BEC Formulas Flashcards
1
Q
A
2
Q
A
3
Q
Roxy’s Ice Cream Shoppe sells 100 quarts of chocolate a day at $6 each. If it lowers the price to $3 per quart, it will sell 300 quarts.
Point Method
A
4
Q
Roxy’s Ice Cream Shoppe sells 100 quarts of chocolate a day at $6 each. If it lowers the price to $3 per quart, it will sell 300 quarts.
Midpoint (Arc) Method
A
5
Q
A
6
Q
Explicit Costs
A
Actual cash payments for out-of-pocket costs.
7
Q
Implicit Costs
A
An opportunity cost passed on.
8
Q
Economic Costs
A
Explicit costs + Implicit costs
9
Q
Accounting Profit
A
Sales revenue - Explicit costs
10
Q
Economic Loss
A
Accounting profit - Implicit costs
11
Q
Short Run Costs
A
= Variable costs + Fixed costs
12
Q
Long Run Costs
A
= Variable costs
13
Q
Total Costs
A
= total fixed costs + total variable costs
14
Q
Average Total Costs
A
= average fixed costs + average variable costs
15
Q
Price Index Rate of Inflation
A
16
Q
A
17
Q
A
18
Q
Nominal Interest Rate
A
= Real interest rate + Expected inflation
19
Q
M1 and M2
A
20
Q
A
21
Q
Amount of money banks can potentially create
A
Is approximated by the money multiplier
22
Q
Exchange rates….
A
23
Q
Exchange rates: Cross rate
A
24
Q
Exchange rates: Cross rate
A
25
Required rate of return regarding investment risk
26
Return on an investment
27
Rate of return of an investment %
28
Coefficient of correlation, r
What does the r stand for?
Is a measure of the relative relationship between two variables.
29
Simple regression
30
High-Low Method
A regression line using only the highest and lowest from data.
31
Expected rate of return
32
Standard deviation
33
Coefficient of variation (CV): risk per unit of return
The lower the ratio the better.
34
35
Bonds at a premium are sold for more than par value. Stated rate is higher than the market rate.
36
Bonds at a discount are sold for less than par value. Stated rate is lower than the market rate.
37
Degree of operating leverage (DOL)
38
Degree of financial leverage (DFL)
39
Degree of total leverage (DTL)
40
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42
Required rate of return (cost of common stock)
43
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45
46
Dividend payout ratio
47
Dividend yield ratio
48
Shareholder return
49
Times-interest-earned ratio
50
Total debt ratio
The lowest ratio is the least risky
51
52
53
54
Cost of long-term debt
55
Cost of preferred stock
56
Cost of common equity
57
58
Component Cost of Capital for Common Stock
59
Mortgage Weighted Cost
60
Debentures Weighted Cost
61
WACC
Weighted Average Cost of Capital
62
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64
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66
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68
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70
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72
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74
75
Average AR for Year 4, Year 3, and Year 2 with only info given:
Year 4 = $5,327,000
Year 3 = $5,074,000
Year 2 = $4,832,000
76
Ending AR for Year 4, Year 3, and Year 2 with only info given:
Year 4 = $5,456,000
Year 3 = $5,198,000
Year 2 = $4,950,000
77
Days' Sales in AR for Year 4, Year 3, and Year 2 with given info:
Year 4 = 321
Year 3 = 343
Year 2 = 356
78
79
Four components of total costs
80
81
82
83
84
85
86
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88
89
90
91
92
Effective rate of discounted loans
93
94
Effective rate with compensating balances
95
96
Relevant Cash Flows: After-tax annual cash flows (two ways)
97
Free cash flow
98
99
It ignores the time value of money
100
101
Future value
102
PV - Single amount
103
FV - Single amount
104
Ordinary annuity
Payments at the end of the period
105
Annuity due
Payments at the beginning of the period
106
Net present value (NPV)
Positive - accept the project
Negative - reject the project
107
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113
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120
IRR example:
A company is considering a project that calls for an initial cash outlay of $50,000. The expected net cash inflows from the project are $7,791 for each of 10 years.
What is the IRR of the project?
A. 9%
B. 7%
C. 8%
D. 6%
A. 9%
To determine the IRR:
Comparing the payback period with the PV factors given, a payback period of 6.418 years corresponds with an IRR of 9%.
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127
128
Return on Common Equity (ROCE) example:
Fact Pattern: The information below pertains to Devlin Company.
Assuming there are no preferred stock dividends in arrears, Devlin Company’s return on common equity for the year ended May 31, Year 2, was
A. 10.5%
B. 7.5%
C. 6.3%
D. 7.8%
A. 10.5%
The return on common equity equals income available to common shareholders divided by average common equity. Net income available to common shareholders is $45 [$54 – ($150 par value of preferred stock × 6%)]. Average common equity is $429.5 {[$574 – $150 preferred stock) + ($585 – $150 preferred stock)] ÷ 2}. Thus, the return is 10.5% ($45 ÷ $429.5).
129
130
131
132
133
Similar to Pareto diagrams, but histograms display a continuum for the independent variable.
134
135
136
Direct Materials (DM)
Direct Labor (DL)
137
Direct Labor (DL)
Manufacturing overhead (OH)
138
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140
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142
143
144
Assigns costs to specific units, lots, or batches.
145
Assigns costs to large numbers of homogenous products with costs accumulated by processes, departments, or cost centers.
146
Refines an existing costing system like job-order and process costing.
Indirect costs are assigned to activities then rationally allocated to end products.
147
148
149
Beginning WIP (BWIP)
150
Units started and completed
151
Ending WIP (EWIP)
152
Weighted-average EUP
153
First in, First out (FIFO) EUP
154
First in, First out (FIFO) EUP
155
FIFO cost per EUP
156
Contribution margin per unit (UCM)
157
UCM divided by unit selling price
158
159
160
161
162
Operating income
163
164
165
166
167
168
169
170
171
172
Make-or-Buy Decisions - Opportunity Cost
173
Abbreviations for variance calculations
174
Direct materials price variance
175
Direct materials quantity variance
176
Direct labor rate variance
177
Direct labor efficiency variance
178
Variable overhead (VOH) flexible budget variance
179
VOH over or underapplied
180
VOH spending variance
181
VOH efficiency variance
182
Fixed overhead (FOH) over or underapplied
183
FOH spending variance
184
FOH volume variance
185
186
187
188
189
Sales price variance
190
Sales volume variance
191
Volume
Variety
Velocity
Veracity
192
