BEC 5 Flashcards
return on investment is equal to net income divided by average investment ($1,100,000-$700,000) ÷ [($1,200,000 + $2,000,000) ÷ 2] = $400,000 ÷ $1,600,000 = 25%.
return on investment is equal to net income divided by average investment ($1,100,000-$700,000) ÷ [($1,200,000 + $2,000,000) ÷ 2] = $400,000 ÷ $1,600,000 = 25%.
The economic order quantity model seeks to determine the order size that will minimize total inventory cost, both order cost and carrying costs.
The economic order quantity model seeks to determine the order size that will minimize total inventory cost, both order cost and carrying costs.
ABC (activity-based costing) is a system of costing that assigns cost to activities performed in the organization and then to products according to their use of the various activities.
ABC (activity-based costing) is a system of costing that assigns cost to activities performed in the organization and then to products according to their use of the various activities.
A change in safety stock does not affect a firm’s economic order quantity (but does affect its reorder point).
A change in safety stock does not affect a firm’s economic order quantity (but does affect its reorder point).
Measures related to the solvency of a firm are primarily concerned with the ability of a firm to pay its debts as they become due.
Measures related to the solvency of a firm are primarily concerned with the ability of a firm to pay its debts as they become due.
Times-Interest-Earned Ratio = (Net Income + Interest Expense + Income Tax Expense) / Interest Expense
Times-Interest-Earned Ratio = (Net Income + Interest Expense + Income Tax Expense) / Interest Expense
The net working capital formula is calculated by subtracting the current liabilities from the current assets.
The net working capital formula is calculated by subtracting the current liabilities from the current assets.
Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable for that period.
Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable for that period.
Turnco’s average collection period is 72 days. This answer is calculated as the number of days in a year divided by the receivables turnover, or 360/5 = 72 days
Turnco’s average collection period is 72 days. This answer is calculated as the number of days in a year divided by the receivables turnover, or 360/5 = 72 days
The average days’ sales in inventory is calculated as: 360 days/Inventory Turnover.
Inventory Turnover = COGS/Average Inventory
Inventory turnover measures the number of times that inventory is acquired and sold or used during a period.
The average days’ sales in inventory is calculated as: 360 days/Inventory Turnover.
Inventory Turnover = COGS/Average Inventory
Inventory turnover measures the number of times that inventory is acquired and sold or used during a period.
The operating cycle measures the average length of time to invest cash in inventory, convert the inventory to accounts receivable, and collect the receivables.
The cash conversion cycle includes AR, Inventory and then subtract AP.
The operating cycle measures the average length of time to invest cash in inventory, convert the inventory to accounts receivable, and collect the receivables.
The cash conversion cycle includes AR, Inventory and then subtract AP.
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.
In general, items of short-term financing do not require collateral from or impose restrictive terms on the borrower. Accounts payable and accrued payables, for example, do not require either collateral or have restrictive terms. Similarly, most short-term notes do not require collateral or have restrictive terms.
In general, items of short-term financing do not require collateral from or impose restrictive terms on the borrower. Accounts payable and accrued payables, for example, do not require either collateral or have restrictive terms. Similarly, most short-term notes do not require collateral or have restrictive terms.
A swap agreement would be recommended to hedge interest rate risk on long-term floating-rate bonds. In an interest rate swap agreement one stream of future interest payments (e.g., floating-rate payments) is exchanged for another stream of future interest payments (e.g., fixed-rate payments) for a specified principal amount. In this case, an interest rate swap would hedge (mitigate) exposure to fluctuations in interest rates of the floating-rate bonds by exchanging those payments for a fixed-rate payment.
A swap agreement would be recommended to hedge interest rate risk on long-term floating-rate bonds. In an interest rate swap agreement one stream of future interest payments (e.g., floating-rate payments) is exchanged for another stream of future interest payments (e.g., fixed-rate payments) for a specified principal amount. In this case, an interest rate swap would hedge (mitigate) exposure to fluctuations in interest rates of the floating-rate bonds by exchanging those payments for a fixed-rate payment.
Of the alternative answer choices listed, during a period of high inflation, the best investment is precious metals. Because of their scarcity, precious metals tend to increase in market value during periods of inflation
Of the alternative answer choices listed, during a period of high inflation, the best investment is precious metals. Because of their scarcity, precious metals tend to increase in market value during periods of inflation
