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Financial Acct > Managerial Acct final > Flashcards

Managerial Acct final Flashcards

1
Q

Opportunity costs

A

potential benefit lost by taking specific action when two or more alternative choices are available

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2
Q

sunk costs

A

This arises from a past decision and cannot be avoided or changed. Not relevant to future decisions

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3
Q

out-of-pocket costs

A

requires future outlay of cash and results from results of managements decisions; is relevant in making future decisions

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4
Q

avoidable costs

A

costs or expenses that would not be incurred if the segment is eliminated; also known as relevant costs

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5
Q

unavoidable costs

A

costs or expenses that would continue even if segment is eliminated

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6
Q

IRR

A

rate used to calculate acceptability of an investment. It equals the rate that yields an NPV of 0 for an investment

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7
Q

hurdle rate

A

required rate of return or the cost of capital that the company must pay to long term creditors and shareholders

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8
Q

NPV

A
  1. Applies the time value of money to cash inflows/outflows so management can evaluate a projects benefits and costs at one point in time
  2. decision: If NPV> (or equal to)$0 then asset is expected to recover its cost and provide a return at least as high as that required- INVEST
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9
Q

What methods of capital budgeting take into account the time value of money?

A
  1. NPV and IRR- do take it into account

2. Payback rate, accounting rate of return- DO NOT

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10
Q

horizontal financial analysis

A

Comparison of companys financial conditions and performance across time

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11
Q

vertical fin analysis

A

comparison of companys financial condition and performance to a base amount

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12
Q

common size statements

A

reveal changes in the relative importance of each financial statement item by redefining each in terms of common size percents
(analysis amt/base amt)x100
base amount is total assets
base amount is revenue

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13
Q

ratio analysis

A

measurement of key relations between fin statment items

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14
Q

Generally fixed costs are ____

A

irrelevant

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15
Q

Variable costs are ____

A

relevant

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16
Q

Time has a ____ value, money has a ____ value

A

money, time

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17
Q

Why is capital budgeting is risky?

A
  • outcome is uncertain
  • large amount $ involved
  • Decision is diff to reverse
  • Investment involves a long term commitment
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18
Q

How well are we meeting short-term obligations to get $

A

liquidity/efficiency ratios

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19
Q

Ability to generate $ and meet long term obligations

A

solvency ratio

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20
Q

ability to provide financial rewards to attract and retain financing

A

profitability ratio

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21
Q

ability to generate market expectations

A

market prospects

22
Q

We want high/low accts. recievable when we have a lot of cash

A

low accts recievable- means we converted (a/r) to cash

23
Q

a lot of accounts payable are a

A

Source of cash

24
Q

a little accounts payable are a

A

use of cash

25
Q

If COGS>Sales

A

we have a problem

26
Q

If this ratio is high it suggests a strong liquidity position and an ability to meet current obligations

A

current ratio

27
Q

This reflects short term liquidity; Also measures the ability to use its quick assets to pay its current liabilities.

A

acid test ratio

28
Q

This measures how frequently a company converts receivables to cash

A

a/r turnover- high # is favorable

29
Q

Measure of how quickly a company collects a/r

A

days sales uncollected

30
Q

This is useful for evaluating inventory liquidity

A

days sales in inventory

31
Q

Reflects a company’s ability to use its assets to generate sales and is an important measure of operating efficiency

A

total asset turnover

32
Q

A company’s is considered less risky if there are more/less equity

A

more

33
Q

larger ratio implies less opportunity to expand through use of additional debt financing

A

Debt must be repaid with interest (equity doesn’t) so want more equity than debt; also if economy is bad debt becomes more burdensome

debt to equity ratio

34
Q

The larger the ratio, the less risky the company is for creditors

A

times interest earned

35
Q

This reflects the companys ability to earn NI from sales

A

profit margin

36
Q

shows the percentage of profit a company earns in relation to its overall resources.

A

ROA

The higher the ROA, the better management/ better operating efficiency

37
Q

Measures the companys success in earning income for owners

A

ROE

38
Q

Used as an indicator of market expectations for future growth and risk of a comp’s earnings

A

price-earning ratio

39
Q

used to compare the dividends paying performance of diff. company

A

Dividend yield

40
Q

If avoidable costs>revenue then we should

A

Eliminate segment

41
Q

Diff bw Payback period and breakeven time

A

pbp ignores the time value of money and breakeven doesnt

42
Q

comparison of a company’s Financial condition and performance to a base amount.

A

vertical analysis

43
Q

comparison of a company’s Financial condition and performance across time.

A

horizontal analysis

44
Q

the company’s current performance is compared to its prior performance and its relations between Financial items. Apple’s current net income, for instance, can be compared with its prior Year’s net income and in relation to its revenues or total assets.

A

intercompany

45
Q

provide standards of comparisons.

A

competitors

46
Q

published industry statistics provide standards of comparison (Available from servers like Dun & Bradstreet, Standard & Poor’s, and Moody’s).

A

industry

47
Q

standards of comparisons developed from experience.

A

guidelines

48
Q

The time value of money concept states

A

that a dollar received today is more valuable than a dollar received at some point in the future. The reason is that someone who agrees to receive payment at a later date foregoes the ability to invest that cash right now

49
Q

Internal vs external users use financial information for

A

i: provide strategic information / strategic and operating decisions to improve the company’s efficiency and effectiveness.
e: pursuing their own goals

50
Q

the minimum acceptable rate of return for an investment decisions is called

A

hurdle rate of return

51
Q

a disadvantage of using the payback period to compare investment alternatives is that it

A

ignores cash flows beyond the payback period

Financial Acct (7 decks)

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