BEC 3 Flashcards
mnemonic: SEC consider what factor when selecting puc co for review
(C PERV) C=large market Cap; P=diff P/e ratio; E=affect Economy; R=issued mat Restatemnt; V=Volatility in stock
CRIME (COSO Framework)
Control Environment; mgmt Risk Assess; Info & comm sys; Monitoring; Exist control activities
mnemonic: Components of ERM
(CRRRIMES) C=Control/internal enviro; R=assess Risk; R=id Risk; R=Risk response; I=Info & comm sys; M=Monitoring; E=Effective control activities; S=Setting objectives (orcS)
Control/Internal Environment Factors
(EBOCA HR) E=Ethical val & integrity; B=Board oversight; O=Org structure; C=Commitment to Competence; A=Accountability; HR=hiring, risk mgmt/appetite
objectives of cost accounting
(PIE) P=Product costing; I=Income; E=Efficiency
OPERATING budgets contain what factors? 4
(PPSS)Personnel, Production, Sales, Selling/Admin
3 major section of CASH BUDGET
- Cash Available; 2. Cash Disbursement; 3. Financing=line of credit
variable needed for flex budgets
- rev per unit; 2. vc per unit; 3. fc per unit
Order of budget preparation (5)
(Some People Make Cash Payments) 1. Sales; 2. Production; 3. Materials/Labo/OH purchased; 4. Cash; 5. Pro Forma F/s
3 purposes of standard costing systems
- cost control; 2. variance analysis; 3. learn from & improve processes
4 measures of SBU to which mgmt is held accountable
(CRPI=mgmt is creepy) C=Cost; R=Revenue; P=Profit; I=Investment
FEEDBACK w/in financial scorecards must be (AT US)
Accurate, Timely, Understandable, Specific
Factors w/in the BALANCED SCORECARD
(FICA) F=Financial; I=Internal bus processes; C=Customer satisfaction; A=Advancement of innovation & hr develpmnt
3 examples of off b/s transactions
- op lease; 2. lawsuits; 3. related party trans
Terminal Year Cash Flow (TYCF) =
salvage value
ADVANTAGE of npv method
FLEXIBILITY (may be used when there is no constant rate of return required)
DISADVANTAGE of npv method
does not provide the TRUE rate of return
2 way discounted cash flow may be calculated
- NPV; 2. IRR
WACC
Weighted Average Cost of Capital
Profitability Index =
PVfcf / PV net Initial Investment
IRR
Internal Rate of Return
____ does not indicate $ value added
IRR
Payback period =
net Initial Investment / INCREASE in cash flow (after tax)
UNDISCOUNTED ignores
TVM
INCREASED leverage = ____ returns = ____ risk
INCREASED leverage = INCREASED returns = INCREASED risk
DOL
Degree of Operating Leverage
DOL =
% change EBIT / % change Sales
_____ WACC is ideal
LOWEST WACC
____ carries the lowest cost of capital
DEBT (and is tax deductible)
3 methods for comuting COST OF RE
- DCF; 2. Capital asset pricing model; 3. Bond yield plus risk premium
CAPM
Capital Asset Pricing Model
BYRP
Bond Yield plus Risk Premium
ROI =
NI / Investment
ROA (return on assets) =
NI / ave Assets
in residual income efficiency approach, hurdle rate =
mgmt judgement (aka made up)
in economic value added income efficiency approach, hurdle rate =
WACC
Residual Income =
NI - Required Return
EOQ
Economic Order Quantity
EOQ =
sq root of (2 x annual sales x order cost / carrying cost per unit)
