BEC EQs

Question 1

It is assumed that cash flows are reinvested at the rate earned by the investment in which of the following capital budgeting techniques?

IRR Y/N
NPV Y/N

Answer 1

IRR Y
NPV N

The internal rate of return method determines the rate of return at which the present value of the cash flows or benefits will exactly equal the investment outlay. This method assumes that cash flows received are reinvested to earn the same internal rate of return.

On the other hand, the net present value method requires the selection of a discount rate which represents the minimum rate of return desired. This method assumes that all cash flows received are reinvested at this minimum rate of return and not at the rate earned on the investment.

Question 2

Which of the following terms best describes a payroll system?

Database management system (DBMS).
Transaction processing system (TPS).
Decision support system (DSS).
Enterprise resource planning (ERP) system.

Answer 2

Ans. B. Transaction Processing System

Question 3

Calculate Operating Profit Margin

Answer 3

Operating Profit / Sales

Operating Profit = Sales - COGS - G&A

Operating profit does not include interest and taxes

Question 4

Operation-costing system

Answer 4

applies costs to batches of similar, but not identical products. Blends characteristics of job-order and process costing systems.

Question 5

Calculate Book Value per Share

Answer 5

(Common Stock + Retained Earnings) / Outstanding Shares

Question 6

Accounting Rate of Return

Answer 6

Net Income / Book Value

Question 7

If a CPA’s client expected a high inflation rate in the future, the CPA would suggest to the client which of the following types of investments?

Precious metals.
Treasury bonds.
Corporate bonds.
Common stock.

Answer 7

Ans. Precious Metals

Precious metals would be expected to perform best when a high degree of inflation is expected.

Question 8

Transaction Logs

Answer 8

Maintain records of changes in data

Question 9

Error Reports

Answer 9

Contain information about transactions that do not meet certain criteria

Question 10

Error Files

Answer 10

contain details of how errors ere resolved

Question 11

Purchase of treasury stock

Answer 11

Decreases the firm’s assets and stockholder’s equity, therefore increasing the firm’s financial leverage