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BEC > Becker > Flashcards

Becker Flashcards

0
Q

Calculation for economic value added

A

Cost of investment x capital=required return

Income after required economic taxes - return=value added

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1
Q

Compute calculation of net cash outflow at beginning of 1st year

A 
Initial investment
\+shipping
\+installation
\+training
\+increase in working capital
-cash proceeds on sale of old (net of tax)
=net initial outflow
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2
Q

Calculation for expected cost savings

A

1) budgeted cost of sales/current inventory turnover=current average inventory
2) budgeted cost of sales/expected inventory turnover=expected average inventory
3) current average inventory - expected average inventory=inventory increase/decrease
4) inventory increased/decrease x interest rate=cost savings

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3
Q

Calculation for margin of safety percentage

A

Margin of safety in dollars/total sales

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4
Q

Calculation for margin of safety (in dollars)

A

Total sales (in dollars) - break even sales ( in dollars)

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5
Q

Formulas for return on investment

A

Income/investment capital
Or
Profit margin x investment turnover

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6
Q

Calculation for APR of quick payment discount

A

Disc % x 365/(100-disc%) x (pay period-disc period)

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7
Q

Overhead variances

A

Actual vs. Budget on actual hours

Budget on actual hours vs. Budget on standard hours

Budget on standard hours vs. Overhead applied

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8
Q

What are the 4 strategic business units?

A

Cost
Revenue
Profit
Investment

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9
Q

What are the 4 designs for financial scorecards

A

“AT US”

Accurate, timely, understandable, specific accountability

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10
Q

Calculation for market size variance

A

Actual market size - Expected market size x budgeted marketed share% x budgeted CM (weighted average)

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11
Q

Calculation for sales price variance

A

(Actual SP/Unit - Budgeted SP/Unit) x actual sold units

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12
Q

Calculation for sales volume variance

A

Actual sold units - Budgeted sales x CM

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13
Q

Calculation for profit margin?

Investment turnover?

A

Income/sales

Sales/invested capital

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14
Q

Formula for bond yield plus risk premium (BYRP) for cost of retained earnings

A

KDT(pretax cost of long-term debt) + PMR(risk premium)

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15
Q

Formula for cost of retained earnings

A

kre=krf + [bi x (km - krf)]

krf=risk free rate
Bi=beta
Km=market rate
Krf=risk free rate

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16
Q

What are the formula notations for the following
Risk free rate?
Risk premium?

A

Krf

Stocks beta coefficient ( bi) x the market risk premium (PMR)

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17
Q

What are the 3 methods of computing cost of retained earnings (kre)

A

Capital asset pricing model
Discounted cash flow
Bond yield plus risk premium

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18
Q

Calculation for return on assets

A

Net income / average total assets

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19
Q

Formula for dividend per share expected at the end of one year: D1

A

D0 x (1+g)

Annual stock dividend

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20
Q

Formula for cost of retained earnings using discounted cash flow

A

(Div1 / P0) + g

Div1=dividend per share expected at end

P0=current market value or price of common stocks

G=constant rate of growth

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21
Q

Formula for cost of preferred stock

A

Preferred stock cash dividends / net proceeds of preferred stocks

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22
Q

What letters express
Cost of preferred stock?
Net proceeds of preferred stocks?
Preferred stock cash dividend?

A

Kps
Nps
Dps

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23
Q

What letters express
Cost of long-term debt?
Pre-tax cost of debts?
After-tax cost of debt?

A

Kdx
Kdt
Kids

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24
Q

Formula for weighted average interest rate

A

Effective annual interest payments / debt cash available

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25
Q

Formula for weighted average cost of capital

A

Cost of equity multiplied by the percentage equity in capital structure + weighted average cost of debt multiplied by the percentage debt in capital structure

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26
Q

Formula for degree of combined leverage

A

% change in EPS / % change in sales

Or

DOL x DFL

27
Q

Formula for degree of financial leverage

A

% change in EPS / % change in EBIT

28
Q

Formula for degree of operating leverage (DOL)

A

% change in EBIT / % change in sales

29
Q

What 2 rates can be used as cost of long-term debt

A

Market rate

Yield to maturity

30
Q

Calculation for net cost of debt

A

Effective interest rate x (1-T)

31
Q

Equation for absorption approach

A

Revenue - cost of goods sold = gross margin - operating expenses = net income

32
Q

Calculation for break even point in units

A

Total fixed costs / contribution margin per unit

33
Q

Contribution approach equation

A

Revenue - variable costs = contribution margin - fixed costs = net income

34
Q

Calculation for number of units to be purchased

A

DM needed + desired ending inventory - beginning inventory

35
Q

Calculation for unit contribution margin

A

Unit sales price - unit variable cost

36
Q

Compute contribution margin ratio

A

Total fixed costs / contribution margin ratio

37
Q

Calculation for sales volume for target profit

A

Sales = fixed cost + profit / contribution margin ratio

38
Q

Calculation for direct materials used

A

Beg. Inventory at cost + purchasing at cost - ending inventory at cost

39
Q

Calculation for cost of goods sold

A

COGM + beginning finished goods - ending finished goods = COGS

40
Q

Comparison for price variance

A

Actual quantity purchased x actual price

Vs.

Actual quantity purchased x standard price

41
Q

Comparison for quantity usage variance

A

Actual quantity used x standard price

Vs.

Standard quantity allowed x standard price

42
Q

Efficiency variance comparison

A

Actual hours x standard rate

Vs.

Standard hours allowed x standard rate

43
Q

Rate variance comparison

A

Actual hours x actual price

Vs.

Actual hours x standard rate

44
Q

What is the formula for total cost

A

Fixed cost + (VC per unit x volume)

45
Q

Formula for budgeted production

A

Budgeted sales + desired ending inventory - beginning inventory = budgeted production

46
Q

Calculation for contribution margin ratio

A

Contribution margin / revenue

47
Q

How is the application of overhead accomplished

A

Calculate overhead rate: budgeted overhead costs / estimated cost driver

Applied overhead = standard cost driver for actual level of activity x overhead rate ( step 1 )

48
Q

What is the 3 way variance

A

Spending
Efficiency
Volume

49
Q

When production is greater than sales, is profit higher in absorption costing or variable costing? Sales greater than production?

A

Absorption costing

Variable costing

50
Q

Y=
X=
A=
B=

A

Dependent variable
Independent variable
Y - intercept
Slope

51
Q

How is fixed factory overhead treated in absorption approach? Contribution approach?

A

Product cost

Period cost

52
Q

If y was total costs, what would x be? A? B?

A

Total activity (or output)

Total fixed costs

Change in total costs due to a one unit change in output ( variable cost per unit )

53
Q

Computation of target profit before tax based on the target profit after tax

A

Target profit after tax / (1- tax rate)

54
Q

Computation for target cost

A

Market price - required profit

55
Q

Steps to compute difference between absorption and variable net income

A

1) compute fixed cost per unit ( fixed man overhead / units produced )
2) compute change in income ( change I’m inventory units x fixed cost per unit )
3) determine the impact of the change in income

56
Q

Calculation for discounted annual depreciation tax shield

A

1) depreciable cost / useful life
2) depreciation expense x tax rate
3) amount depreciation tax shield x annuity rate

57
Q

Calculation for annual savings needed to make investment

A

PV cash savings / inflows = PV net cash outflows

58
Q

Calculation for after tax present value using discount factor

A

( PV of cash inflow x annuity rate ) - PV of cash outflow x tax rate x annuity rate = after tax PV

59
Q

Calculation for overall discounted cash flow impact

A

Cash flow driver x PV interest factor

60
Q

Calculation for internal rate of return

A

Net incremental investment / net annual cash flows

61
Q

Calculation for payback period

A

Net initial investment / increase in annual net after tax cash flow

62
Q

Calculation for profitability index

A

Present value of net future cash inflow / present value of net initial investment

63
Q

Computation for net present value methods

A

1) calculate after tax cash flows
2) multiply result by appropriate present value of an annuity
3) subtract initial cash outflow

64
Q

Compute net cash flow for the final year for capital budgeting analysis

A

Net cash flow from sales - taxes on net sales + depreciation + salvage value ( net of tax )= net cash flow

65
Q

How to compute after tax cash flows? ( annual operating cash in flow ) step 2

A

1) pre-tax cash inflow x ( 1-tax rate )

+2) depreciation x tax rate

66
Q

Calculation of for asset sale

A

Net proceeds on sale of old ( net of tax ) proceeds on sale - tax paid on gain ( G x T ) + tax saved on loss ( L x T )

BEC (32 decks)

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