BEC Mnumonics Flashcards
The 5 components COSO’s Framework
CRIME
C-Control Activities: policies & procedures to implement IC
R-Risk Assessment: FS misstated or fraud
I-Information and Communication: Timely & accurate
M-Monitoring: Are IC effective-report deficiencies
E-Control Environment: Tone at the tope - “PHRASED”
4 categories that the ERM framework defines as enterprise objectives?
SORC
S-Strategic: high level goals designed to achieve the mission
O-Operations: Achievement objectives through the effective and efficient use of resources (ROIC> Cost)
R-Reporting: Achievement of reliable reporting
C-Compliance: Ensuring compliance with laws and regulations.
Control environment component are often?
PHRASE P: Philosophy and operating style of management H: Human resources R: Reporting (financial) competencies A: Authority and responsibility S: Structure (organizational) E: Ethical values (and entegrity) D: Directors
Enterprise Risk Management (ERM) includes components that are similar to the components of the Framework but are broader in scope:
IS EAR AIM I: Internal environment (control environment) S: Setting objectives E: Event identificaiton A: assessment of risk R: Risk repsonse A: Activities I: Information and communication M: Monitoring
The Internal Environment component of ERM?
PHRASEDC P: risk management Philosophy H: Human resources standards R: Risk appetite A: Assignment of Authority and responsibility S: organizational Structure E: integrity and Ethical values D: board of Directors C: commitment of Competence
Critical success factors?
FECH
F: Financial (measuring financial results)
E: business process (measuring Efficiency and effectiveness of business process)
C: Customer (measuring the effort that adds to customer satisfaction)
H: learning and growth (leveraging Human resource capabilities)
Cost accounting systems are designed to meet the goal of measuring cost objects or objectives. The most frequent objectives include?
PIE
P - Product costing (inventory and cost of goods manufactured and sold)
I - Income determination (profitability)
E - Efficiency measurements (comparisons to standards)
Conforming and Non-Conforming qualities?
A PIE
Conforming:
A - Appraisal includes the costs incurred (e.g. statistical quality control, inspection and testing) to identify defective products or services
P - Prevention includes the costs incurred (e.g., engineering or training) to prevent the production or delivery of defective products or services.
Non-Conforming:
I - Internal failure is the cost of defective parts or lost production time (e.g., scrap and rework)
E - External failure is the cost of returns and lost customer loyalty due to defective products or services.
Calculating the GDP using the expenditure approach
GICE
G: Government purchases of goods and services
I: Gross private domestic Investment
C: Personal Consumption expenditures
E: Net Exports (exports minus imports)
Calculating the GDP using the income approach:
: I PIRATED
I: Income of proprietors P: Profits of corportations I: Intererst R: Rental income A: Adjustment for net foreign income and misc items T: Taxes E: Employee compensation D: Depreciation
Factors that shift the demand curves:
WRITEN
W: Changes in Wealth
R: Changes in the price of Related goods
I: Changes in consumer Income
T: Changes in consumer Tastes or preference
E: Changes in consumer Expectations
N: Changes in the Number of buyers served by the market
Factors that shift supply curves:
E COST
E: changes in price Expectations of the supplying firm
C: changes in production Costs
O: changes in the price or demand of Other goods
S: changes in Subsidies or taxes
T: changes in production Technologies
The classification of risk?
DUNS
D: Diversifiable Risk
U: Unsystematic Risk (non-market/firm specific)
N: Nondiversifiable Risk
S: Systematic Risk (market)
Responsibility segments?
CRPI
C - Cost SBU
R - Revenue SBU
P - Profit SBU
I - Investment - return on assets (board of directors)
Components of Strategy?
SR ORC
S - Strategic objective, high level goals that support the mission of the organization
R - Related objectives, the specific objectives that permeate the organization in support of strategic objectives.
O - Operations Objectives, efficiency and effectiveness of operations
R - Reporting objectives, relevance, accuracy and timeliness are typically the objectives for reporting.
C - Complianance objectives, ongoing compliance with laws, rules, and regulations.
Financial Scorecard (measures)
pointed ‘AT US’
AT - Accurate & Timely
U - Understandable
S - Specific accountability
The critical success factors, measured by Financial and non-financial features of an organization?
FICA
F - Financial (profit “AT US”)
I - Internal business processes, efficient production
C - Customer satisfaction, market share
A - Advancement of innovation & Human resource development (learning & growth)
The four domains that COBIT defines IT processes that direct the delivery of solutions and services and ensure that directions are followed:
PO AIDS ME: Direct: PO - plan and organize Solution: AI - Acquire and Implement Service: DS - Deliver and Support Ensure direction followed: ME - Monitor and Evaluate
The seven distinct information criteria, COBIT describes as the business requirements for information that satisfy business objectives:
ICE RACE
I-Integrity C-Confidentiality E- Efficiency R- Reliability A- Availability C- Compliance E- Effectiveness
The steps in the systems development life cycle:
A DITTO
A- Analysis D- Design I- Implementation and conversion T- Training T- Testing O- Operations and Maintenance
Leftward shifts in the demand curve will cause supply (national output) to fall at equilibrium. Changes in factos that cause the demand curve to shift left:
TWICE Govt.
Factors Change Shift Output T - Taxes - Increase Left falls W-wealth Decrease Left falls I - Interest Increase Left falls C-consumer confid Decrease Left falls E-exchange rate Increase Left falls Govt Spending Decrease Left falls
Calculate real GDP with multiplier effect?
Multiplier = 1/(1-MPC); change in real GDP= Multiplier x change in spending;
MPC = change in consumption / change in income.
What are the three major production concepts?
(1) total product TP= total amount of output (Q) produced;
(2) marginal product MP = change in total product resulting from a one-unit increase in quantity of an input employed;
(3) average product AP = total product divided by the quantity of an input
What is the process for discounting cash flows?
(1) calculate after-tax cash flows;
(2) add depreciation benefit (depreciation x tax rate);
(3) multiply result by appropriate present value of annuity;
(4) subtract initial cash outflow; Result= Net present value
How do you calculate a firm’s degree of operating leverage?
percentage change in EBIT (earnings before interest and taxes)/percentage change in sales
What is financial leverage?
financial leverage= percentage change in EPS/percentage change in EBIT
How do you calculate combined (Total Leverage)?
percentage change in EPS/percentage change in sales
What is net working capital?
difference between current assets and current liabilities
What is the cash conversion cycle formula?
lower the better; inventory conversion period + receivables collection period - payables deferral period
How do you calculate inventory conversion period?
average inventory/average cost of sales per day (COGS /360)
How do you calculate receivables collection period?
average receivables/average sales per day (sales/360)
How do you calculate payables deferral period?
average payables / averages purchases per day (COGS/360)
How do you calculate # of days of inventory in stock?
360/inventory turnover ratio = ending inventory/COGS x 360
How do you calculate per share valuation?
Price= Dividend/required return
How do you calculate per share valuation with assumed growth?
Current price=Dividend in one year/ (Required return-growth rate)
What is sales volume variance?
(actual sold units minus budgeted sales units) x (sales price minus variable costs)
How do you calculate sales mix variance?
(actual product sales mix ratio minus budgeted product sales mix ratio) x actual sold units x budgeted contribution margin per unit of that product
How do you calculate sales quantity variance?
(actual sold units of product minus budgeted sales units of product) x budgeted product sales mix ratio x budgeted contribution margin per unit of that product
How do you calculate market size variance?
(actual market size in units minus expected size in units) x budgeted market share x budgeted contribution margin per unit (weighted average)
How do you calculate market share variance?
(actual market share minus budgeted market share) x actual industry units x budgeted contribution margin per unit (weighted average)
How do you calculate selling price variance (or sales revenue flexible budget variance)?
(actual selling price per unit minus budgeted sales price per unit) x actual sold units
How do you calculate contribution margin ratio?
ntribution margin / revenue
Under the equation format, how do you calculate DM price variance?
actual quantity purchased x (actual price minus standard price)
Under the equation format, how do you calculate DM quantity usage variance?
standard price x (actual quantity used minus standard quantity allowed)
Under the equation format, how do you calculate DL rate variance?
actual hours worked x (actual rate minus standard rate)
Under the equation format, how do you calculate DL efficiency variance?
standard rate x (actual hours worked minus standard hours allowed)
Direct labor and direct materials variances.
Direct labor and direct materials variances. The mnemonics are PURE, SAD, and DADS.
P-DA
U-DS
R-DA
E-DS
P = Price variance U = Usage variance R = Rate variance E = Efficiency variance
Standard less Actual = Difference (SAD)
For the SAD mnemonic a positive difference is good and a negative difference is bad (ie standard price is greater than actual means you saved money, hence a positive number is a good variance).
DA = Difference times Actual DS = Difference times Standard
Margin of Safety ?
= Sales – Breakeven even sales
OR Breakeven% x sales
Qick ratio (Acid test)?
= (cash and equivalents + marketable securities + accounts receivable) / current liabilities
Inventory valuation under FIFO method?
- WIP BFN x % complete
+ 2. unit completed (transferred out)
- 3. Beginning inventory
+ 4. % complete of ending
