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CPA- BEC > B6 > Flashcards

B6 Flashcards

1
Q

What is Business Process Management (BPM)?

A

A management approach that seeks to coordinate functions of an organization to increase customer satisfaction. Seeks effectiveness & efficiency through promotion of innovation, flexibility, & integration with technology

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2
Q

Compare BPM vs. Project Management.

A

BPM attempts to improve processes continuously. There is no end

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3
Q

What are the 5 categories of BPM?

A

Design, Modeling, Execution, Monitoring, Optimization

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4
Q

What are the 5 techniques of BPM?

A

Define, Measure, Analyze, Improve, Control

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5
Q

What is the other technique to BPM?

A

Plan-Do-Check-Act (Sigma Six)

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6
Q

What are the measures of BPM?

A

Financial: Gross Revenue,

Non-financial: Customer Contracts, Customer Satisfaction, Operational Statistics

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7
Q

What are the benefits of BPM?

A

Efficiency, Effectiveness, Agility

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8
Q

What are shared services?

A

When you seek out redundant services in an organization, combine them, & share them.

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9
Q

What are the implications of shared services?

A

service flow disruption & failure demand

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10
Q

What is outsourcing?

A

using an external provider

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11
Q

What are the implications of outsourcing?

A

Quality, Productivity, Staff Turnover, Security, Labor insecurity

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12
Q

What are offshore operations?

A

outsourcing to a different country

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13
Q

What are the 4 types of offshore operations?

A

IT, Business Process (call center), Software R&D, Knowledge Process (skill)

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14
Q

What are the implications of offshore operations?

A

Language Skills & qualifications

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15
Q

What are 2 types of improvement initiatives?

A

Irrational (intuitive & emotional) and Rational (structured & systematic)

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16
Q

How do you implement improvement initiatives?

A

Internal Leadership, Inspections, Executive Support, Internal Process Ownership

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17
Q

What is Business Process Re-engineering (BPR)?

A

techniques to help organizations rethink how work is done to dramatically improve (radical) customer satisfaction, customer service, cut costs of operations, & enhance competitiveness

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18
Q

Compare BPM vs. BPR.

A

BPR is radical and BPM is incremental/tweak

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19
Q

What does performance improvement seek to do?

A

provide the highest quality goods/services in the most efficient & effective manner possible

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20
Q

What is Just in Time (JIT)?

A

A pull approach. Costs go down, WIP goes down, Quality goes up. JIT schedules deployment of resources JIT to meet customer or production requirements

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21
Q

What is a key part of JIT?

A

Inventory does not add value!

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22
Q

What are the costs of JIT?

A

a reduction in the number of suppliers

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23
Q

What are the benefits of JIT?

A

scheduling with demand. Supplies arrive at regular intervals during the day. Improved coordination with suppliers. Reduced set up time

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24
Q

What is quality?

A

the ability to meet or exceed customer expectations

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25
Q

What are the costs of quality?

A

Conformance & Non conformance (inverse) APIE

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26
Q

What are the quality control principles of Conformance?

A

AP: Appraisal= costs incurred to detect before, & Prevention= investment cost to prevent defects

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27
Q

What are the quality control principles of Non-Conformance?

A

IE: Internal= before customer, & External= after customer (measures quality)

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28
Q

What is Total Quality Management (TQM)?

A

please customers through quality & continuous improvement

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29
Q

What are the 7 critical factors of TQM?

A

Customer Focus. Continuous Improvement. Workforce Involvement (Quality Circles). Top Management Support. Objective Measures. Timely Recognition. Ongoing Training

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30
Q

What are Quality Audits?

A

management assesses quality practices. Strengths & weaknesses

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31
Q

What are Gap Analysis?

A

difference between industry best practices & our current practices

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32
Q

What is Lean Manufacturing?

A

investing resources only in value added activities

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33
Q

What are the factors of lean manufacturing?

A

waste reduction, continuous improvement (Kaizen), Process Improvement/Activity Based Management (ABM)

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34
Q

What is Demand Flow?

A

uses customer demand as basis for resource allocation (JIT or lean)

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35
Q

What is a constraint?

A

it impedes the accomplishment of an objective. Internal or external

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36
Q

What is the Theory of Constraints (TOC)?

A

to maximize throughput by working around and leveraging (hedging) constraints

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37
Q

What is Six Sigma?

A

emphasizes cost reduction through rigorous metrics and continuous quality improvements. It expands on Plan-Do-Check-Act but for new or existing product or plans

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38
Q

What is a project?

A

a temporary undertaking intended to produce a unique product/service. Has a definite beginning and end

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39
Q

What is re the 5 phases of project management?

A

An authorized project plan, implemented, monitored and controlled, ends when the objectives have been met (we delivered). Authorization. Planning, Implementation. Monitoring. Closing

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40
Q

What is a statement of work?

A

included in authorization of the project management. = the products/services to be delivered at the end. = product scope.

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41
Q

Who are the stakeholders in a project>

A

Project manager, members & steering group

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42
Q

What does the Project Manager do?

A

administration for day to day business

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43
Q

What do project members do?

A

perform the project tasks

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44
Q

what does the project sponsor do?

A

executive level of management. Allocates $ and resources

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45
Q

what does the executive steering committee do?

A

the board of directors

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46
Q

What is the reporting order for a project?

A

Manager to Sponsor to Steering Committee

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47
Q

What is project risk

A

the chance that something will go wrong

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48
Q

What are the steps for planning for risk management?

A

risk assessment and risk control

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49
Q

What is a risk assessment?

A

anticipate. Analyze. Prioritize

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50
Q

What is risk control?

A

Spend $ in advance to prevent risk. Plan for emergencies

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51
Q

What is the HR Plan?

A

a formal document of the labor plans for a project

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52
Q

What are the factors of the HR plan?

A

influences on the HR plan. Tools to enhance communication and success in HR plan. Conflict resolution strategies. Plan for things to go wrong and identify an appropriate response

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53
Q

What is the scope of the project?

A

all work required to complete the project and nothing else

54
Q

What is product scope?

A

defines the deliverables

55
Q

What is project scope

A

defines the work needed to produce the deliverables

56
Q

what is the scope baseline?

A

formal written statement of project scope and product scope

57
Q

What is the requirements documentation?

A

written document describing project requirements

58
Q

what is the requirements management plan?

A

documents how the requirements will be analyzed, documented and managed, tracked, and reported

59
Q

what is the cost baseline?

A

the amount of $ expected to spend on the project

60
Q

When does the maximum project expenditure occur? Beginning middle or end?

A

middle

61
Q

What is judgment?

A

historical info and experience

62
Q

what is parametric estimating?

A

statistical relationship

63
Q

what is analogous estimating?

A

cost of similar sized projects

64
Q

what is the work breakdown structure (WBS) estimating?

A

bottom up analysis

65
Q

what are three point estimates?

A

a range… optimistic assumption = best case, base case = most likely, and pessimistic assumption = worst case

66
Q

What is a reserve analysis?

A

plan for a reserve (uncertain cost estimates)

67
Q

What are deliverables?

A

the product/service the project must deliver

68
Q

What are the 5 criteria for the quality of the deliverables?

A

SMART- specific, measurable, attainable, relevant, time-based

69
Q

what is globalization?

A

distribution of the industrial and service activities across an increasing number of nations (more integrated and interdependent)

70
Q

How do you measure globalization?

A

world trade as a % of GDP

71
Q

What are the factors that drive globalization?

A

transportation, technology, deregulation, options for international business

72
Q

what does globalization promote?

A

Specialization & comparative advantage

73
Q

What are the motivations for international business operations?

A

comparative advantage, imperfect markets, product cycle

74
Q

what are the methods for conducting international business operations?

A

international trade, licensing, franchising, joint ventures, direct foreign investment, global sourcing (combination)

75
Q

What are the relevant factors of globalization?

A

political and legal influences, risk of asset expropriation, taxes and tariffs, limitations on asset ownership or joint venture, content or value added limits, foreign trade zones, economic systems, culture.

76
Q

what are content or value added limits?

A

NAFTA. Government may provide tariff reductions to companies whose imports include specified % of material & labor in their products

77
Q

What are the different types of economic systems?

A

centrally planned economies (China, govt control assets) vs. market economies (US, indiv own assets)

78
Q

what are the different factors of culture?

A

individualism vs. collectivism, uncertainty avoidance, ST vs. LT orientation, acceptance of leadership hierarchy, tech & infrastructure (main diff)

79
Q

what are the 3 inherent risks of international business operations?

A

exchange rate fluctuations, foreign economies, political risks

80
Q

What are the factors of foreign economies that affect international business?

A

foreign demand (income & purchasing power), interest rates increase AD dec, inflation inc AD dec, exchange rates inc AD inc

81
Q

what are the political risks of international business?

A

bureaucracies and trade barriers, corruption, host govt attitude toward foreign firms, consumer attitude toward foreign firms, inconvertibility of foreign currency, war

82
Q

what are the complications of global sourcing?

A

multiple sources for raw materials & multiple exchange rates

83
Q

what is a unipolar economy?

A

one lone superpower (US)

84
Q

what is multipolarity?

A

power is distributed among many nations

85
Q

what are the dimensions of national power?

A

geography, population, resources, economy, military, diplomacy, identity

86
Q

what is functional interdependence?

A

cooperation amongst nations to address global issues

87
Q

what is systemic interdependence?

A

the global issues

88
Q

Compare developed nations vs. emerging nations.

A

Developed (US) nations usually have trade deficits. While emerging nations (BRIC Brazil Russia India china) usually have trade surpluses

89
Q

Risk and return are both a function of what?

A

market conditions and risk preferences

90
Q

what are the 3 types of risk preferences?

A

risk averse. Risk seeking. Risk indifferent

91
Q

Compare diversifiable risk vs. nondiversifiable risk.

A

DUNS. Diversifiable risk is Unsystematic (unique) and Nondiversifiable risk is Systematic (market)

92
Q

What are 4 types of financial risk?

A

IR risk. Market Risk. Credit risk. Default risk.

93
Q

What is the stated interest rate?

A

the rate shown in agreement, before compounding

94
Q

How do you calculate the effective periodic IR?

A

Interest paid per period (= Principal * periodic rate) / Net Proceeds of Loan (= Principal - Fees)

95
Q

How do you calculate the annual percentage rate (APR)?

A

Effective Periodic IR * # compounding periods

96
Q

How do you calculate the effective APR?

A

= ((1+Effective Periodic IR)# compounding pds) -1

97
Q

How do you calculate simple interest?

A

Principal * Annual Rate * # years

98
Q

How do you calculate compound interest?

A

Principal * (1 + IR)# years

99
Q

How do you calculate the required rate of return?

A

Risk Premium + Nominal RF (=Real RF + IP)

100
Q

What are the 3 different risk premiums?

A

Maturity risk premium (MRP), Liquidity risk premium (LRP), Default risk premium (DRP)

101
Q

What are the categories of international risk factors?

A

trade and financial factors

102
Q

What are the categories of international risk exposure?

A

transaction, economic and translation exposures

103
Q

What are trade risk factors?

A

the relative inflation rate inc thus AD dec and value of currency dec. or government controls

104
Q

What are financial risk factors?

A

relative IR inc thus AD inc and value of currency inc

105
Q

What is the export transaction exposure?

A

Have A/R in FC: 1) FC inc, A/R inc, Gain! 2) FC dec, A/R dec, Loss

106
Q

What is the import transaction exposure?

A

Have A/P in FC: 1) FC inc, A/P inc, Loss 2) FC dec, A/P dec, Gain!

107
Q

Economic Exposure: What happens w/ domestic currency appreciation?

A

Thus FC dec: 1) A/R dec BAD, 2) A/P dec GOOD!

108
Q

Economic Exposure: What happens w/ domestic currency depreciation?

A

Thus FC inc: 1) A/R inc GOOD!, 2) A/P inc BAD

109
Q

What are the factors of translation exposure?

A

As the degree of foreign involvement inc, translation exposure inc. As the stability of the FC inc, translation exposure dec

110
Q

What are the 4 techniques for transaction exposure mitigation?

A

Futures Hedge. Forward Hedge. Money Market Hedge. Currency Option Hedge

111
Q

What is a call option?

A

option to buy

112
Q

What is a put option?

A

option to sell

113
Q

If FC inc and A/P inc, how can you mitigate your transaction risk?

A

Buy Futures Hedge or Buy call option

114
Q

If FC dec and A/R dec, how can you mitigate your transaction risk?

A

Sell Futures Hedge or Buy put option

115
Q

What is economic exposure?

A

the extent to which Rev and Exp are denominated in different currencies

116
Q

What is the ideal restructuring technique for economic exposure mitigation?

A

Denominate sales in FC increasing. Denominate expenses in FC that is decreasing.

117
Q

What is transfer pricing

A

the goal is to reduce taxable income

119
Q

What are specific types of DT or LT Financial Instruments?

A

working capital financing. Letter of credit. Line of credit. Leasing options. Debentures and bonds. Equity financing.

120
Q

Compare Debentures and bonds vs. equity financing.

A

Debt: FC w/ maturity date, new debt decreases credit worthiness, EPS inc. Equity: VC w/o maturity, increases credit worthiness, EPS dec.

121
Q

What are debt covenants?

A

they protect the value of the debt by protecting the the debtors credit rating. Debtors agree to debt covenants to secure a lower cost of borrowing the new debt.

122
Q

What are common examples of debt covenants?

A

limitations on issuing additional debt. Restrictions on payment of dividends. Limitations on disposal of certain assets. Minimum WC req. collateral requirements. Limitations on spending borrowed $. Maintenance of specific ratios.

123
Q

What happens if the debt covenants are violated?

A

technical default… usually just negotiate new terms

124
Q

How do you calculate the PV of an annuity?

A

Pmt. * (1-(1/(1+i)n)/i)

125
Q

How do you calculate the price of perpetuity (PS)?

A

P = D(Par * fixed %) / R (req return)

126
Q

How do you calculate the price of constant growth (CS)?

A

P0 = D1/(R-G)

127
Q

How do you calculate the Price-Earnings (P/E) Ratio?

A

P0/E1

128
Q

How do you calculate the PEG Ratio?

A

P0/E1/G(whole number)

129
Q

How do you calculate Price-to-Sales Ratio?

A

P0/S1 (used w/start-ups only)

130
Q

How do you calculate Price-to-Cash-Flow-Ratio?

A

P0/CF1

131
Q

What are different evaluating assumptions used in valuation?

A

Generalized rules of thumb can distort. Behavioral Biases distort judgment. Impact of Loss Aversion

132
Q

Compare STD vs. LTD

A

ST Debt

  • Lower Rates
  • Adv: Higher liquidity and Profitability
  • Dis: Higher IR Risk and Credit Risk
  • Strategy: Use w/ higher levels of temporary WC

LT Debt

  • Higher Rates
  • Adv: Lower IR Risk and Credit Risk
  • Dis: Lower liquidity and Profitability
  • Strategy: Use w/ higher levels of permanent WC
133
Q

Who does the International Professional Practices Framework Code of Ethics apply to?

A

Individuals and entities who provide internal auditing services

CPA- BEC (6 decks)

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