B1-B6 Deck 2 Flashcards
how is IRR calculated?
investment/cash flows
what would decrease the IRR?
decreasing tax credits would increase initial investment reducing the overall rate
what is characteristic of a horizontal merger
companies within the same industry
what is a floating rate bond?
produces a constant market rate automatically, no premium or discount is required
what are the two types of acceptance tests?
beta and alpha
how does globalization impact growth rates
it will increase growth rates due to more investment opportunities
how does lowering discount rate raise the money supply?
encourages more borrowing by banks thus increasing money supply
WACC ratio
debt/debt +equity + equity/debt+equity
what does a steering committee do?
oversight of systems and development aquisition
what does a JIT inventory system require?
more deliveries and fewer suppliers because they know the best ones
what is a VPN
virtual private network that allows remote users access to the network
why does a natural monopoly exist
because the conditions only permit one efficient supplier
what is the profitability ratio?
present value of future cash inflows to the initial net investment. it requires long, detailed forecasts of cash flows which take time to conduct
what is default risk premium?
if the issuer does not pay timely, the investors bearing the risk demand more compensation
what type of investments are subject to translation risk
foreign investments
what drives the relationship between 2 tables
the foreign key because it liks to the primary key
opportunity cost
variable cost +alternative use
define float
number of days it takes a check to clear the bank
what costs are considered in a make/buy decision?
variable labor and materials and avoidable fixed costs
what are capital budgets used for?
purchase of assets and their affect of depreciation and operational expenses
is updating the audit committee a monitoring activity?
no, it is a report of a deficiency
what is a control chart
zero defects goalpost, upper and lower limits, within acceptable range of error
how often must internal controls be evaluated?
within 90 days before report
what type of risk can be reduced by diversification?
unsystematic risk
what type of risk cannot be reduced by diversification?
market risk/systematic risk/nondiversifiable risk
what is a short?
when a company sells goods and payment is due in the foreign currency
conformance costs include
prevention and appraisal costs
prevention cost example
redesign processes
appraisal cost
testing
normal vs abnormal spoilage
normal-product cost
abnormal-period cost
what is the budget to give info on owners equity?
budgeted income statement
what principal supports performance of ERM?
identify risks
develop portfolio view
assess severity of risk
prioritize risk
implement risk response
what is a semivariable cost?
utility costs fixed+variable characteristics over a relevant range
