Exam 2 Flashcards
Which of the following cannot be used as an INPUT in a tornado chart
Constraints
an institutional advantage of building a simulation model is that
makes and shares explicit assumptions that decision makers use for planning
if a firms discount rate is 10%, and NPV is 1000, then the IRR of the same cash flow should be
> 10%
which type of NPV calculation model creates a larger standard distriubutionsince its cash flows and variability are linked to eachother per year than calculated separately
Addititive Random Walk Model
Tornado chart is useful for initial investigation of sensitivities to suggest the order in which we should be concerned with the
Inputs
cash streams provided by steady customers are assets that organizations should manage just like any other asset” is the underlying principle of
CLV models
which of the following can be used to predict financial measures into the future
Historical Data, input from management about the industry, and subjective estimates of uniform or triangular assumptions
What is the primary function of tornado charts
executing preliminary, deterministic sensitivity analysis of any spreadsheet cell to its precedent
Sensitivity analysis obtains its results by
performing a statistical analysis fo the relationship between randomly generated inputs and outputs
a common size income statement serves what purpose that a normal income statement does not
identifies which percentages are stable and which are variable over time
Deterministic Versions of a pro forma have long been used to answer which of the following questions
“what if” questions about the impact of the bottom line of managerial decisions
the intent of modeling financial statements is to project financial measures into the future for this purpose
help make informed decisions about the the activities that result in these matters
Assuming tex consequences are being considered, which of the following would be relevant
variable, fixed, and depreciation
Sunk Costs
costs that have occurred in the past or are committed for the future and are irrelevant to decision making
Which of the followind do not include opportunity cost
when making the decision to buy equipment new or lease it for a special projcet
Shirts’R’ us question… add all the costs
add 4000/25= 16, DM+VOH+DL= 17… bulk order
which is not a qualitative factor for Shirts’R’Us when thinking about the bulk order
decrease in customer interactions
tom crean, belts
relevant cost $4, inc contribution $1
Define Master Budget
translates organization short term objectives into action steps, while reflecting the organizations operating and financial plans for the upcoming periods
Budgets will allow management to accomplish
I. Manage, work out, and minimize any adverse effects that anticipated problems could have on operations
II. Identify current and potential bottlenecks
III. Assess period performance by analyzing variances between actual and budgeted results
IV. Serve as a communication device through which top managements communicate pan and goals for the period to managers and employees
V. Motivate employees to meet the expected activities and operating results
which factors should be considered for a sales forecasting in a sales budget
I. Credit Policies
II. Competition
III. Advertising
IV. Unfilled Backorders
Define Zero-based budgeting
method requires management to start over every period instead of focusing on changes to the current operating budget
NOT Correct
C. Cash flow from operation activities excludes non-operating activities, like gain/loss on disposition of investment assets
Kaizen budgeting
“cushion effect”
Which of the following reasons explains how it is possible for low-volume customer segments to have a higher average NPV than high-volume customer segments?
The low-volume segment must have a high cost of retention, The high-volume segment must have a high retention rate
Which of the following descriptions best describes Models 1 and 2 (shown below)
c. Model 2 is more likely to experience a negative NPV than Model 1
Which of the following circumstances will not cause the best-fit distribution of a dataset to be invalid or inappropriate?
b. The “eyeball test” is used to measure closeness of fit.
When building a deterministic model, why should you convert historical income statements into common-sized income statements?
a. By looking at the variability of common-size line items, one can gain an understanding of how much influence each line item in a pro-forma statement will have on earnings
Value-at-Risk (VAR) can be used in all of the following circumstances, except:
a. By analysts to determine excessive losses beyond the threshold level
Which of the following action items represents the last step in the simulation modeling process
b. Analyze the forecast statistics and graphics to make decisions about the real problem.
Why did Amanco transition from the use of lead in PVC to a calcium zinc substitute?
a) They believed the environmental leadership would create long-run profits
Amanco’s triple-bottom-line Sustainability Scorecard (SSC) focuses on what three values?
c) Economic, Social, Environmental
What did Amanco use to link the sustainability scorecard to compensation?
a) EVA as the key financial measure, but also included social and environmental metrics
What are the five persepctives of Amanco’s Sustainability Scorecard?
b) Financial, customer, process and technology, environmental and social, human resources
The core customer dimensions should encompass what three objectives?
d) Brand management, innovative and high-margin products, and customer satisfaction
Which of the following is mentioned as a complication in linking Amanco’s Sustainability Scorecard with its compensation system?
a) Little consistency exists across the organization because of different country laws and labor structures
- Which of the following is not a potential problem with the use of marketing through search engines?
b. Household broadband use has grown tremendously over the past five years and continues to grow.
- Which of the following is a Key Performance Indicator (KPI) for deciding how to properly allocate an advertising budget for online searches?
a. Volume of Bookings
b. Cost Per Click
c. Net profit per transaction
- What does SEM stand for?
b. Search Engine Marketing
- Which of the following is not a key factor in determining the success of SEM (according to the client’s POV)?
a. Tim of day the search is done
- If a company wants to quickly sort and highlight key factors in a large amount of data, what is the most efficient way to do it?
a. Pivot Table analysis
- Which of the following was not a reason why Air France decided to employ an SEM campaign?
c. SEM is costly to employ
- What do tornado charts identify for a model?
b. Variables that have the greatest impact
- What does Crystal Ball use to generate the forecast errors?
a. Correlation tool
- Which variables are used in analyzing Customer Lifetime Value, as shown in Charnes Chapter 7?
c. Retention rate and retention cost
- What factors could contribute to low Customer Lifetime Value NPV, as was the case in Charnes Chapter 7 for the LifetimeValue model?
a. Low retention rates
b. High retention cost
- What is the greatest benefit to making a “Common Size” Statement for a deterministic model?
a. To gain a better understanding of variability across each line item
- What is the most preferential set of data to use for a deterministic model?
b. Subjective estimates from subject matter experts
c. Historical data
- What is the preferred method of evaluating long-term investment projects?
d. Relative Analysis
- What is a Sunk Cost?
a. Historical costs that are not affected by any decision
- Which of the following is an example of a Fixed Cost?
a. Salaries
b. Insurances
c. PPE
- Which of the following is an example of a Fixed Cost?
b. Competitive life of an asset
- The _________ is the exact amount of time it takes the firm to recover its initial investment.
d. Payback period
- What do we evaluate in a proper capital budgeting analysis?
b. Incremental cash flow