BEC deck 2

Question 1

What is the difference between primary market and secondary market for common stock?

Answer 1

Primary market - firms raise capital by issuing new securities here.

Secondary market - this is used for “outstanding stocks” of public companies to trade among investors. The original issuer (company) receives no additional capital from these trades.

Question 2

What is the advantage of the accounting rate of return (ARR) method when evaluating investment returns?

Answer 2

ARR is often used as a performance evaluation measure, so the consistency may lead to better decisions.

Question 3

What costs of quality are identified in the total quality management (TQM) process?

Answer 3

Preventive, internal failure, and external failure are costs of quality, but investment costs are not.

Question 4

What are the main assessment technique differences between PEST and SWOT analysis?

Answer 4

PEST analysis is a form of macro-environmental analysis and is primarily concerned with where an entity should operate, and SWOT is a form of micro-environmental analysis and is primarily concerned how an entity should operate.

Question 5

What accounts are used by the U.S. to account for transactions and balances with other nations?

Answer 5

1) current account: used in the balance of payments accounting and reports the dollar value of (1) net imports/ exports of goods/ services, (2) NI from U.S. investments in foreign securities and real estate and vice versa, (3) other net transfers in/out of U.S.

2) Capital account: net U.S. purchases of foreign capital and investments

3)

Question 6

How do you calculate equivalent units?

Answer 6

Beg. WIP x Complete %
+ (Completed transferred to FG - Beg. WIP)
+ Spoiled units
+ End. WIP x Complete %
= Equivalent Units

Question 7

Calculate margin of safety:

Answer 7

Margin of safety = Current Sales - Breakeven Sales