Q: 41-80 Flashcards
What is the present value of two payments of 100 each (at the end of year one and at the end of year two), considering a discount rate of 10%?
A
1/(1+0,1) * 100 + 1/(1+0,1)2*100 ≈ 174
B
100/(1+0,2)2 ≈ 69,44
C
100-10%100+100-10%100 =180
D
100+100 = 200
Question:
What is the present value of two payments of 100 each (at the end of year one and at the end of year two), considering a discount rate of 10%?
Correct Answer:
A)
1/(1+0,1) * 100 + 1/(1+0,1)2*100 ≈ 174
A scenario analysis can typically include a worst case, a probable case and a best case scenario. T True F False
True
You are thinking of hiring a student as a junior consultant. The relevant cost (i.e. the costs that will occur due to the recruitment) is 500 000 SEK. You develop an expected value for the possible revenues that the junior consultant can attain. Calculate the expected value of hiring the student given the follwing probabilities: Probability Revenues 10% 0 40% 400 000 50% 600 000 A 500 000
B
- 500 000
C
+ 40 000
D
- 40 000
E
Never hire a student!
Explanation:
- 500 000 + 10%0+40%400 000+ 50%*600 000 = -500 000 + 0 + 160 000 + 300 000 = -40 000
A firm has to have a budget according to law. This is true for all European countries.
True
False
False
Explanation:
In some countries, like Sweden, the public sector has to have a budget. Still, this is not true for firms. The ways in which the firm controls and allocates its resources is up to the management (and owners) to decide.
Net Present Value is a method of investment appraisal based on the present value of relevant cashflows (both inflows and outflows) of an investment. T True F False
True
Materiality is a qualitative characteristic for accounting and it suggests that only information that is significant should be reported. T True F False
True
One way to see the balanced scorecard (BSC) is that it focuses on balancing the interests of the organization's stakeholders. T True F False
False
Explanation:
The BSC is a management tool in which financial and non-financial measures are used as a means to implement strategy. If the strategy is to avoid balancing interests, then the BSC is a vehicle to not balancing interests.
Shareholder value is… [choose one or many]
A
… typically understood as maximizing the returns for the shareholders.
B
… can be measured by the sales number
C
… can be measured by the change of the net present value of the firm
D
… builds on an idea that the employees should be influenced (by e.g control measures) to act in the shareholders interest.
E
… is the law.
Correct Answers
… builds on an idea that the employees should be influenced (by e.g control measures) to act in the shareholders interest.
… can be measured by the change of the net present value of the firm.
.. typically understood as maximizing the returns for the shareholders.
Because shareholder value is about a long period it makes no sense to think of the profit of one year as a good measure for shareholder value. T True F False
True
The concept of an "economic profit" suggests that a business, to make economic sense, must exceed the required returns of investors. T True F False
True
One of the risks of full cost pricing (i.e. cost-plus pricing) is that the charging of overheads might be wrong and that, therefor, the price might be “too low” or “too high”.
True
False
Correct Answer:
True
Explanation:
One reason is that the charging of indirect costs (overheads) tries to transform indirect costs to direct costs and this transformation might be done on - what might be - the wrong method. As an example, some products might demand much less effort from the administration and might be charged too much costs for the administration.
The shirt firm uses cost-plus pricing. Habitually they multiply the variable costs by 250%. The firm buys shirts for 40 and sells them for 100 and thus the contribution margin ratio (CMR) is 60%. If they increase the price with 20% (to 120), how much less (in percent of the volume) will they have to sell to achieve the same absolute contribution?
25% LESS
This can be calculated as (60%/(20%+60%))-1 = 0,75-1 => The volume can be decreased by 25%.
One can check this by e.g. presuming a break-even at a volume of 100 before the price change. This suggests that the fixed costs (FC)are 6 000 because the contribution margin (CM) per shirt is 60 (100-40) and the total contribution margin (TCM) = 6 000 (60*100)
(0 = 60*100-FC)
With the price change we do not know the volume, but we know the FC so our equation looks like this:
0 = TCM (CM*Volume - FC) and CM = 80 (120-40) => = 0= 80X - 6000 => X=6000/80=75
This means that we need to sell 75 (25% less) to reach break even if we increase the price with 20% to 120 with a new CM of 80.
0 = CMvolume - FC => 8075-6000
Negative contribution margin it will loose money
True
False
True
It is fair to place BSC as a part of the efforts to carry out strategic accounting. T True F False
True
If the liabilities (debts) are 60 and the equity (capital) is 40, then…
A the assets are 20 B the assets are 100 C the debt/equity ratio is 1.5 D the debt equity ratio is 40% E ROA is 100%
C
D
It is said that the employees are the most important assets of the firm, but the accounting value of them, in a normal firm, is 0 in the balance sheet.
True
