BEC - Superfast CPA Flashcards

Question 1

Q

BEC - Superfast CPA

how often does an internal audit activity need to be assessed externally?

Answer

A

every five years.

Question 2

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BEC - Superfast CPA

what are the primary themes associated with internal audit attribute standards

Answer

A

(1) Purpose, Authority, and Responsibility; (2) Independence and Objectivity; (3) Proficiency and Due Professional Care; and (4) Quality Assurance and Improvement Program.

Question 3

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BEC - Superfast CPA

the 7 primary themes of the performance standards:

Answer

A

(1) Managing the Internal Audit Activity; (2) Nature of Work; (3) Engagement Planning; (4) Performing the Engagement; (5) Communicating Results; (6) Monitoring Progress; and (7) Resolution of Senior Management’s Acceptance of Risks.

Question 4

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BEC - Superfast CPA

in a conventional graph, the ‘intercept’ is the point at which:

Answer

A

the dependent variable intersects the Y axis, and where the independent variable has the lowest value, usually zero

Question 5

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BEC - Superfast CPA

elasticity of supply?

Answer

A

%change in quantity supplied/%change in price

Question 6

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BEC - Superfast CPA

what is elasticity of demand?

Answer

A

the % change in quantity is greater than the % change in price

Question 7

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BEC - Superfast CPA

how do you prevent deflation?

Answer

A

you increase the money supply by lowering the reserve requirement, or lowering interest rates which stimulates demand and increases the general price level

Question 8

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BEC - Superfast CPA

what does an import quota do?

Answer

A

it restricts the quantity of a commodity that can be brought into the country from foreign providers. The biggest beneficiary is the domestic suppliers of the commodity.

Question 9

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BEC - Superfast CPA

3 generic strategies by Michael Porter?

Answer

A

cost leadership, differentiation, and focus

Question 10

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BEC - Superfast CPA

which framework is for gauging the attractiveness of the competitive environment of an industry?

Answer

A

five forces

Question 11

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BEC - Superfast CPA

what analysis method is for evaluating a macro-environment?

Answer

A

PEST analysis: political, economic, social, and technological characteristics

Question 12

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BEC - Superfast CPA

what are the five forces?

Answer

A

1-threat of new competition entering the market2-threat of substitute goods or services3-bargaining power of buyers of the industry good or service4-bargaining power of suppliers of the inputs used in the industry5-intensity of rivalry

Question 13

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BEC - Superfast CPA

what does SWOT stand for?

Answer

A

strengths and weaknesses of the entity, and the opportunities and threats faced by the entity

Question 14

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BEC - Superfast CPA

how is weighted avg cost of capital calculated?

Answer

A

the required rate of return on each source of capital weighted by the proportion of total capital provided by each source and then those amounts are summed.debt:30%x(10% 1-30% tax rate)=2.1%CS: 60%x12%= 7.2%PS: 10%x10%= 1%WACC= 10.3%

Question 15

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BEC - Superfast CPA

what is a compensating balance and how is the effective interest rate calculated?

Answer

A

an amount the borrower has to maintain in an account with a lender.the effective int rate is the cost of borrowing divided by the funds available for use.If the interest each year is 40,000 and the only amount you can actually use is 400,000, then the effective rate is 10%.

Question 16

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BEC - Superfast CPA

how is the required rate of return calculated?

Answer

A

risk free rate + Beta(expected rate - risk free rate)

Question 17

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BEC - Superfast CPA

basic approach to capitalize earnings to determine value of business?

Answer

A

annual earnings / required rate of return.

Question 18

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BEC - Superfast CPA

what is a time series model?

Answer

A

models based on extrapolation of past data to predict a future value

Question 19

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BEC - Superfast CPA

delphi method?

Answer

A

form of qualitative forecasting that involves consensus of a group of experts using a multi-stage process to converge on a forecast.

Question 20

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BEC - Superfast CPA

diff in quantitative & qualitative forecasting?

Answer

A

quantitative is objective and rely on math and calculations. qualitative are subjective and rely on judgement and opinion

Question 21

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BEC - Superfast CPA

what is the profitability index approach?

Answer

A

the relative economic ranking of projects by taking into account the cost & net present value of projects

Question 22

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BEC - Superfast CPA

average accounting rate of return?

Answer

A

avg annual after tax net income / avg cost of investment.the avg cost of investment is the beg book value + ending bv then divided by 2.

Question 23

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BEC - Superfast CPA

formula for calculating the profitability index of a project?

Answer

A

present value of annual after tax cash flows / original cash invested in the project

Question 24

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BEC - Superfast CPA

NASDAQ requires all companies have audit committees composed entirely of:

Answer

A

Independent directors who are also financially literate

Question 25

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BEC - Superfast CPA

can board of directors change the articles of incorporation?

Answer

A

no, only stockholders can do that

Question 26

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BEC - Superfast CPA

the purchase and sale of commodities for current delivery is what:

Answer

A

the spot market. the futures market is for delivery in the future

Question 27

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BEC - Superfast CPA

what is a specialist on the NYSE?

Answer

A

a NYSE member acting as a dealer in a small number of securities

Question 28

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BEC - Superfast CPA

what is a call option?

Answer

A

the right to purchase a security at a specified price for a defined period of time.

Question 29

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BEC - Superfast CPA

what factors make up the nominal risk free rate?

Answer

A

the real rate of interest and an inflation premium

Question 30

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BEC - Superfast CPA

if the Fed reserve purchases a large number of US gov securities, what is the effect?

Answer

A

it increases the monetary supply and puts downward pressure on interest rates

Question 31

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BEC - Superfast CPA

what is a put option?

Answer

A

it lets you sell a stock at a certain price for a period of time.

Question 32

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BEC - Superfast CPA

what is transfer pricing?

Answer

A

the pricing strategy for products and services bought and sold across international borders between related parties. it is mainly part of tax planning.

Question 33

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BEC - Superfast CPA

capital structure refers to:

Answer

A

all long-term debt and equity

Question 34

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BEC - Superfast CPA

the market price of a bond is the present value of the principal amount plus:

Answer

A

the present value of future interest payments at the market rate of interest

Question 35

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BEC - Superfast CPA

cost of capital for newly issued preferred stock?

Answer

A

net proceeds per share / annual costs40 sales price less 5 issuance costs = 35.if par value is 20, @9% int. payments are 1.80calculation is 1.8/35=5.1%

Question 36

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BEC - Superfast CPA

what is the CAPM formula?

Answer

A

Expected return= RF + B(RM-RF)RF means risk free rate.B means betaRM means return on market

Question 37

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BEC - Superfast CPA

between 2 investments with the same expected return, choose the one with:

Answer

A

lower projected standard deviation

Question 38

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BEC - Superfast CPA

between 2 investments with different expected returns and standard deviations, choose the one with:

Answer

A

lower coefficient of variation

Question 39

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BEC - Superfast CPA

What is NPV?

Answer

A

net present value is the present values of future cash flows less the cost of the investment. If the NPV is above zero then it’s a good investment.

Question 40

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BEC - Superfast CPA

How do you calculate NPV?

Answer

A

it’s the present value of future cash flows discounted to present value using the COST OF CAPITAL

Question 41

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BEC - Superfast CPA

what is the basic FV calculation?

Answer

A

FV= current amount x(1+i)^nor1,000 times(1+0.1)^5

Question 42

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BEC - Superfast CPA

what is the rule of 72?

Answer

A

a very close estimate for seeing how long it takes for an investment to double. You just divide 72 by the interest rate. If the interest rate is 8% you divide 72/8=9

Question 43

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BEC - Superfast CPA

what does the security market line(SML) graph?

Answer

A

the relationship between expected return and risk as measured by the beta coefficient

Question 44

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BEC - Superfast CPA

How to calculate the benefit cost (profitability) index?

Answer

A

present value of cash flows / net investment. an index greater than 1 means the project is acceptable

Question 45

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BEC - Superfast CPA

what does the equivalent annual annuity(EAA) technique evaluate?

Answer

A

projects that have different durations(lives)

Question 46

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BEC - Superfast CPA

times interest earned calculation?

Answer

A

Earnings before interest and taxes / interest expenseThis is telling you how many times you earned your interest during the period

Question 47

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BEC - Superfast CPA

cash conversion cycle?

Answer

A

period beg with paying cash for inventory and ending with the collection of cash from the sale of products made with that inventory

Question 48

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BEC - Superfast CPA

what is underwriting?

Answer

A

investment bank buys an entire offering then tries to sell it to the public at a profit

Question 49

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BEC - Superfast CPA

least expensive long-term source of capital?

Answer

A

long term debt because interest is tax deductible and debt is repaid first so it has less risk

Question 50

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BEC - Superfast CPA

formula to determine the cost of common stock:

Answer

A

next period’s dividend / proceeds such as 2/50 which equals 4%. then you add this to the firms growth rate in dividends. If growth rate the cost of common stock would be 7+4 for 11%

Question 51

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BEC - Superfast CPA

what are the chronological events in the dividend payment process?

Answer

A

1-declaration date when board approves dividend2-ex dividend date is first date you buy stock without being entitled to the dividend3-date of record is date you must own shares by to receive dividend4-payment date is when checks are mailed

Question 52

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BEC - Superfast CPA

how is financial leverage calculated?

Answer

A

It is calculated by taking the percentage increase in earnings per share which is then divided by the percentage increase in earnings before interest and taxes. Here, earnings per share starts as $4.00 and increases by $2.00, a 50 percent increase. Earnings before interest and taxes starts as $300,000 and increases by $60,000, only a 20 percent increase. Therefore, the degree of financial leverage is 50 percent divided by 20 percent or 2.5.

Question 53

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BEC - Superfast CPA

what are the 4 reasons to hold cash?

Answer

A

transactions to meet day to day cash outflows, compensating balances required by banks, precautionary balances to meet unexpected events, and speculative balances to take advantage of opportunities

Question 54

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BEC - Superfast CPA

cash conversion cycle?

Answer

A

age of inventory + age of receivables - age of payables

Question 55

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BEC - Superfast CPA

4 parts of a company’s credit policy?

Answer

A

(1) Credit period–when the payment is due; (2) Credit standards–criteria as to which customers are granted credit; (3) Collection policy–enforcement of the collection process; and, (4) Discount–reductions offered to speed up payments.

Question 56

Q

BEC - Superfast CPA

Your supplier gives you credit terms of 2/10 net 30. This means that if you pay within 10 days you take a 2% discount. If not, the balance is due in full within 30 days. What is the annual percentage cost to you of not taking the discount and paying on the 30th day?

Answer

A

Your choice is to pay $.98 on the dollar on day 10 or $1 on day 30. The extra cost is .02/.98 or .0204081. You save 20 days (30-10) by paying later. To annualize the cost take 365 days and divide by the days saved. 365/20=18.25 and multiply this by the .0204081 percent cost: (.0204081) (18.25) = 37.24%

Question 57

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BEC - Superfast CPA

A manufacturer of single engine aircraft operates 365 days per year and produces 3,650 aircraft per year. Its engine supplier takes 5 days from the time an order is placed to deliver engines. Assuming the manufacturer does not wish to carry a safety stock, at what level of engine inventory should they place an order (reorder point) for new engines to ensure that production is not interrupted?

Answer

A

Economic Order Quantity points (EOQ) tells you how many engines to order at one time. It is determined by taking the square root of the following result: 2 times annual demand (1,600 units) times the cost of placing an order ($50) divided by the cost of carrying a unit for a year ($1). So, (2 x 1,600 x 50) or 160,000. That is then divided by $1 so that it stays 160,000. The square root of 160,000 is 400. That is the number of units that should always be ordered. Because 1,600 are needed, the orders of 400 are placed four times per year.

Question 58

Q

BEC - Superfast CPA

A manufacturer of single engine aircraft operates 365 days per year and produces 3,650 aircraft per year. Its engine supplier takes 5 days from the time an order is placed to deliver engines. Assuming the manufacturer does not wish to carry a safety stock, at what level of engine inventory should they place an order (reorder point) for new engines to ensure that production is not interrupted?

Answer

A

In the absence of a safety stock, reorder point is equal to daily usage times the time it takes for a supplier to deliver. Daily usage is 3,650/365 or 10 x 5 days to deliver (lead time) is equal to 50 engines as a reorder point.

Question 59

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BEC - Superfast CPA

average days sales in inventory?

Answer

A

360 / inventory turnoverinventory turnover= COGS/ Avg inventory

Question 60

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BEC - Superfast CPA

What does a TPS do?

Answer

A

it supports the day to day activities of a business such as purchasing goods, sales to customers, and payroll

Question 61

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BEC - Superfast CPA

ROI calculation?

Answer

A

net income / avg investment

Question 62

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BEC - Superfast CPA

alternate ROI calculation?

Answer

A

asset turnover x profit margin on sales

Question 63

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BEC - Superfast CPA

what is the dupont ROA?

Answer

A

(net income/net sales) x (net sales/avg total assets)

Question 64

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BEC - Superfast CPA

asset turnover?

Answer

A

sales / assets

Answer 65

A

systematic risk because it deals with the macro environment

Answer 66

A

designs systems, prepares specifications for programmers, and serves as intermediary between users and programmers

Answer 67

A

a parity check

Answer 68

A

difference between your actual or expected profitability and the break even point

Answer 69

A

the floor is opportunity cost plus costs of outlay. the ceiling is the market price

Answer 70

A

set prices based on what you think customers are willing to pay based on perceived value

Answer 71

A

net operating profit after taxes less cost of capital

Answer 72

A

deflation discourages borrowing because people want to borrow money in times of inflation because you can repay it with money with less purchasing power

Answer 73

A

decrease. and vice versa

Answer 74

A

dividing estimated overhead costs(both variable and fixed) by a budgeted or estimated quantity of a cost driver. Example: total overhead costs of 75,000 divided by 20,000 budgeted direct labor hours for a overhead application rate of 3.75 per direct labor hour

Answer 75

A

direct labor + overhead

Answer 76

A

normal spoilage is a manufacturing cost because it’s an inherent part of production, so it is included in finished goods.Abnormal spoilage is treated as a period cost.If total units completed are 5500 with 5000 being saleable, 200 being normal spoilage, and 300 being abnormal spoilage, then 5200 is included in finished goods. so 5200/5500 times the total cost:(5200/5500)*99,000=93,600 which is what will be debited to finished goods

Answer 77

A

total costs y=a+b(x)y=total costsa=fixed costsb=variable cost per unitx=number of kilos,etcb is change in costs divided by change in kilos, or (y2-y1)/(x2-x1)

Answer 78

A

primary storage, a control unit, and an arithmetic/logic unit

Answer 79

A

temporary main memory portion of the CPU which is part RAM part ROM. Secondary storage consists of devices external to the CPU such as disks, flash drives, & hard drives

Answer 80

A

must be translated into machine language by an assemblereasier to write programs in than machine languageit’s an efficient form of second gen language

Answer 81

A

3rd gen language that concentrates on the procedures and functions of the programs. written in source code then translated into object code. source code is more similar to english but object code is the machine language for the type of computer. FORTRAN, COBOL, and BASIC are all forms of procedural languages

Answer 82

A

Job control language initiates programs, specifies priorities and running sequences, and which databases are used and which files are used

Answer 83

A

sales budget is first, then production budget, budgeted income statement then budgeted balance sheet

Answer 84

A

assigns all 3 factors(direct material, direct labor, and both fixed and variable manufacturing overhead) to inventory

Answer 85

A

assigns only variable manufacturing costs to inventory- which means variable manufacturing overhead

Answer 86

A

percentage of variation in the dependent variable explained by the variation in the independent variables

Answer 87

A

x is the independent variable, and y is the dependent variable.

Answer 88

A

The overhead efficiency variance is the difference between actual direct labor hours worked, and the standard quantity of hours allowed for actual production, times the variable overhead rate per hour.

Answer 89

A

The overhead volume variance equals the difference between the master budget for fixed overhead and applied fixed overhead. The variance has one cause only: producing a number of units different from that specified in the master budget.

Answer 90

A

The labor efficiency variance is the difference between actual direct labor hours worked, and the standard quantity of hours allowed for actual production, times the direct labor wage rate per hour.

Answer 91

A

This variance is the difference between the actual quantity of material used, and the standard quantity allowed for the output achieved, times the standard price of material.

Answer 92

A

The spending variance for variable overhead is the difference between the actual overhead and the budgeted overhead based on actual direct labor hours. The spending variance for fixed overhead is the difference between the actual overhead and the master budget for fixed overhead. Neither variance is affected by the denominator used for allocating fixed overhead.

Answer 93

A

the total difference in cost of two alternatives.

Answer 94

A

Residual income = operating income - required rate of return (invested capital)

Answer 95

A

max amount of time an activity can be delayed without delaying the entire project

Answer 96

A

systems development and data processing

Answer 97

A

the control group.

Answer 98

A

data flow diagramssystem flowchartsentity relationship diagrams

Answer 99

A

AICPA’s Trust Services provides assurance on systems.

Answer 100

A

programming, operations, and the library

Answer 101

A

Web coordinator

Answer 102

A

Control activities include all of the policies and procedures used within a sytem to help ensure that all management directives are performed as anticipated. Each system is supposed to perform designated tasks. Control activities are installed to ensure those tasks get accomplished efficiently and effectively.

Answer 103

A

(1) input validity - where input data be approved and reflect accurate economic events (2) input completeness - all valid events are captured (3) input accuracy - all events are captured correctly (4) update completeness - all events are reflected in respective master files (5) update accuracy - all events are reflected correctly within master file.

Answer 104

A

Segregation controls, backup and recovery, contingency processing, file protection rings and internal and external labels represent methods to control computer operations. Segregation controls represent controlling access to programs and data.

Answer 105

A

1) security, 2) availability, 3) processing integrity, 4) online privacy, and 5) confidentiality.

Answer 106

A

applications, which include systems and manual procedures to process information; the information itself; infrastructure, which includes hardware, equipment, and operating systems needed to process information; and people.

Answer 107

A

1) plan and organize, 2) acquire and implement, 3) deliver and support, and 4) monitor and evaluate. Abbreviated, these components are referred to as: Plan, Build, Run, and Monitor.

Answer 108

A

The Information Systems Audit and Control Association (ISACA)

Answer 109

A

present value of cash inflows minus the net investment

Answer 110

A

the specific discount rate that makes the present value of the inflows equal to the net investment and forces the NPV to be equal to zero

Answer 111

A

market value of the firm minus the book value of the capital investment in the firm

Answer 112

A

net operating profit after taxes minus the firm’s cost of capital in dollar terms

Answer 113

A

net income divided by total assets

Answer 114

A

net income divided by total equity

Answer 115

A

net income plus interest divided by average total invested capital. invested capital is just interest bearing debt plus owners equity

Answer 116

A

financial, customer, internal processes, and learning & growth

Answer 117

A

the current level of performance should be determined (baseline performance), a designated performance rate or a designated improvement rate should be set (targets), and actions needed to achieve those targets should be designated (strategic initiatives)

Answer 118

A

net operating profit after taxes (NOPAT), add in depreciation expense, then subtract money set aside for capital expenditures and any need for increasing working capital

Answer 119

A

net credit sales / avg acc receivable

Answer 120

A

COGS divided by 365. Then divide avg inventory by the first number.

Answer 121

A

1) analyzing the investment and financing alternatives available to a firm, 2) forecasting the future consequences for each of the alternatives, 3) deciding which alternatives to undertake, 4) measuring subsequent performance against established goals. Measuring the subsequent performance is the final step in that process.

Answer 122

A

1) design, 2) modeling (which involves simulation of the process), 3) execution (including training of personnel and testing of the process), 4) monitoring, and 5) optimization.

Answer 123

A

a bar chart or histogram that ranks the causes of variations in a process from most to least frequent, which is intended to indicate their effects on quality

Answer 124

A

measures deviations from process standards, a fishbone diagram identifies causes of defects and their effects

Answer 125

A

project initiation, project planning, project execution, project monitoring and control, and project closure

Answer 126

A

a planning and control system that measures the cost of significant activities, identifies non value-added cost, and identifies activities.

Answer 127

A

level of activity where fixed costs remain fixed

Answer 128

A

Theoretical capacity assumes output is produced 100% of the time. Practical capacity adjusts theoretical capacity for non-production time such as holidays and maintenance shutdowns.

Answer 129

A

Actual overhead costs were less than expected and/or production was higher than expected.Overhead is applied based on a calculated rate per unit. This calculated rates uses estimate overhead costs divided by an estimated activity level. If either the estimated overhead is higher than the actual overhead or the estimated activity level is lower than the actual activity level, overhead can be overapplied.

Answer 130

A

actual rate paid minus standard hourly rate times the total hours worked

Answer 131

A

number of hours worked less hours supposed to have been worked times the standard rate

Answer 132

A

diff of total price paid and total price should have paid for the same amount

Answer 133

A

It is the difference between the actual overhead spending and the budgeted overhead spending.

Answer 134

A

the cost of capital for DEBT must be computed net of the tax benefit provided by the deductibility of the interest expense

Answer 135

A

cost of borrowing / funds available for useIf you have 500,000 at 8% interest that equals 40,000 in interest expense. but if you can only use 400,000, then the calculation is 40k/400k for an effective rate of 10%, not 8%

Answer 136

A

attribute standards describe the characteristics of organizations and people who perform internal audit services.performance standards describe internal auditing and identify the quality criteria applicable to the performance of the internal audit services

Answer 137

A

10% and 30% of sanctions imposed

Answer 138

A

it is negative. the lower the price, the greater quantity demanded

Answer 139

A

potential GDP exceeds real GDP. This means that the economy is operating at less than full capacity- which implies unemployment and under-utilized plant and equipment

Answer 140

A

germany and china- each about 9%

Answer 141

A

approximately 25%

Answer 142

A

cyclical- the other 3 types can exist and still have “full employment”

Answer 143

A

the selling price of the commodity. A supply curve is basically saying that as price increases, more sellers would enter the market and more of the good would be supplied

Answer 144

A

automatically correct a lack of equilibrium in the balance of payments

Answer 145

A

Reduce tax rates. The Fed Reserve does not change tax rates. This would stimulate the economy, but tax rates are set by Congress, not the Fed. The Fed could reduce the reserve requirement, reduce the discount rate which would increase loan activity, and they could increase the money supply.

Answer 146

A

The Fed controls monetary policy(money supply), and Congress controls fiscal policy(gov spending and taxes)

Answer 147

A

change in spending over change in disposable income

Answer 148

A

% of disposable income spent on consumable goods

Answer 149

A

increase the money supply. this stimulates demand and increases the general price level

Answer 150

A

depreciation is NOT reflective of current fixed-asset replacement costs?

Answer 151

A

the relationship between an entity and its environment

Answer 152

A

the nature, operating attractiveness, and probably long-run profitability of a competitive industry

Answer 153

A

economics of scale- or an increasing return to scale.

Answer 154

A

Marginal revenue = marginal cost.

Answer 155

A

one unit of foreign currency. 1 euro to $1.15

Answer 156

A

political, economic, social, and technological

Answer 157

A

E= environmental factorsL= legal factors

Answer 158

A

riskfree rate + beta(expected rate - riskfree rate)

Answer 159

A

financial structure includes all items of liabilities and owners equity, and capital structure includes LONG-TERM liabilities and owners equity.

Answer 160

A

exponential smoothing

Answer 161

A

bonds. less risk to investors so they’re cheaper than equity, and the interest payments are tax deductible

Answer 162

A

an indenture

Answer 163

A

to rank potential investments by taking into account both the time value of money and the initial cost of the project

Answer 164

A

short term, unsecured promissory notes

Answer 165

A

divide present value of annual after tax cash flows by the original cash invested in the project

Answer 166

A

economic value added. it measures economic profit, not accounting profit. NOPAT minus cost of capital

Answer 167

A

dividing accrual based net income by the initial cost of the project

Answer 168

A

electronic data interchange allows companies to place orders with suppliers electronically

Answer 169

A

Value added network- VANs provide the additional security and addressing capabilities necessary to process EDI transactions

Answer 170

A

online real-time systems. periodic snapshots are taken of a master file, and upon detection of a problem, the system reprocesses all transactions that have occurred since the snapshot

Answer 171

A

application programmers

Answer 172

A

halon and other chemical suppressents that dont harm computer hardware

Answer 173

A

authorization

Answer 174

A

the data librarian

Answer 175

A

a data manipulation language (DML)

Answer 176

A

a source code comparison program. this compares an archived program to the program actually in use

Answer 177

A

PaaS is the use of the cloud to create (not access) software

Answer 178

A

market risk. large scale economic events that typically affect all companies

Answer 179

A

decrease fixed costs and increase contribution margin

Answer 180

A

total quality management

Answer 181

A

prevention costsappraisal costsinternal failure costsexternal failure costs

Answer 182

A

create framework and structure, identify the scope of the plan, its key roles, and assign individuals to roles. Understand and evaluate organizational risks. Define alternative methods to ensure delivery of products and services. Strategy for handling crisis incidents. embed plan in organizational culture. educate, train, and make aware.

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BEC - Superfast CPA Flashcards

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