Day 24 Flashcards

1
Q

Specifying objectives falls under which principle?

A

Risk Assessment

MCQ-00502

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2
Q

Policy and procedure deployment falls under which principle?

A

Existing Control Activities

MCQ-00502

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3
Q

Equation: CAPM

A

E = R + Beta(M - R)

MCQ-03386

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4
Q

Three elements needed to estimate the cost of Equity Capital

A
  1. Current dividends per share (D)
  2. Expected growth rate (g)
  3. Current market price per share of Common Stock (P)

MCQ-03920

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5
Q

Internal Controls Acronyms - 17 Principles

A

CRIME

  • EBOCA
  • SAFR
  • OIE
  • SOD
  • CATP
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6
Q

Define: Lagging Economic Indicator

A

Tend to follow economic activity, or occur as a result of economic activity

EX:
1. Average duration of unemployment
2. Prime rate charged by banks
3. Consumer price index for services

MCQ-07816

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7
Q

Examples of Leading Economic Indicators:

A
  1. Price changes of materials
  2. Building permits for residential properties
  3. Orders for goods
  4. Average NEW Unemployment claims
  5. Average length of the workweek
  6. Money Supply (M2)

Note: Manufacturing and Trade Sales = Coincident Indicators

MCQ-07858

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8
Q

Factors That Shift Demand Curves:

A

WRITEN

- Wealth ↑, D↑ shift right
- Related Goods (Substitutes Price ↑, D ↑ & Complements Price↑, D↓)
- Income ↑, D↑
- Tastes
- Expectations P in future↑, buy now D↑
- Number of Buyers↑, D↑

MCQ-07836

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9
Q

What would cause the demand curve for a normal good to shift to the left?

A

The price of a substitute good decreases

MCQ-07833

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10
Q

A change in price of a product will result in ______

A

A change in the quantity demanded (movement along the demand curve) NOT a shift in demand

MCQ-07833

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11
Q

Elasticity = 0.0

A

Perfectly inelastic - Quantity demanded stays the same no matter how the price changes
- Demand Curves are Vertical

Ex: Pharmaceuticals - Insulin for Diabetics

MCQ-07859

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12
Q

Elasticity > 1.0

greater than 1.0

A

Demand = Elastic

As Price↑, Qty. D↓ and Revenue↓ - VERY SENSITIVE

MCQ-07859

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13
Q

Elasticity < 1.0

less than 1

A

Demand = Inelastic

*As Price↑, Qty. D↑ and Revenue↑

MCQ-07859

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14
Q

Effect on Equilibrium Quantity: D↑, S↑

A

D↑ Q↑, Increase S↑ Q↑

MCQ-07834

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15
Q

Effect on Equilibrium Quantity: D↑, S↓

A

D↑ Q↑, Indeterminate S↓ Q↓

MCQ-07834

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16
Q

Effect on Equilibrium Quantity: D↓, S↓

A

D↓ Q↓, Decrease S↓ Q↓

MCQ-07834

17
Q

Effect on Equilibrium Quantity: D↓, S↑

A

D↓ Q↓, Indeterminates S↑ Q↑

MCQ-07834

18
Q

When are profits maximized for Transfer Pricing?

A

When the company selling the good has a lower tax rate than the purchasing company

MCQ-08980

19
Q

What are the characteristics of Total Quality Mgmt (TQM)

A
  1. Customer Needs
  2. Continuous Improvement
  3. Quality Circles

MCQ-06790

20
Q

Equation: Economic Value Added

A

Economic Value Added = Net Operating Profit After Taxes (NOPAT) - Required Return

  • NOPAT = EBIT × (1 - Tax Rate)
  • Required Return = Investment × WACC

MCQ-04818

21
Q

Equation: The Net Present Value

A

NPV = Discounted After-Tax Cash Flows - Initial Investment

MCQ-04983

22
Q

Equation: Annual Operating Cash Flows (OCF)

A

Annual OCF = Pretax Cash Flow × (1 - Tax Rate) + (Depreciation × Tax Rate)

MCQ-08558

23
Q

Equation: The Cost of Debt After-Tax

A

The Cost of Debt After-Tax = Interest Rate × (1 - Tax Rate)

MCQ-07800