BEC 1

Question 1

What corporate characteristic would favor debt financing versus equity financing

Answer 1

A high tax rate

Question 2

How do you calculate asset turnover ratio?

Answer 2

sales/assets

Question 3

What is the formula for Days inventory outstanding (DIO)

Answer 3

Avg end inv/COGS per day

Question 4

What is the formula for days sales outstanding (DSO)

Answer 4

Avg end AR (net)/(sales(net)/365)

Question 5

What is the formula for days payable outstanding (DPO)

Answer 5

Avg end AP/COGS per day

Question 6

What is the formula for number of days in the company’s cash conversion cycle

Answer 6

DIO+DSO-DPO

Question 7

what is the total cost of producing an nth unit (7th, 8th, etc.)

Answer 7

Avg total cost X Number of units

Question 8

How do you calculate price-earnings ratio

Answer 8

market price per share/annual earnings per share

Question 9

How do you hedge against increases in short term interest rates

Answer 9

Sell treasury notes in the futures market

Question 10

How do you hedge against increases in short term interest rates

Answer 10

Sell treasury notes in the futures market

Question 11

What method of evaluating investment projects is used to rank projects

Answer 11

Profitability Index Method

Question 12

What describes the relationship shown in a yield curve

Answer 12

A yield curve shows the relationship between time to maturity and bond interest rates

Question 13

Total assets can be found using

Answer 13

Sales/asset turnover

Question 14

pretax profit can be found using what formula? (Think residual income)

Answer 14

required rate of return*total assets + residual income

Question 15

what is true about master files

Answer 15

Master files are the computerized counterpart of ledgers found in manual systems

Question 16

what capital budgeting model deals with profitability indes

Answer 16

net present value

Question 17

what is the formula for comparing a balance from year 1 to year 2

Answer 17

current balance-prior balance / prior balance

Question 18

How do you find predetermined OH rate

Answer 18

Est total OH costs/Est activity volume

Question 19

How do you find the allocation rate in ABC costing

Answer 19

Budgeted cost/budgeted activity

Question 20

How do you find applied OH in job costing

Answer 20

Amount of Base incurred (actual amount)*POR

Question 21

What risk relates to the possibility that a derivative might not be effective at hedging

Answer 21

basis risk

Question 22

what is the formula for inventory turnover

Answer 22

COGS/Avg Inventory

Question 23

What is the formula for Avg days sales inventory

Answer 23

360/Inv turnover ratio

Question 24

What is the formula for the capital turnover ratio

Answer 24

Revenue/Capital

Question 25

What is the formula for AR turnover

Answer 25

Sales/Avg AR

Question 26

How do you calculate avg collection period

Answer 26

Avg AR/Avg sales per day

Question 27

How do you calculate required rate of return (RRR)

Answer 27

Risk-free rate of return + Beta*(Market rate of return - Risk-free rate of return)

Question 28

What is the formula to calculate profitability index

Answer 28

Project NPV/project cost

Question 29

How do you find a level of risk when you are given expected return and standard deviation

Answer 29

Divide standard deviation by expected return

Question 30

Which capital technique gives the best answer when evaluating investment projects that are mutually exclusive

Answer 30

Net present value