MARKET AND RISK ANALYSIS

Question 1

Contribution ratio formula

Answer 1

Contribution margin / revenue

Question 2

What approach does not segregate fixed and variable costs

Answer 2

Absorption

Question 3

Selling,general & administrative expenses(SGA) are period costs under

Answer 3

Contribution Approach(Variable)
Absorption Approach

Question 4

Looking at Absorption Approach and Contribution Approach, which one is required by GAAP

Answer 4

Absorption Approach

Question 5

A graph of a series of successive observations of a procedure taken at regular intervals of time is a(n)

Answer 5

Control Chart

Question 6

A chart that indicates how frequently each particular defect occurs is a

Answer 6

Pareto diagram.

Question 7

A just-in-time system is also known as a(n)

Answer 7

demand-pull system

Question 8

The minimum annual acceptable rate of return on an investment is the

Answer 8

hurdle rate.

Question 9

The net present value is expressed

Answer 9

in dollar

Question 10

The net present value method captures

Answer 10

future growth.

Question 11

If a responsibility center manager has influence over a cost, it is called

Answer 11

a controllable cost.

Question 12

defined as the state in which output is produced 100% of the time

Answer 12

Theoretical capacity

Question 13

performed by companies to determine the output quantity and other variables that should be used to maximize profits.

Answer 13

Cost-volume-profit analysis

Question 14

should seek to eliminate bottlenecks in its production activities in order to maximize throughput.

Answer 14

Theory of constraints

Question 15

firms from developed nations can generally effectively compete on the other three aspects listed: -

Answer 15

product and process quality, customer service, and technology.

Question 16

Returns to scale only occur in

Answer 16

long run since a change in scale represents a change in fixed costs -

Question 17

the following items would decrease the cash flow attributable to a potential investment project?

Answer 17

A higher tax rate

Question 18

The security market line (SML) graphs the relationship between

Answer 18

Expected return and systematic risk (beta)

Question 19

The equation for the SML is the

Answer 19

capital asset pricing model (CAPM).

Question 20

The number of days between the time a firm acquires raw materials or inventory until it collects cash from the sale of its finished goods is called the

Answer 20

Operating cycle

Question 21

an attempt should be made to segregate what three functions? -

Answer 21

Programming, operations and the data library

Question 22

A provision in a bond contract that requires the issuer to retire a set percentage of the bond issue each year is referred to as a

Answer 22

Sinking fund

Question 23

If interest rates rise, what will happen to the price of a bond and its yield to maturity (YTM)?

Answer 23

Price decreases and YTM increases

Question 24

allow the customer to borrow from the bank if necessary, but do not guarantee payment to the supplier.

Answer 24

Lines of credit

Question 25

include all of the policies and procedures used within a system to help ensure that all management directives are performed as anticipated

Answer 25

Control activities

Question 26

Transfer pricing strategies is designed to

Answer 26

to maximize the profits of the company as a whole.

Question 27

adjusts theoretical capacity for the expected output for the current year only

Answer 27

Expected annual capacity

Question 28

What is meant by information and communication?

Answer 28

The identification, capture, and exchange of data in a format and time to allow proper tasks and responsibilities to be performed

Question 29

A working capital technique, which delays the outflow of cash is

Answer 29

Draft

Question 30

Investors are likely to view a high price earning P/E ratio as an indication that:

Answer 30

Earnings have growth potential

Question 31

Transactions that would increase the current ratio and decrease net profit

Answer 31

Vacant land is sold for less than the NBV

Question 32

The overall cost of capital is the

Answer 32

Rate of return on assets that covers the costs associated with the funds employed

Question 33

If the NPV of a project is positive, it would indicate that

Answer 33

Rate of Return for this project is greater than the discount percentage rate used in the NPV computation

Question 34

In equipment-replacement decisions, the decision making process is NOT affect by

Answer 34

Original FMV of the old equipment

Question 35

Represent routine transactions that remain unpaid at the end of an accounting period as a result of transaction timing

Answer 35

Accrual

Question 36

Accruals are another common form of

Answer 36

Short-term credit

Question 37

The lower the carrying cost of inventory

Answer 37

the more inventory companies are willing to carry

Question 38

Carrying Costs would include

Answer 38

1. Storage Costs
2. Insurance Cost
3. Opportunity cost of inventory investment
4. Lost inventory due to obsolescence or spoilage