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Fall 24 > 404 Final > Flashcards

404 Final Flashcards

1
Q

Cost Center

A

control over costs but not revenue,
overall profit or investments

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2
Q

Revenue Center

A

control over revenue but not
costs, overall profit or investments

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3
Q

Profit Center

A

control over revenue and cost

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4
Q

Investment or Business Unit Center

A

control over profit and investments

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5
Q

Responsibility Centers

A

cost, revenue, profit, and investment

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6
Q

Jenkins Stupid Fucking Golden Four of Effective Delegation

A
  1. Communicate Expectations
  2. Provide Resources
  3. Monitor Performance
  4. Provide Feedback
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7
Q

What is Net Operating Income?

A

EBIT

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8
Q

What is Average Operating Assets?

A

cash, A/R, inventory, PPE

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9
Q

What is Transfer Pricing?

A

evenly distributing funds, avoids suboptimization by motivating managers to act in the best interests of the company

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10
Q

What are the four aspects of Cost of Quality?

A
  1. quality of conformance
  2. prevention and appraisal costs
  3. internal failure costs
  4. external failure costs
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11
Q

Explain Quality of Conformance

A

costs incurred to prevent defects or that result from defects in products

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12
Q

Explain Prevention and Appraisal

A

prevention supports activities that tries to reduce number of defects

appraisal is incurred to identify defective products before the products are shipped

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13
Q

Explain Internal Failure Costs

A

incurred as a result of identifying defects before they are shipped

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14
Q

Explain External Failure Costs

A

incurred as a result of defective products being delivered to customers

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15
Q

Differential Analysis

A

focusing on the costs and benefits that differ between the alternatives, everything else is irrelevant

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16
Q

Relevant Cost

A

cost that differs between alternatives

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17
Q

Relevant Benefit

A

benefit that differs between alternatives

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18
Q

differential cost

A

future costs that differ between any two alternatives

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19
Q

differential revenue

A

future revenue that differs between any two alternatives

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20
Q

incremental cost

A

increase in cost between two alternatives

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21
Q

avoidable cost

A

cost that can be eliminated by choosing one alternative over another

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22
Q

Sunk Costs

A

always irrelevant, cost has already been incurred and cannot be changed

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23
Q

Opportunity Costs

A

must be considered in differential analysis, potential benefit that is given up when another is selected

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24
Q

Rising Star

A

( high growth and high share ), invest

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25
Q

Cash Cow

A

( low growth and high share ) milk it and use cash to reinvest

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26
Q

Question Mark

A

( high growth and low share )

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27
Q

Dog

A

( low growth and low share ), need exit strategy

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28
Q

Vertical Integration

A

common ownership of activities in consumer value chain

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29
Q

Make or Buy Choice

A

companies with vertical integration can choose to make something or buy it

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30
Q

Special Order

A

one time order that is not considered part of normal ongoing business, must focus on incremental costs and benefits

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31
Q

volume-trade off decision

A

made when companies do not have enough capacity to produce all of their products

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32
Q

bottleneck

A

machine is the constraint, increase in the machines capacity leads to increased sales

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33
Q

joint-products

A

two or more products are produced from a single raw-material

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34
Q

split-off point

A

the point at which joint-products can be considered two separate products

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35
Q

Time Value of Money

A

A dollar today is worth more than a dollar tmrw because you have the opportunity to invest it

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36
Q

Simple Interest

A

interest is only compounded on the principal

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37
Q

Compound Interest

A

interest from a prior period is added to principal and interest is calculated for both

38
Q

Opportunity Cost

A

rate of return you could earn on an investment of similar risk

39
Q

Discounting

A

finding the present value of a future cash flow

40
Q

Annuity

A

series of consecutive payments of equal amounts, helps compare investment decisions

41
Q

Horizontal Analysis

A

shows changes between years in the financial data (trend analysis)

comparative form

42
Q

What does quantifying dollar changes highlight?

A

economic changes

43
Q

What does quantifying percentage changes highlight?

A

unusual changes

44
Q

Vertical Analysis

A

focuses on relationships among financial statements at a given time

45
Q

Common-Size Financial Statements

A

part of vertical analysis, each financial statement is expressed as a %, usually a % of sales

46
Q

What is Financial Leverage?

A

Magnify ROA with inexpensive liabilities to provide a higher rate of return to our shareholders

47
Q

Profit margin on sales (ROS)

A

how efficiently a company turns sales into profits

48
Q

Gross profit percentage

A

evaluates profitability

49
Q

Return on assets

A

shows how much profit a company generates from its assets

50
Q

return on net worth (ROE)

A

how well it generates profits from shareholder investments

helps decide whether you should invest

51
Q

Earnings per Share

A

indicates how much profit a company makes per stock share

52
Q

Earnings per Share (Fully diluted)

A

indicates how much money a company makes per stock share, including all potential shares

53
Q

Accounts receivable turnover

A

how quickly a company collects its (AR) and converts them into cash

if higher than 12 (months), then you’re collecting payments late

54
Q

Inventory turnover

A

rate that inventory stock is sold, or used, and replaced

55
Q

Average collection period

A

amount of time it takes for a business to receive payment (A/R)

56
Q

Fixed assets turnover

A

how efficiently a company generates sales from its existing fixed assets.

56
Q

Days sales in inventory

A

average number of days it takes for a company to sell its entire inventory

57
Q

Total assets turnover

A

efficiency with which a company uses its assets to produce sales

58
Q

Current ratio

A

used to find liquidity

59
Q

Quick, or acid test

A

measures a company’s ability to pay its current liabilities with its HIGHLY LIQUID assets

60
Q

Working capital

A

helps plan for future needs and ensure the company has enough cash and cash equivalents meet short-term obligations

61
Q

Days to cash (Operating cycle)

A

the number of days it takes for a company to convert its inventory into cash by selling it and collecting payment from customers

62
Q

Debt to total assets

A

how leveraged the company is, higher ratios indicate more debt is used compared to equity

63
Q

Times interest earned

A

company’s ability to cover the interest owed on its debt obligations

how many times you can payoff interest (7x)

64
Q

Debt to Equity Ratio

A

calculates how much of a company’s funding comes from debt compared to shareholder equity

looking for 1 to 1

65
Q

Equity multiplier

A

measures how much of a company’s assets are financed by shareholders’ equity, rather than debt

66
Q

P-E Ratio

A

It tells you how much you are paying for each dollar of earnings

how many years until my investment pays me back (20s-30s years)

67
Q

Dividend payout ratio

A

represents how much of a company’s earnings after tax are paid to shareholders

68
Q

Book value per Share (EPS)

A

show how well management increases shareholder equity over time

69
Q

Effective tax rate

A

share of your annual income you pay in taxes

70
Q

Performance Measures Used in Balanced Scorecard Categories: Financial

A

Has our financial performance improved? / What are our goals?

71
Q

Performance Measures Used in Balanced Scorecard Categories: Customer

A

Do customers recognize that we are delivering more value? / Who do we want to Serve?

72
Q

Performance Measures Used in Balanced Scorecard Categories: Internal Business Processes

A

Have we improved key business processes so that we can deliver more value to customers? /

73
Q

Performance Measures Used in Balanced Scorecard Categories: Learning and Growth

A

Are we maintaining our ability to change and improve?

73
Q

Importance of the Quality Cost Report

A

helps manager see financial significance of defects

uses quality cost information to understand importance of large-scale quality issues

helps managers see distribution of quality costs

74
Q

Connect Strategy to Daily Decision Making in the Context of a Balanced Scorecard

A

starts with defining a strategy, which utilizes performance measures to track strategy

continually test’s managements theories

also can be linked to measure employee performance

75
Q

What does an MCE of 25% mean?

A

Only 25% of the total throughput time it take for a unit to be completed is spent on adding value

76
Q

Acceptability of a project based on NPV

A

if NPV is zero or greater, it is acceptable, if below zero then not acceptable

77
Q

What does NPV focus on?

A

NPV focuses on the difference between cash inflows and outflows and not accounting income due to the time factor

78
Q

Discount Rate

A

typically use required rate of return

determine discount rate by starting at the company’s
weighted average cost of capital

79
Q

What is IRR?

A

discount rate that creates a zero NPV

measures a projects rate of return over its useful life

  1. find discount factor using formula
  2. find discount rate closest to it
80
Q

How do you rank investment projects using IRR?

A

the higher the IRR, the more attractive the investment

81
Q

Simple Rate of Return

A

used to evaluate capital investment proposals

does not account for change of monetary value over time (discounts)

comparing the annual increase in income to the cost of the investment

82
Q

Hurdle Rate of Return

A

minimum rate of return required for an investment or project to be considered

83
Q

Decentralization

A

giving multiple people the authority to make financial decisions to make faster decisions and train lower management

84
Q

What is the payback period formula used for?

A

It is used for unequal cash flows from an investment project (change from year to year) and is used instead of the other payback period formula

85
Q

What is cost of capital?

A

average rate of return a company must pay to its creditors and shareholders for use of their funds

projects with a rate of return less than cost of capital should not be taken on

86
Q

Future Value

A

How much money will i have one year from now if i invest 100 at a 20$ return?

87
Q

Present Value

A

How much money do i invest today to achieve 120 one year from now at an expected 20% return?giving multiple people the authority to make financial decisions

88
Q

WACC (Weighted Average Cost of Capital)

A

firms cost of capital where each category is proportionally weighted

89
Q

What is NPV?

A

translates future cash flows into today’s money to determine if it is worth it

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