Day 42 Flashcards
Define: Discount Rate
Is the rate the Fed charges to banks for borrowing money
If the bank pays lower interest = the banks lend more money = Increases money supply
Factors that shift the demand curve:
WRITEN
- Wealth
- Related Goods
- Income
- Tastes
- Expectations
- Number of buyers
Factors that shift the Supply Curve:
ECOST
- Expectations
- Production Costs
- Other Goods
- Subsidies
- Technology
Equation: Residual Income
= Net Income - Required Return
Required Return = Net Book Value (Equity) × Hurdle Rate
MCQ-06657
Equation: ROA
ROA = Net Income / Total Assets
ROA = Profit Margin × Asset Turnover
Profit Margin = Net Income / Sales
Asset Turnover = Sales / Assets
MCQ-1115
During the CY, strategic business units saw an increase of costs by $2m, revenues increased by $4m, and assets decreased by $1m. What SBUs would receive favorable reviews?
- Revenue SBU
- Profit SBU
- Investment SBU
MCQ-07731
What transaction exposure passes the greatest risk for a country?
Payables dominated in foreign currency when domestic currency falls
Foreign currency appreciates while domestic currency depreciates
MCQ-07848
What method is best suited for evaluating performance of a firms Capital in any given year?
Economic Value Added
= Net Operating Profit After Tax (NOPAT) - Required Return
Required Return = Investment × WACC
EVA uses NOPAT and compares it to the required return for Capital. Each component is calculated on an annual basis so it is good for any year
MCQ-04333
What term represents the residual income that remains after all costs of capital, including equity capital have been deducted?
Economic Value Added
MCQ-05586
Equation: ROE
= (Net Income / Sales) × (Sales / Assets) × (Assets / Equity)
= Net Profit Margin × Asset Turnover × Financial Leverage
MCQ-08378
Equation: Cash Conversion Cycle
= Days in Inventory + Days Sales in AR - Days AP Outstanding
MCQ-07781
Residual Income approach of performance measurement and evaluation is to have a division maximize it’s:
Income in excess of a desired minimum amount
RI is defined as - Income in excess of desired minimum return
MCQ-03447
Using long term debt instead of short term debt to finance inventory purchases will have what effect on the Current Ratio and the Total Debt Ratio?
Increase & Increase
Assume the company has positive equity, so Debt is lower than Assets. So if Debt increases at the same amount of Assets, the % impact on Debt will be larger and the Total Debt will increase
MCQ-07785
Equation: Reorder Point
= Safety Stock + (Lead Time × Sales During Lead Time)
MCQ-07786
Define: Throughput Time
Refers to the units of goods that are produced and sold within a period of time
MCQ-03886
Balanced Scorecard critical success factors:
“FICA”
- Financial
- Internal business processes
- Customer satisfaction
- Advancement of Innovation & HR
MCQ-07758
A good reason to using RI instead of ROI?
Goal congruence is more likely to be promoted by using RI
ROI may cause segments that have high returns to reject investments that lower the segments rate of return
MCQ-04246
Equation: Days Sales in AR
= Ending AR / (Sales / 365)
MCQ-07774
Equation: AR Turnover
= Sales / Avg. AR
Equation: AP Turnover
= COGS / Avg. AP
Equation: Days of AP Outstanding
= Ending AP / (COGS / 365)
