BEC 4 Flashcards
In a common-size income statement, each item is measures as a percentage of total revenues.
In a common-size income statement, each item is measures as a percentage of total revenues.
The cost approach is NOT a major approach to assigning value to an entire going business. The market approach, the income approach and the asset approach are the major approaches to assigning value to an entire going business.
The cost approach is NOT a major approach to assigning value to an entire going business. The market approach, the income approach and the asset approach are the major approaches to assigning value to an entire going business.
The buyer of a forward contract will gain when prices increase because the buyer has a lower purchased price (contract price) than the price at which the contracted asset can be sold after the price increase. The seller of a forward contract will lose when the price increases because the seller has agreed to sell at a lower price than the price of the asset after the price increase. Also, obviously, if the buyer gains, the seller must lose.
The buyer of a forward contract will gain when prices increase because the buyer has a lower purchased price (contract price) than the price at which the contracted asset can be sold after the price increase. The seller of a forward contract will lose when the price increases because the seller has agreed to sell at a lower price than the price of the asset after the price increase. Also, obviously, if the buyer gains, the seller must lose.
Basis risk is the risk that relates to the possibility that a derivative might not be effective at hedging a particular asset. Basis risk is a measure of the ineffectiveness of a hedge.
Basis risk is the risk that relates to the possibility that a derivative might not be effective at hedging a particular asset. Basis risk is a measure of the ineffectiveness of a hedge.
Default risk (also called credit risk) is the risk of loss that results from the counterparty (the other party) to the derivative contract not performing as specified in the contract.
Default risk (also called credit risk) is the risk of loss that results from the counterparty (the other party) to the derivative contract not performing as specified in the contract.
For the Accountxing Rate of Return, you do include depreciation in your reduction to income. You should be using annual accounting income in the numerator
For the Accounting Rate of Return, you do include depreciation in your reduction to income. You should be using annual accounting income in the numerator
The accounting rate of return (ARR) is calculated as:
ARR = Average annual incremental income/Initial (or Average) investment.
The accounting rate of return (ARR) is calculated as:
ARR = Average annual incremental income/Initial (or Average) investment.
The internal rate of return (IRR) determines the discount rate that equates the present value of a project’s expected cash inflows to the present value of the project’s expected costs.
The internal rate of return (IRR) determines the discount rate that equates the present value of a project’s expected cash inflows to the present value of the project’s expected costs.
The profitability index computes the expected return for each dollar invested. It is computed as: Net Present Value/Project Cost.
The profitability index computes the expected return for each dollar invested. It is computed as: Net Present Value/Project Cost.
In pledging of accounts receivable, the receivables are used as collateral in a financing agreement with a lender.
In factoring of accounts receivable, the receivables are sold at a discount for cash to a factor.
In pledging of accounts receivable, the receivables are used as collateral in a financing agreement with a lender.
In factoring of accounts receivable, the receivables are sold at a discount for cash to a factor.
The annual interest rate of forgoing the cash discount is calculated as:
[Discount %/(1.00 – Discount %)] × [360/((standard pay terms in days) – (discounted pay terms in days))]
The annual interest rate of forgoing the cash discount is calculated as:
[Discount %/(1.00 – Discount %)] × [360/((standard pay terms in days) – (discounted pay terms in days))]
A letter of credit is a conditional commitment to pay a third party in accordance with specified terms.
A letter of credit is a conditional commitment to pay a third party in accordance with specified terms.
A revolving credit agreement is a formal legal commitment, usually by a bank, to extend credit up to some maximum amount to a borrower over a stated period.
A revolving credit agreement is a formal legal commitment, usually by a bank, to extend credit up to some maximum amount to a borrower over a stated period.
Fixed costs and variable cost per unit must be estimated from the data using the high-low method. Total costs can then be estimated using the following equation: y = a + b(x), where y = total costs, a = fixed costs, b = variable cost per unit, and x = number of kilos.
Fixed costs and variable cost per unit must be estimated from the data using the high-low method. Total costs can then be estimated using the following equation: y = a + b(x), where y = total costs, a = fixed costs, b = variable cost per unit, and x = number of kilos.
In a field warehouse agreement, the inventory that serves as security for a borrowing remains with the borrower, but is placed under the control of an independent third party.
In a field warehouse agreement, the inventory that serves as security for a borrowing remains with the borrower, but is placed under the control of an independent third party.
