BEC - 23 Flashcards
Does the Sarbanes-Oxley Act require certification by management that it has violated no major laws?
NO
The Dodd-Frank Act of 2010 established a requirement that
All members of the compensation committee of the board of directors be independent.
What are the components of the capital asset pricing model calculation?
Risk free interest rate
Beta coefficient
Estimated return on the market
All of these are used to calculate cost of equity
ssuming that the real rate of interest is the same in both countries, if country A has a higher nominal interest rate than country B, then the currency of country A will likely be selling at a
Forward discount relative to the currency of country B.
If the real rates of interest are the same, the country with the higher nominal interest rate is expected to experience a higher rate of inflation. A higher rate of inflation is associated with a devaluing currency so the currency of the country with the higher nominal interest rate will likely be selling at a forward discount.
What do strategy maps diagram?
Cause-and-effect relationships between strategic objectives
The difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances?
Labor usage variance
List 4 effects from opening an emerging stock market to foreign investment
An increase in the correlation of emerging stock markets with world markets
A change in the volatility of emerging stock market returns
A decrease in local firms’ cost of capital
An increase in investment growth rates
What does a swap agreement do?
Allows a company to exchange variable interest-rate debt cash flows for fixed-rate debt cash flows
Companies can reduce the potential loss from host-government expropriation of their foreign subsidiaries by
Financing the subsidiary with local-country capital.
To protect their investment, local capital would be preferred. The parent company could then default on the local creditors in the event that the subsidiary is expropriated from them. The creditors’ claims would have to be satisfied by the expropriating host government.
What is the major advantage of a zero-balance account system?
It maximizes the float involved in cash disbursements.
By using regional banks and not transferring funds until the checks are presented, the float on disbursements is maximized.
NPV Formula
Required investment - PVFC
The future inflow of cash from salvage value is included in the calc
Depreciation does not enter directly into the NPV calculation
