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BEC EXAM > Random Concepts BEC > Flashcards

Random Concepts BEC Flashcards

1
Q

4 “ critical success factors “ in balanced scorecard

A
  1. Learning & growth
  2. Customer satisfaction
  3. Financial
  4. Production (most relevant)
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2
Q

Oligopoly characteristics

A
  1. Few firms
  2. Significant barriers to entry
  3. Differentiated products
  4. Kinked demand curves
  5. Fixed prices
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3
Q

Required rate of return

A

Net book valve (total assets) x hurdle rate (required rate of return)

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4
Q

Residual income formula

A

Net income - required rate of return

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5
Q

Advantages & disadvantages of using debt relative to equity

A

Advantage of using debt:
Interest tax shield - interest costs associated with debt are tax deductible
Debt holders must be paid interest before stockholders receive dividends

Advantage of Equity:
Debt must be paid where dividends are optional if cash is constrained this could be an issue
High debt levels indicate risk to lenders

WACC: tax advantages of debt

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6
Q

Prevention costs

A

Employee training, inspection expenses-pre-production, process redesign, product redesign

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7
Q

Appraisal costs

A

Inspection expenses- post production , laboratory maintenance, product testing

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8
Q

Conformance costs

A

Appraisal & prevention

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9
Q

Internal failure costs

A

Rework, scrap, tooling changes

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10
Q

External failure costs

A

Cost of returning goods, lability claims, warranty costs

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11
Q

Nonconformance costs

A

Internal & external failure costs

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12
Q

If internal rate of return > hurdle rate… Is a project accepted or rejected?

A

Accepted because it will provide positive net returns and a positive net present value

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13
Q

What 3 items does a voucher include?

A
  1. Purchase order
  2. Receiving report
  3. Supplier invoice
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14
Q

3-way match

A

1-Supplier invoice
2-purchase order
3- receiving report

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15
Q

What is risk order of commercial paper, US treasury bills, bankers acceptances, and negotiable CDs ( starting with riskiest)

A
  1. Commercial paper
  2. Bankers acceptances
  3. Negotiable CDs
  4. U.S treasury Bills
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16
Q

Business cycle

A

Expansion, peak, contraction, trough

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17
Q

Effective interest rate

A

Annual interest / Net cash available

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18
Q

Economic value added

A

Excess of income after taxes earned by an investment / cost of capital

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19
Q

How many prison years for altering or destroying documents under Sox

A

20 years

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20
Q

Capital asset pricing model (cost of retained earnings) CAPM formula

A

Risk-free rate + (Beta x (market return- risk free rate))

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21
Q

In order to maximize shareholder wealth, a company should invest in all projects with a net present value…..

A

greater than zero … unless there is a better project, if they have unlimited wealth, all projects with NPV > 0 should be accepted

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22
Q

Price elasticity of demand formula

A

% Change in quantity/ % change in price

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23
Q

Price elasticity > 1

A

Price elastic

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24
Q

Price elasticity < 1

A

Inelastic

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25
Q

SCOR model

A

Source, plan, make, deliver → supply chain analysis

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26
Q

Relevant cost

A

Does it change as a result of selecting different alternatives? If yes, it is relevant

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27
Q

Market capitalization

A

Number of common shares outstanding x FMV per share

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28
Q

Price to earnings ratio

A

Price / earning anticipated for the coming year

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29
Q

SOX requires officers of a corporation include representation in their financial statements that internal control is the responsibility of…

A

The signing officers

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30
Q

Payback period

A

Net initial investment / annual after tax cash flows

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31
Q

Economic order quantity formula

A

Square root of (2x annual sales in units x cost per purchase order / carrying cost per unit)

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32
Q

Beta formula

A

Change in stock value / change in market value

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33
Q

Effective annual interest rate formula

A

1+ stated interest rate / interest periods ^ compounding periods

(For semi annual interest divide stated rate by 2)

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34
Q

Firm specific / non-market / diversifiable risk

A

Unsystematic

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35
Q

Operating leverage

A

Fixed costs / variable costs….allows a small change in sales to produce a larger relative change in profits

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36
Q

Futures contract

A

Designed for specific transactions rather than large groups of transactions

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37
Q

Forward contracts

A

Used for larger groups of transactions (such as large volume accounts recievable)

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38
Q

How many years should auditors retain work papers for

A

7-Years, failure to do so results in fines & imprisonment for not more than 10 years

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39
Q

What is an issuer

A

Public company that Must file their financial statements with the SEC

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40
Q

Audit committee members [may/may not] accept compensation from the issuer for consulting or advisory services

A

May not

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41
Q

Audit committee members [may /may not] be an affiliated person of the issuer (affiliation means having the ability to influence financial decisions)

A

May not

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42
Q

Who does the auditor report to

A

Directly to the audit committee

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43
Q

Who is responsible for resolving disputes between the auditor and management

A

Audit committee

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44
Q

CEO & CFO sign report and assume responsibility for internal controls including WHAT assertions

A

1- Internal controls have been designed to ensure material information has been made available
2- Internal controls have been evaluated within 90 days prior to report
3- Report includes conclusions as to effectiveness of internal controls based on their evaluation

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45
Q

Issuers must disclose whether the issuer has adopted a code of conduct for senior officers, if no code of conduct has been adopted …..

A

Issuer must disclose why

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46
Q

What is a Pareto diagram

A

Represents an individual and cumulative graphical analysis of errors by type. Individual errors are represented on a histogram (bar graph) and cumulative errors are presented on a line graph. It is used to prioritize process improvement efforts

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47
Q

Asset turnover ratio

A

Net Sales / average total assets

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48
Q

The ability of an organization to withstand impact of large - scale events refers to what

A

Organizational sustainability

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49
Q

Six sigma

A

Quality improvement program that uses metrics to evaluate the achievement of goals ( such as reducing rate of defective products )

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50
Q

Theory of constraints

A

Organizations are impeded from achieving objectives by the existence of One or more constraints

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51
Q

Direct materials price variance

A

Actual quantity purchased x (actual price - standard price)

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52
Q

Direct materials quantity usage variance

A

Standard price x (actual quantity used - standard quantity allowed )

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53
Q

Direct labor rate variance

A

Actual hours worked x (actual rate - standard rate )

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54
Q

Direct labor efficiency variance

A

Standard rate x (actual hours worked- standard hours allowed)

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55
Q

VOH rate (spending) variance

A

VOH rate (spending) variance = actual hours x (actual rate - standard rate)

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56
Q

VOH efficiency variance

A

= standard rate x (actual hours -standard hours allowed for actual production volume)

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57
Q

FOH budget (spending) variance

A

Actual fixed overhead - budgeted fixed overhead

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58
Q

FOH volume variance

A

Budgeted fixed Overhead - standard fixed overhead cost allocated to production**

**based on actual production x standard rate

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59
Q

Sales price variance

A

[Actual SP / Unit - Budgeted SP / Unit] x actual sold units

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60
Q

Sales volume variance

A

[actual sold units - budgeted sales units] x standard contribution Margin per unit

61
Q

Price elasticity of demand formula

A

% Change in quantity demanded/ % change in price

62
Q

Price elasticity of supply formula

A

% Change in quantity supplied / % change in price

63
Q

Cross elasticity of demand (supply)

A

% Change in number of units of x demanded (supplied) / % change in price of y

***substitutes (positive) complementary (negative)

64
Q

Material efficiency variance

A

Standard unit price x ( actual units - standard units)

65
Q

Flow of units in a process cost system

A

Beginning Units in process + units transferred in = units transferred out + ending inventory

66
Q

Cost of goods manufactured formula

A

DM + DL + OVH + beg WIP - end WIP

67
Q

Total current manufacturing costs formula

A

DM + DL + OVH

68
Q

Total manufacturing costs formula

A

DM + DL + OVH + BEG WIP

69
Q

A relevant range is range where relationship between a cost and it’s driver remain valid, within this range, which cost does not change?

A

Total fixed costs

70
Q

Fishbone diagram

A

Describes a process, the contributions to the process, and potential problems that could occur at each phase, the chronological sequence of events is represented by a single horizontal line while the contributions are diagonal

71
Q

Inventory turnover formula

A

Cost of goods sold / average inventory

72
Q

Minimum acceptable selling price

A

Only the incremental costs associated with the order

73
Q

High-low method of budgeting fixed and variable costs

A

Variable costs= difference in highest & lowest production month / difference in number of units produced

74
Q

Net realizable value in joint costing

A

(Selling price per unit x units produced) - SEPARABLE COSTS = NRV (then take percentage out of total NRV

75
Q

Equivalent units of production formula

A

EQU: % complete ending WIP + EQU completed - Completed beginning WIP

76
Q

Cost of preferred stock

A

Cost of preferred stock dividends/ net proceeds of preferred stock

77
Q

4 big data types (V)

A

Volume, velocity, veracity, variety

78
Q

Veracity

A

Veracity represents reliability, quality, or integrity of the data

79
Q

ETL process (IT)

A

Extract, transfer, load

80
Q

Deflation

A

Continuous decline in overall price level

81
Q

Debt to equity ratio

A

Total liabilities / total equity

82
Q

Total debt ratio

A

Total liabilities / total assets

83
Q

Times interest earned ratio

A

EBIT / interest expense

84
Q

Equity multiplier

A

Total assets / total equity

85
Q

Porter’s five forces

A
  1. Barriers to entry
  2. Market competition
  3. Existing substitute products
  4. Bargaining power of customers
  5. Bargaining power of suppliers
86
Q

How many characters should passwords be

A

At least 7 or 8

87
Q

How long in between changing passwords

A

90 days

88
Q

Lock- box system

A

These expedite cash, bank receives payments directly from a companies customers via mailboxes to which the bank has access & they’re deposited into companies account immediately

89
Q

Concentration banking

A

Each store can deposit into a local bank and those balances are immadiately consolidated into one bank or account

90
Q

Letter of Credit

A

Guarantees obligations of a company - usually from a bank

91
Q

To decrease money supply… do you buy or sell government securities

A

Sell… when the feds sell securities the banks buy them which causes the banks to have less money which decreases money supply

92
Q

Consumer price index

A

Measures how much a fixed basket of goods and services purchased by households costs to purchase in each & every year

93
Q

If domestic currency appreciates, it benefits (AR or AP) and harms (AR or AP)

A

Benefits AP & harms AR

94
Q

If domestic currency depreciates, it benefits (AR or AP) and harms AR or AP)

A

Benefits AR and harms AP

95
Q

A futures hedge contract to BUY at a specific price at time PAYABLE is due will mitigate risk of

A

Weakening currency

96
Q

A futures hedge contract to SELL the foreign currency received in satisfaction of receivable at specific price when A/R is due mitigates risk of

A

Strengthening currency

97
Q

WACC usually equals hurdle rate but adjusts for what

A

Risk premium

98
Q

Cost of retained earnings is AKA

A

CAPM

99
Q

Optimal capital structure is highest/lowest WACC

A

Lowest

100
Q

Net income is the numerator for which 3 profitability ratios

A

ROI, ROA, ROE

101
Q

Higher or lower operating leverage better

A

Higher

102
Q

Carrying cost formula (EOQ)

A

Average inventory (inventory / 2) x price

103
Q

Economic order quantity formula

A

Square root of (2 x total sales x fixed costs / carrying cost)

104
Q

Most widely used price multiple when valuing equity securities

A

Price to earnings ratio

105
Q

Ratio used to estimate current stock price

A

Price to sales ratio

106
Q

Black-scholes assumptions

A

1- no dividends paid out during life of option
2- no transaction costs
3- markets are random
4- risk free rate of underlying asset are known and constant

107
Q

Het present value method does not provide

A

True rate of return

108
Q

Profitability index

A

PV of net future cash flows / initial investment …. Projects < 1 are rejected

109
Q

Projects with an IRR > hurdle rate should be

A

ACCEPTED

110
Q

Price to earnings ratio

A

Current price / expecting earnings

111
Q

Internal control is the responsibility of

A

The signing officers

112
Q

CAPM = risk free rate + risk premium … risk premium equals

A

Beta (market- risk free rate)

113
Q

Effective annual interest rate

A

1+ (stated rate/2) ^2

114
Q

PDCA model

A

Plan do check act model with process management IT

115
Q

DSS

A

Provides interactive tools to support day-to-day decision making

116
Q

EIS

A

Provides senior executives with internal & external information to assist in strategic decision making

117
Q

3 word SQL pattern

A

SELECT…. FROM…. WHERE

118
Q

5 steps in à disaster recovery plan

A
  1. Assess risk
  2. Identify mission critical applications and data
  3. Develop a plan for handing mission critical applications and data
  4. Determine responsibilities of personnel involved in disaster recovery
  5. Test disaster recovery plan
119
Q

3 types of divestures

A

Sell-offs, spin offs, equity carve outs

120
Q

Inflation

A

Increase in overall price level

121
Q

Perfect competition characteristics

A

1- many firms
2- no barriers to entry
3- no product differentiation
4- price is set by market
5- perfectly elastic

Strategy: maintain market share and responsiveness of sales price to market conditions

122
Q

Monopolistic competition characteristics

A
  1. Many firms
  2. Low barriers to entry
  3. Some product differentiation
  4. Price is set by market for the most part
  5. Highly elastic

Strategy: maintain market share, enhance product differentiation, allocate resources to advertising and research

123
Q

Monopoly characteristics

A
  1. One firm
  2. No entry is possible
  3. No product differentiation
  4. Total control over price and quantity
  5. Inelastic

Strategy: focus on profitability

124
Q

Examples of perfect competition

A

Milk, paper, coffee shops

125
Q

Examples of monopolistic competition

A

Restaurants, hair salons

126
Q

Oligopoly example

A

Airlines and pharmaceuticals

127
Q

Monopoly example

A

Public utilities ( the Grid)

128
Q

Bridge table is used for which SQL relationship

A

Many to many

129
Q

A row in a relational database Is A

A

Record

130
Q

Product costs are (inventoried or expensed)

A

Inventory

131
Q

Period costs are (inventoried or expensed)

A

Expensed

132
Q

FIFO equivalent units 3 components

A
  1. Completion of units on hand at beginning of period
  2. Units started and completed during the period
  3. Units partially complete at the end of the period
133
Q

Weighted average equivalent unit components (2)

A
  1. Units completed during the period
  2. Units partially complete at the end of the period
134
Q

Normal spoilage is a standard inventory cost, abnormal spoilage is…

A

A period expense

135
Q

Strategic business units (SBU’s) 4 financial measures

A
  1. Cost SBU
  2. Revenue SBU
  3. Profit SBU
  4. Investment SBU
136
Q

Return on investment (ROI) two equations

A
  1. Income/ invested capital
  2. Profit margin x investment turnover
137
Q

What is DuPont model

A

Breaks down ROE into three ratios

  1. Net profit margin
  2. Asset turnover
  3. Financial leverage

Extended DuPont model adds tax and interest

138
Q

Residual income (conceptually)

A

Measures excess of actual income earned by an investment over the target or hurdle rate

139
Q

Residual income formula

A

=Net income - required return

Where required return = net book value (equity) x hurdle rate

140
Q

Economic value added formula

A

= net operating profit after taxes (nopat) - required return

Where required return = investment x WACC

141
Q

Coefficient of correlation (r) measures what

A

The strength of the linear relationship between the independent & dependent variable

(-1 is perfect inverse +1 is perfect direct)

142
Q

If there is an increase in inventory, absorption net income is

A

Greater than variable costing net income

(Because with absorption fixed OVH is inventoried)

143
Q

Margin of safety

A

Excess of sales / breakeven sales

144
Q

Example of cost that is not relevant

A

Sunk cost

145
Q

Special order should be accepted when

A

Selling price per unit > variable cost per unit

146
Q

Master budget order

A
  1. Sales budget
  2. Production budget (DM DL and OVH)
  3. COGS budget
  4. SG&A budget
  5. Capital budget
  6. Financial budget (cash budget and proforma)
147
Q

Variance analysis overhead: debit balance is what and credit balance is what

A

Debit balance → unfavorable & underapplied
Credit balance - favorable & overapplied

148
Q

Variance analysis nuemonic

A

SAD
Price. DA
Usage. DS
Rate. DA
Efficiency. DS

BEC EXAM (3 decks)

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