BEC 1 Flashcards
3 objectives of COSO Framework
operating, reporting, compliance
5 Components of Internal Control
Control Environment Risk Assessment Information and Communication Monitoring Activities Existing Activities
5 Components of ERM
Governance and Culture Objective/Strategy Setting Performance Review and revision Ongoing reporting, communication, and information
effective interest rate
= interest paid / net proceeds
interest paid = principal * stated rate
net proceeds = amount actually received
compound interest
P (1 + i)^n
nominal interest rate
nominal interest rate = risk free rate + inflation premium
3 areas of risk exposure (when dealing with foreign exchange)
transaction –> loss/gain
economic –> PV of cash flows could change
translation exposure –> if you have a foreign sub
when to use forward hedges vs. future hedges
futures = smaller transactions forwards = larger transactions
When to use Accounts Payable Application of Hedging
when domestic currency is weakening
**buy calls, futures, or forwards
When to use Accounts Receivable Application of Hedging
when domestic currency is strengthening
**put options, sell futures or forwards