Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPA > Need to Know > Flashcards

Need to Know Flashcards

1
Q

How to you calculate GDP expenditure approach?

GDP is includes all final goods and services within our boarders (doesn’t matter who owns the factory).

A

GDP = G + I + C + E

Where:

  • G = Government purchases
  • I = Gross private domestic investment
  • C = Personal consumption expenditures (households)
  • E = Net exports
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a trough (i.e. bottom)?

A
  1. unused productive capacity and an

2. unwillingness to risk new investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is nominal GDP?

A

NOT adjusted for inflation (i.e. changes in the price level)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is real GDP?

A

Has been adjusted for inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How do you calculate Disposable Income (i.e after-tax income received by households)?

A 
GDP 
- depreciation
= Net Domestic Product (NDP)
- indirect business taxes 
- net foreign factor income 
= National Income (NI) 
- soc sec contributions 
- corp income taxes 
- undistributed corp profits 
\+ transfer payments 
= Personal Income (PI)
- personal taxes
= Disposal Income (DI)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are examples of leading economic indictors?

A
  1. weekly unemployment claims
  2. new orders for consumer goods
  3. average work week
  4. building permits
  5. stock prices
  6. money supply (tight or easy?)
  7. vendor on-time deliveries
  8. new orders for capital goods
  9. long-term vs. short-term interest rate differences
  10. consumer expectations (happy or conservative?)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are examples of lagging indictors? changes after economy starts a pattern and confirms where we are moving.

A
  1. average duration of unemployment
  2. corporate profits
  3. labor cost per unit of output
  4. average prime rate
  5. changes in CPI for services
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is GDP exclude?

A

Excludes:

  1. 2nd hand sales b/c nothing produced in current yr
  2. financial transactions (i.e. soc sec, welfare, etc.)
  3. illegal drugs and tips
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How do you calculate the rate of inflation?

A

(new CIP less old CIP) divided by old CPI = %

If CIP rises from 176.0 to 179.5
= (179.5 - 176.0) = 3.5 / 176.0 = 0.0198 = 1.98%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the formula for break even aka cost-volume-profit (CVP)?

A

Sales
- Variable Costs
- Fixed Costs
= Profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the Rate of Return also called?

A

Discount Rate

Cost of Capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the Cost-Volume-Profit also called?

A

Break even

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the annual cost of credit if the cash discount is not taken?

2/10, net 30 for 360-day year

A 
Pretend $100 invoice
= $100 invoice x 2% discount = $2.00
= $100 invoice - $2 discount = $98
= $2 divided by $98 = 2.041% for 20 days (30-10)
= 360 days divided by 20 days = 18 days
= 18 x 2.041% = 36.738%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is Cost of Capital also called?

A

Interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How do you calculate Economic Order Quantity?
EOQ = Square root of 2AD/K
A = Annual unit demand = 100,000 lbs raw material
D = Cost per order = $35 variable cost only (ignore FC)
K = Cost of carrying one unit per year = Handling costs + Interest
Material cost = $12 per lb
Handling & storage costs = 20% of the per lb cost
Cost of capital = 15%

A

Cost of carrying one unit per year = Handling + Interest
Handling = 20% x $12 = $2.40
Interest = 15% x $12 = $1.80
= Carrying costs = $2.40 + 1.80 = $4.20

= 2 x 100,000 units x $35 variable costs = 7,000,000
=7,000,000 divided by $4.20 carrying cost = 1,666,666
=square root is 1,291

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What percentage represents the firm’s cost of common equity?
The stock selling for $85.
The next annual dividend is expected to be $4.25 expected to grow at a rate of 7%.
The corporate tax rate is 30% (ignore this b/c dividends are not tax deductible)

A

Cost of common equity aka Rate of Return = (Dividend ÷ Price) + Growth percentage
= ($4.25 dividend ÷ $85 value) + 7% growth = 12%

17
Q

Delete

A

Delete

18
Q

What’s the formula for quick (acid-test) ratio?

A

quick assets divided by current liabilities

Quick assets include cash, marketable securities, and accounts receivable, but exclude inventory and prepaid expenses.

Quick liabilities include accounts payable and short-term note payable.

19
Q

What is the required return on an investment?

A

Risk-free return + premium

risk-free return (return on a totally risk-free investment such as U.S. government bonds) plus any required risk premium associated with the particular investment. Riskier investments require a greater risk premium.

20
Q

What’s the acid-test ratio?

Aka quick ratio

A

= Cash + Cash equivalents + Net receivables + Marketable securities
divided by Current liabilities

quick ratio = quick assets divided by current liabilities. Quick assets include cash, marketable securities, and accounts receivable, but exclude inventory and prepaid expenses.

21
Q

Which inventory management approaches orders at the point where carrying costs equate nearest to restocking costs in order to minimize total inventory cost?

A

Economic order quantity (EOQ) is the quantity of inventory that should be ordered at one time in order to minimize the associated costs of carrying and ordering inventory, such as purchase-order processing, transportation, and insurance. Carrying costs increase as the size of the order increases. Setup or ordering costs, however, decrease as the size of the production run or order increases.

22
Q

What is the current ratio?

What is the quick ratio?

A

Current ratio = Current assets / Current liabilities
= (Cash + Accounts receivable + Trading securities + Inventory) / (Accounts payable + Accrued liabilities)

quick ratio [(Cash + Marketable securities + Net accounts receivable) ÷ Current liabilities]

23
Q

Return on common equity Formula

A

preferred x % cumulative = Preferred stock dividend

Net income less preferred stock dividend

(beg bal + end bal) / 2 = Average common stockholders’ equity

Net income / Ave common stock - ROE

24
Q

Breakeven in units formula

Breakeven plus Desired net income per month

A

selling less variable costs = Contribution margin

Fixed costs / contribution margin = Breakeven

(Fixed costs + Desired Income) / contribution margin = breakeven units for desired income

Breakeven (step 1) - Breakeven for Desired (step 2) = units

25
Q

How do you calculate COGS?

How do you calculate Inventory Turnover?

How do you calculate # days sales in inventory?

A

Sales - Gross Profit = COGS

COGS / Average Inventory = Inventory Turnover

360 days / Inventory Turnover = # days sales in inventory

26
Q

How do you calculate A/R Turnover?

How do you calculate A/R Collection Period?

A

Net sales / average accounts receivable = A/R Turnover

365 days / A/R Turnover = A/R Collection Period

CPA (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions