansion
2)Peak
3)Contraction
4)Trough
SWOT Analysis evaluates
Strengths
Weaknesses
Opportunities
Threats
Working Capital Formula
(Current Assets minus Current Liabilities) divided by Current Liabilities
Quick Ratio Formula
Current Assets minus Inventory and Prepaids
Weighted Average Cost of Capital formula (WACC)
(% of Equity Financing Times Cost of Equity) Plus ((% of Debt Financing Times Cost of Debt Interest Rate) Times (1 Minus Tax Rate))
Return on Assets Formula
Net Income Divided by Total Assets
Growth Rate
((End Value Minus Beginning Value) Divided by Beginning Value) Times 100
Gross Margin Formula
Revenue Minus COGS
Contribution Margin Formula
Revenue Minus Variable Expenses
Operating Margin Formula
Operating Income Divided By Revenue
Pretax Margin Formula
Earnings Before Tax Divided By Revenue
Net Profit Margin
Net Income Divided By Revenue
COGS Formula
Beginning Inventory
+ Purchases
= Goods available for sale
- Ending Inventory
= Cost of Goods Sold
Cash Formula
Cash Balance
+ Cash Sales
- Cash Expenditures
+/- Change in AR
+/- Change in AP
= Ending Cash Balance
AR and AP Changes
If AR increases, cash decreases
If AR decreases, cash increases
If AP increases, cash increases
If AP decreases, cash decreases
Regression Analysis Formula
Y = A + Bx
Y= Total Costs(Dependent variable)
A= Fixed Cost(the y intercept)
B= variable cost per unit(the slope)
x= number of units(independent variable)
Nonmaterial variances
Written off to COGS
Material Variances
Are allocated to WIP, finished goods, and/or COGS.
