Me Flashcards
1
Q
Restricted stock
A
forces managers to think long term
2
Q
Clawback rules
A
require executives to pay back incentive compensation when there is an accounting restatement
3
Q
Control baselines
A
Establishing a starting point that includes a supported understanding of the existing internal control system
4
Q
Black swan analysis
A
evaluate negative events that were unforeseen to determine why
5
Q
Residual risk
A
residual after management’s response
6
Q
Prime facie creditibility
A
the origin of paper documents is easier to determine
7
Q
evidence of approvals
A
paper documents show approvals more obviously
8
Q
Circumvention benefit of IT
A
controls are difficult to circumvent when programmed properly, and exception sare unikely to be permitted
9
Q
Microcomputers
A
personal computers designed for use by a single individual, including desktops and laptops
10
Q
Magnetic tape
A
sequential accesss of data
11
Q
magnetic disks
A
random access to data
12
Q
Utility
A
programs are used for sorts, merges, and other routine functions to maintain and improve the efficiency of a computer system
13
Q
object program
A
in a form the machine understands
14
Q
Decisison support system
A
Combines models and data to help in problem solving but with extensive user interpretation needed
15
Q
COBIT
A
a framework for integrating IT with business strategy and governance
16
Q
Applicaiton controls relate to:
A
data input
data processing
data output
17
Q
when size of the market increases
A
positive demand curve shift
18
Q
Price elasticity
A
percent change in demand / percent change in price
19
Q
income elasticity
A
percentage change in quantity demanded / percent change in income
20
Q
cross-elasticity
A
percentage change in demand for product x / percentage chang ein product Y
21
Q
Price celing causes
A
shortage
22
Q
price floor causes
A
surplus
23
Q
Return to scale
A
percent increase in output / percent increase in input
24
Q
Interest rate effect
A
price inflation causes an increase in interest rates
25
International purchasing power effect
domestic price inflation makes domestic goods and services more expensive relative to foreign goods and services
26
GDP Deplator
utilizes the total production of the economy as measured by GDP and is used to convert GDP to real GDP
27
Phillips curve
trade off between inflation and the unemployment rate
28
Increase in GDP:
Change in spendning / marginal propensity to save
29
Panic
a severe contraction of GDP occurring within a very short time frame
30
industrial production
coincident indicator
31
average prime rate
lagging indicator
32
stock market prices
leading indicator
33
This represents the time period during which people are unemployed as a result of changing jobs or newly entering the workforce
frictional
34
Potential workers whose job skills do not match the needs of the workforce as a result of changing demand for goods and services of technological advances that reduce or eliminate the need for the skills they possess
structural
35
cyclical
the unemployment caused by variations in the business cycle
36
Real interest rate
the rate adjusted for inflation
37
FED has 3 options for monetary policy
ROD
reserve requirements
open market operations
discount rate
38
absolute advantage
this exists when the country can produce the goods at a lower cost thatn the other country
39
comparative advantage
this exists when the cost of producing those goods relative to the cost of producing other goods is lower in that country than in the other country
40
International trade restrictions effect on foreign users
positive: their supply curve shifts to the right as their producers will have to do more selling in their own market
41
Balance of trade
difference between goods exported and goods imported
exports higher =\> trade surplus
imports higher =\> deficit
42
Balance of payments
combined surplus or deficit from the current and capital accounts
43
official reserve account
total of gold and foreign currency held by the nation
44
The currency of the country that is a net exporter =\>
will rise in value
45
the currency in the nation with higher interest rates =\>
will rise in value
46
Gordon eqution: total return =
current dividend rate + annual rate of dividend increase
47
Arthmetic average returns
the result of adding different returns and dividing by number of periods
48
Geometric average returns
consistent return that would grow to the same final result
49
standard deviation
most common measure of investment risk
measure of volatility of an investment
50
Determining standard deviation
dtermine average
difference from average for each period
square differences
determine average of differences
take square root of average of differences
51
Concentration of credit risk
the credit risk associated with lending to a small number of borrowers or borrowers with common sector risks. This is an unsystemtaic risk that can be elimitaed through adequate diversifacition of loan portfolios
52
Normal yield curve
an upward- sloping curve with rates rising as time gets longer
53
inverted yield curve
downward curve with rates on long-term loans being longer
54
Basis risk
the risk that the index used in connection with a derivative hedge willl not fluctuate by the sam eamount as the contract or asset that is being hedged
55
Fair value hedge
changes are reported in earnings
56
cash flow hedge
changes in fair value are reported in other comprehsneive income
57
Interest rate swaps are usually valued using:
the zero-coupon method
58
Accounting rate of return =
increase in accounting net income / investment
59
accounting rate of return does not consider:
time value of money
60
Sensitivity analysis
used to evaluate results of decisions under various conditions
61
Operating leases
off balance sheet
62
capital leases
shift risk of ownerhsip from lessor to lessee
63
Inventory conversion period
average inventory / cost of sales per day
64
receivables collection period
average receivables / credit sales per day
65
speculative balances
funds to take advantage of special business opportunities
66
precautionary balances
amounts tha tmay be needed in emergency situations
67
speculative balances
funds to take advantage of special business oportunities
68
precautionary balances
amount that may be needed in emergency situations
69
concentration banking
customers pay to local branches instead of main offices
70
treasury bills
\< 1 year
71
Treasury notes
1-10 years
72
Treasury bonds
10 years
73
Money market rund
shares in a mutual fund that invests in instruments with an average mautiry under 90 days and which generally maintains a stable value for investors
74
reorder point =
average daily demand x average lead time
75
safety stock =
maximum daily demand x maximum lead time - reorder point
76
backflush approach
all mfg. costs charged to cost of goods sold
costs allocated from COGS to inventories at reporting dates
77
pledged receivables
loans is obtained with the receivables offered as collateral for the loan
78
Eurobonds
bonds denominated in U.S. dollars can be sold on the European exchanges
79
Debentures
unsecured bonds
80
Income onds
bonds whose interest payments will be made only out of earnings of the corporation
81
serial bonds
principal repayment will occur in installments
82
Redeemable bonds
the bondholder may be able to demand repayment of the bonds in advance of the normal maturity date should certain events occur
83
Callable bonds
The borrowing firm may force the bondholders to redeem the bonds before their normal maturity date
84
Floating rate bond
The interest payment is not fixed but fluctuates with some general index of interest rates
85
Registered bond
The bondholder's name is registered with the firm, and interst payments are sent directly to the registered owner
86
Operating leverage
the degree to which a firm has built fixed costs into its operations
87
Degree of operating leverage =
% change in operating income / % change in unit volume
88
Degree of financial leverage =
% change in earnings per share / % change in earnings before interest and taxes
89
CAPM
volatility of stock price relative to average stock
90
Horizontal merger
when a firm acquires another in the same line of business
91
Vertical merger
when a firm acquires another in the same supply chain
92
conglomerate merger
when a firm acquires another in an unrelated line of business
93
Market multiple method
The current earnings of the company multiplied by the price-earnings raito that is appropriate to that company
94
Economic value added
Net operating profit after taxes - cost of financing
Cost of financing = (assets - liabilities) x weighted-average cost of capital
95
Lean manufacturing
shorten time by eliminating waste
96
Theory of constraints
increase throughoupt margin by decreasing investment and operating costs
97
Workflow analysis
Focus on eliminating non-value- added activities
98
Return on equity
Net income / average stockholdrs'equity
99
Fixed asset turnover =
Sales / average net fixed assets
100
Total asset turnover =
sales / average total assets
101
Times interest earned ratio =
earnings before interest and taxes / interest expense
102
Price/earnings ratio
common stock price per share / earnings per share
103
Market capitalization
Common stock price per share x common stock shares outstanding
104
Market/book ratio
common stock price per share / book value per share
105
Functional benchmarking
industry averages
106
ISO 9000 series
focus on quality of products and services provided by firms
107
ISO 14000 series
standards focused on pollution reduction and other environmental goals
108
Kaizen
Japanese art of continuous improvement
109
Effective project management: Four basic elements
Resources
Time
Money
Scope
110
Gantt chart
Bar chart that illustrates the scheduled start and finish of elements of a project over time
111
Direct labor is:
both prime and conversion cost
112
Job order costing
DM, DL, and MOH applied charged to WIP
Used when units are relatively expensive and costs can be identified to units or batches
113
Scrap
Generally charged to cost of goods manufactured
114
Absorption costing
used for financial statements
115
Variable costing
used for internal purposes only
116
Difference between absorption and variable costing =
change in inventory x fixed overhead per unit
117
Static budget
budget as specific level of activity
118
master budget
static budget for company as a whole
119
Material price variance =
Act qty x (std pr - act price)
ASA
120
Material usage variance =
Std pr x (std qty - act qty)
SSA
121
Labor rate variance =
Actual qty x (std rate - actual rate)
ASA
122
Labor efficiency variance =
Standard rate x (standard hrs - actual hours)
123
Overhead volume variance =
Std hours x POHR
- budgeted fixed OH
= OVV
124
Overhead efficieny variance =
std hours x POHR
- act hours x POHR
125
Transfer from cost center to profit center
generally use standard variable cost
126
Relative sales value =
sales value - separable costs
127
Profit based on sales price:
Sales price
Cost: 100% - Profit %
Gross profit: profit %
128
Profit based on cost
Sals price: 100% + Profit %
Cost: 100%
Gross profit: profit %
129
CSA can be facilitated through:
surveys or team meetings
130
CSA works best to evaluate:
soft controls
131
audit committee oversees the hiring and performance
of external auditor
132
audit committee is composed of:
members of the board
133
what should be separated?
asset custody
record keeping
internal audit
audhtorization
134
cost of capital
cost of debt and various equity components
135
what variance is the most worrisome
sales volume variance
136
business process re-engineering
focusing only radical changes to achieve breakthroughs
focus on critical business processes
137
The valuation approach that is similar to the economic substitution principle is the _______ approach.
cost
138
Employee training programs would be part of which element of the ERM framework?
internal environment
139
