BEC - Revised Flashcards
How is the effective rate of interest calculated?
How can you arrive at the stated rate by being given the effective rate of interest?
- Add 1 to effective interest rate
- Take the square root
- Subtract 1
- Multiply by the number of compounding periods
What is a key difference between futures and forward contracts?
Futures
Used for specific transaction
Forward
Used for larger group of transactions
How is the P/E ratio calculated?
What are unexpired costs?
Prepaid costs or assets like inventory.
How is the direct materials price variance calculated?
How is the direct materials quantity usage variance calculated?
How is the direct labor price variance calculated?
How is the direct labor efficiency variance calculated?
How is the fixed overhead volume variance calculated?
What causes shortages or surpluses as an effect of government intervention?
Max price set below equilibrium (price ceiling) creates shortages.
Minimum price set above equilibrium (price floor) creates surpluses.
How is the cost of retained earnings calculated using the CAPM method?
What is the difference between financial and operating leverage?
Operating leverage
Degree of fixed costs to variable cost in operating structure
Financial leverage
Degree of debt to equity in capital structure
What is the economic order quantity (EOQ)?
How is it calculated?
Order size that minimizes order and carrying costs.
How is the cost of retained earnings calculated using the DCF method?
How is the cost of retained earnings calculated using the BYRP method?
How is the present value of an ordinary annuity calculated?
How is the present value of a perpetuity calculated?
How can you determine the current value of a stock using the Dividend Growth Model (DGM)?
How is the PEG ratio calculated?
How can you determine the current value of a stock using the PEG ratio?
What is internal rate of return (IRR)?
The discount rate where NPV is equal to 0.
Present value of after-tax cash flows = Initial net investment
How is cash conversion cycle calculated?
What is residual income?
Net income in excess of the required rate of return.
