BEC CPA 3 Flashcards
Intrinsic Stock Price using the dividend growth model
RFR+ Beta x (market - RFR) = required rate of return
internal growth rate = (ROA x retention %) / [1 - (ROA x Retention %)]
Dividend? = EPS x div. payout
Div? in year 1 = Div. x (1+ growth)
Intrinsic price = DIv. / (required rate of return - growth)
Forward P/E based on forecasted data
Stock price = market cap. / shares outstanding
Add up forecasted EPS
P/E = stock price / forecasted EPS
Justified forward P/E based on the Gordon growth model
Dividend payout / (required return common equity - growth rate)
Current price using PEG ratio
PEG ratio x (EPS x (1+growth rate) x (growth % x 100)
Current price-to-sales ratio
Market cap. / shares outstanding = P
Sales x (1 + growth) / shares =S
P / S = price to sales
Price-to-book ratio
(Market cap. / shares) / (Common equity(CS +APIC+RE) / share )
PV of an annuity due with payments beginning immediately
1 + PV of an ordinary annuity
i.e due in 5 years, starts in year 0 (immediately) = PV for 4 periods
Which financial instrument generally provides the largest source of short-term credit for small firms?
Trade credit
What is the purpose of cost allocation?
Measuring income and assets for external reporting
Beta Coefficient equation
% change in stock price / % change in market price
Which Strategic Business Unit (SBU) has the least amount of responsibility?
Cost SBU
The quality program technique commonly used to determine zero defects and goalpost conformance is called?
Control Chart
Normal vs. abnormal spoilage
Normal = necessary production and product (inventoriable) cost.
Abnormal = Unnecessary and is a period cost
Basic assumption of activity-based costing (ABC) is?
Products or services require the performance of activities, and activities consume resources
Period costs vs product costs
-period costs are costs that do not contribute to the manufacturing of products; admin salaries
-product costs - costs to support manufacturing, including OH, direct & indirect labor,
Job-order vs process costing system
-Process costing averages product costs and applies them to a large number of products
-Job-order costing allocates cost to each individual job
Job Cost Sheet
-summarizes direct materials, direct labor, and overhead for each job so you can determine final cost
Materials Requisition Form
identifies the construction materials used on each individual job and feeds into the Job Cost Sheet or record
Labor Time Tickets
Enable payroll expenses to be assigned to individual jobs based on the amount of time actually spend on each project
4 critical success factors of the Balanced Scorecard
- learning & growth - support employees’ growth and knowledge
- Customer satisfaction - meeting customer requirements
- Financial - NI, ROI, etc.
- Production - efficiency and added value
Partial productivity ratio (PPR
Quantity of production (units) / Quantity of material used
Total factor productivity (TFP)
Quantity of output production / cost of raw material inputs used
Economic value-added equation
NOPAT - required return (investment-i.e machine x cost of capital %)
Prevention costs include
employee training, inspection expenses - preproduction, process redesign, product redesign
-Conformance costs
Appraisal costs include
inspection expenses -postproduction, laboratory maintenance, product testing
-Conformance costs
External & Internal failure includes
External: costs of returning goods, liability claims, warranty costs
Internal: rework, scrap, tooling changes
-these are nonconformance costs
Total Quality Costs
Nonconformance (internal + external failure costs) + conformance costs (Prevention + Appraisal costs)
Contribution Margin
Selling price + Direct labor + Direct materials + Variable overhead
Return on Investment
Net income / invested capital
Amount a company paid for a property using NPV
Investment $ / (1 + tax rate) - NPV
NPV= inflows - outflows
valuation estimation technique start-up companies would use where earnings are very low?
price sales ratio
