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CPA BEC > BEC 2 > Flashcards

BEC 2 Flashcards

1
Q

The 5 Processes involved in Project Management

A
  1. Initiation
  2. Planning
  3. Execution
  4. Monitoring and Control
  5. Closure
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2
Q

What is Benchmarking?

A

Is the continuous process of comparing a company’s financial data to published information to determine if optimal performance is achieved

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3
Q

What is Market Risk?

A

Risk that the value of a bond or loan will decline due to a decline in the aggregate value of all the assets in the economy

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4
Q

Multiple Regression has more _______ variables than simple regression

A

Independent Variables

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5
Q

In order for a hedge to be successful how must it react to market conditions?

A

In the opposite way that the hedge investment acts

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6
Q

Budgets are prepared in this order:

A
  • Sales Budget
  • Production Budget
  • Direct/Raw Materials Purchase Budget
  • Cash disbursements Budget
  • Budgeted Financial Statements
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7
Q

What is Delphi?

A

It is a structured forecasting method based on the collective judgment of a group of experts. Each experts judgment is involved; the forecasts will become more accurate after each round after which experts can revise their previous answers

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8
Q

What are Non-value Added Costs?

A

They are costs that increase the cost of a product, but don’t increase its value to customers. These are considered significant because these are costs a manufacturer can manage

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9
Q

What are Internal Failure Costs?

A

They are expenses addressing quality failures that were detected after production but before they were shipped to customers

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10
Q

What is Participative Budgeting?

A

It is more time consuming, because the decision making process involves participation of multiple layers of the organization (Both top managers and employees)

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11
Q

How must a company react to Seasonal Demand Fluctuations?

A

It requires a company to manage it inventories and cash flows to match the cycles

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12
Q

What is a Flexible Budget?

A

It shows the anticipated results of various levels with a relevant range. Within that range, fixed costs and variable cost per unit will remain constant

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13
Q

What is a Master Budget?

A

It is a static budget that shows anticipated results at a specific level of activity

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14
Q

PERT - Slack Time

A

Slack Time for a particular task is defined as the difference between its expected time and the latest the task can be finished without delaying the project

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15
Q

What does PERT stand for?

A

Program Evaluation and Review Technology

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16
Q

What is Change Management? Change Leader?

A

Deliberately guiding a company through a transition is change management

  • Change leader is the person who leads the change
  • Document new policies and procedures and develop new training in order to aid the transition
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17
Q

What is a Value Chain? Examples?

A

Is the sequence of business processes through which a product or service becomes more valuable or useful to the customer

  • Customer Service
  • Marketing
  • R&D
  • NOT ACCOUNTING
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18
Q

What is the first step in preparing a master budget?

A

Forecasting Sales Volume

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19
Q

What are the 3 theories for differences in yields?

A
  • Liquidity Preference
  • Market Segmentation
  • Expectations
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20
Q

Activity Based Costing - Characteristics

A

Involves identifying the costs associated with specific activities with the intention of reducing costs. It is applied, however, by allocating costs of non-producing departments to production departments using an appropriate cost driver for each cost. As a result, the cost of obtaining cost data in increased

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21
Q

On what basis is the Master Budget Prepared?

A

It is prepared on the basis of a specific level of production, the expected level of activity

22
Q

What is the Balanced Scorecard?

A

It is a strategic performance measurement and management framework for translating an organizational mission and specific strategy into a set of performance measures

23
Q

What is Residual Risk?

A

The risk still remaining after taking into account management’s response to the risk

24
Q

What does Standard Deviation represent?

A

it is a measure of the volatility of an investment and is the most common measure of investment risk

25
Q

What is Throughput Time?

A

Is the average time it takes for a unit to pass through the manufacturing system

26
Q

What are Cost Drivers?

A

Are the factors that affect costs, such as the number of units being produced affecting the amount of raw materials used.
-Cost Drivers cannot be eliminated as along as the entity is in operation

27
Q

What is Credit Risk?

A

Is the risk that the counter party to a contract will fail to honor obligations (defaulting on a contract)

28
Q

Where may a Standard Cost System be used?

A

In either a job order costing or process costing system

29
Q

What does Inventoriable Costs (Product costs) Include?

A
  • DM, DL, MO
  • Mo includes all factory costs except for DM and DL
  • Normal Spoilage is part of DM Costs, not abnormal spoilage
30
Q

Where are Activity Based Costing Systems mostly used?

A

They are most applicable in companies that produce heterogeneous products

31
Q

Where is a Process Costing System mostly used?

A

If resources are consumed in a homogeneous way

32
Q

How is abnormal spoilage treated?

A

as a period cost

33
Q

How will the bond sell if the coupon rate exceeds the market rate?

A

The bond will sell at a premium

34
Q

What happens to a bond as it’s maturity date nears?

A

It becomes less sensitive to changes in interest rates

35
Q

Just-In-Time - Size and quantity of orders? Inspection costs?

A

Involves ordering raw materials when they are needed, reducing the size of each order, increasing the number of orders, as a result, increasing the number of inspection and the related inspection cost

36
Q

Back Flush Costing System - Characteristics

A

It involves recognizing the cost of production when it is complete or sold, applying standard costs which eliminates the need for detailed tracking of costs

37
Q

How do US Treasury Bills bear interest?

A

At the risk free rate plus inflation premium

38
Q

What is an advantage of using debt financing?

A

Interest expense is tax deductible, resulting in a portion of the interest cost being offset by tax savings, decreasing the after tax cost of debt

39
Q

What must be determined in advance for the Net Present Value Method?

A

The Discount Rate (Hurdle Rate)

40
Q

This ratio is a profitability ratio that is useful for comparing the profitability of 2 companies of differing sizes

A

The Return on Assets Ratio

41
Q

What is a Collection Float?

A

Is the lapse between the time money is collected and when it can be spent

42
Q

What does a low WACC indicate?

A

It tends to reduce risk as an investment would require a lower rate of return to equal or exceed the WACC

  • Decreasing WACC increases the value of a company
  • WACC includes the borrowing rate and the cost of equity
43
Q

Why does Capital Budgeting require management’s judgments?

A

Because there are uncertainties pertaining to future events and outcomes

44
Q

The Cash Conversion Cycle includes these minor cycles:

A
  • Payables Deferral Period
  • Inventory Conversion Period
  • Average Collection Period
45
Q

What is a limitation of the Profitability Index and other Capital Budgeting techniques?

A

They rely on forecasts of future information which may extend into the distant future and may not reflect on what will actually occur

46
Q

What is a Reorder Pint?

A

Is the quantity of inventory that will be on hand when the company places it next order

47
Q

When determining the most likely outcome between a selection, which choice should you choose?

A

The outcome with the highest probability

48
Q

What is Business Risk?

A

Is the risk profits will fall short of expectations

-Even businesses financed only with equity would bear this risk

49
Q

What is a Financial Risk?

A

Is associated with defaults on debt, which would not affect a company financed exclusively with equity

50
Q

What is Material Requirements Planning?

A

It is a forecast based production planning and inventory control tool used to ensure that materials are available when needed

51
Q

What is cycle counting?

A

It is an inventory tracking procedure where different components of the inventory are counted on a periodic basis

52
Q

What is a Safety Stock Reorder Point?

A

It is the amount of inventory added to the normal reorder point to provide assurance that there will be sufficient inventory on hand if deliveries require more than the average amount of time or if demand exceeds average during the deliver time

CPA BEC (3 decks)

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