BEC 3

Question 1

mnemonic: SEC consider what factor when selecting puc co for review

Answer 1

(C PERV) C=large market Cap; P=diff P/e ratio; E=affect Economy; R=issued mat Restatemnt; V=Volatility in stock

Question 2

CRIME (COSO Framework)

Answer 2

Control Environment; mgmt Risk Assess; Info & comm sys; Monitoring; Exist control activities

Question 3

mnemonic: Components of ERM

Answer 3

(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)

Question 4

Control/Internal Environment Factors

Answer 4

(EBOCA HR) E=Ethical val & integrity; B=Board oversight; O=Org structure; C=Commitment to Competence; A=Accountability; HR=hiring, risk mgmt/appetite

Question 5

objectives of cost accounting

Answer 5

(PIE) P=Product costing; I=Income; E=Efficiency

Question 6

OPERATING budgets contain what factors? 4

Answer 6

(PPSS)Personnel, Production, Sales, Selling/Admin

Question 7

3 major section of CASH BUDGET

Answer 7

1. Cash Available; 2. Cash Disbursement; 3. Financing=line of credit

Question 8

variable needed for flex budgets

Answer 8

1. rev per unit; 2. vc per unit; 3. fc per unit

Question 9

Order of budget preparation (5)

Answer 9

(Some People Make Cash Payments) 1. Sales; 2. Production; 3. Materials/Labo/OH purchased; 4. Cash; 5. Pro Forma F/s

Question 10

3 purposes of standard costing systems

Answer 10

1. cost control; 2. variance analysis; 3. learn from & improve processes

Question 11

4 measures of SBU to which mgmt is held accountable

Answer 11

(CRPI=mgmt is creepy) C=Cost; R=Revenue; P=Profit; I=Investment

Question 12

FEEDBACK w/in financial scorecards must be (AT US)

Answer 12

Accurate, Timely, Understandable, Specific

Question 13

Factors w/in the BALANCED SCORECARD

Answer 13

(FICA) F=Financial; I=Internal bus processes; C=Customer satisfaction; A=Advancement of innovation & hr develpmnt

Question 14

3 examples of off b/s transactions

Answer 14

1. op lease; 2. lawsuits; 3. related party trans

Question 15

Terminal Year Cash Flow (TYCF) =

Answer 15

salvage value

Question 16

ADVANTAGE of npv method

Answer 16

FLEXIBILITY (may be used when there is no constant rate of return required)

Question 17

DISADVANTAGE of npv method

Answer 17

does not provide the TRUE rate of return

Question 18

2 way discounted cash flow may be calculated

Answer 18

1. NPV; 2. IRR

Question 19

WACC

Answer 19

Weighted Average Cost of Capital

Question 20

Profitability Index =

Answer 20

PVfcf / PV net Initial Investment

Question 21

IRR

Answer 21

Internal Rate of Return

Question 22

____ does not indicate $ value added

Answer 22

IRR

Question 23

Payback period =

Answer 23

net Initial Investment / INCREASE in cash flow (after tax)

Question 24

UNDISCOUNTED ignores

Answer 24

TVM

Question 25

INCREASED leverage = ____ returns = ____ risk

Answer 25

INCREASED leverage = INCREASED returns = INCREASED risk

Question 26

DOL

Answer 26

Degree of Operating Leverage

Question 27

DOL =

Answer 27

% change EBIT / % change Sales

Question 28

_____ WACC is ideal

Answer 28

LOWEST WACC

Question 29

____ carries the lowest cost of capital

Answer 29

DEBT (and is tax deductible)

Question 30

3 methods for comuting COST OF RE

Answer 30

1. DCF; 2. Capital asset pricing model; 3. Bond yield plus risk premium

Question 31

CAPM

Answer 31

Capital Asset Pricing Model

Question 32

BYRP

Answer 32

Bond Yield plus Risk Premium

Question 33

ROI =

Answer 33

NI / Investment

Question 34

ROA (return on assets) =

Answer 34

NI / ave Assets

Question 35

in residual income efficiency approach, hurdle rate =

Answer 35

mgmt judgement (aka made up)

Question 36

in economic value added income efficiency approach, hurdle rate =

Answer 36

WACC

Question 37

Residual Income =

Answer 37

NI - Required Return

Question 38

EOQ

Answer 38

Economic Order Quantity

Question 39

EOQ =

Answer 39

sq root of (2 x annual sales x order cost / carrying cost per unit)