Test Questions I dont Know Flashcards
If something has a high price elasticity of demand, what does it say abaout the product
that it is/has a lot of substitutes, meaning a change in price will greatly affect the demand.
this is contrasted by inelastic demand of things like insulin where price wont effect the demand because they NEED it.
What is an advantasge to ERP systems?
very flexibile and aids in the decision making process
How do you find the net cost of debt
It is the effetive interest rate LESS the taxes
Effective Interet rate * (1 - Tax Rate)
How would you go about finding return on investment
Net income / Investment
Most cases it is net income divided by the average assets (Average year 1 and 2)
How would you describe the elasticity of insulin
it is perfectly inelastic….a dead ass veritcal line in relation to price
Margin of Safety Forumla
Current Sales - Breakeven Sales
Breakeven Sales can be found by doing Fixed costs / CM Ratio
The NPV method of budgeting operates under the assumption of reinvetment at what rate?
the discount rate actually used in the analysis
Risk appetite has been exceeded when
liklihood of negative events significantly exceed the reisdual risk
A depreciation tax shield is essentially what
a decrease in income taxes
Does ABC deal with short term or long term? and what about variable/fixed costs
ABC has to do with long term stuff, and the fixed costs become variable cost
When doing weighted average cost of capital what component is adjusted for tax
you need to find the after tax cost of debt which is cost of debt * (1 - Tax Rate)
What decreases inflation
decrease demand and increase supply
Effective ANNUAL interest rate equation
AND
Effective Interest Rate
AND
How to find Annual Percentage Rate
(1+((Stated Rate / # periods)^Number of periods) -1
gives Eff. Annual IR
AND THEN
Interest Paid per period including costs / Net proceeds
=Effective interest rate
AND THEN
Find effective periodic rate by doing (Interst paid per period / Available funds of loan) = %
Take this % and multiply it by the number of periods in a year
How do you find compunded interest, or the FV of a note
FV = Principle (1 + I) ^n
Where n is number of periods, if multi year do periods per year * number of years
What changes cost wise when you take on a special order with excess capacity?
Just the variable costs, fixed costs wouldnt change baby just think about its
Components of Residual income formula
Investment x Hurdle rate = Required Return
Income - Required Return = Residual Income
If youre given a bunch of shit with regard to finding COGM, how would you do it
Beginning WIP \+ DM ACTUALLY USED (NOT PURCHASED) \+DL USED \+MOH USED (Be careful incase they are tricky \+Transports in -returns and allowances -END WIP =COGM
Payback Formula, and what do you adjust for
Net initial investment / Average incremental cash flow or annual annuity
For the denominator, always add back the depreciation tax shield and take out the taxes
High Low method and steps
First:
(High Cost - Low Cost) / (High Quantity - Low Quantity) = VC per Unit
Second: Multiply the VC per unit by total quantity THAT EQUALS total variable cost.
Third: Total Cost - Total VC Cost WHICH EQUALS FIXED COST
Fourth: Take VC Per Units x Desired Month Quantity AND THEN Add Fixed Costs for Monthly Cost.
Relating to COSO, what aspect of CRIME has to do with financial reporting competencies?
Control Enviroment, brings up HR and Org structure.
WTF is a futures contract? Tell me about the types of transactions that are related to futures contracts
A future hedge allows to you either buy or sell a particular number of a currency at a certain price and date. These agreements are in standard amounts and are for smaller transactions
WTF is a forward contract? Tell me about the types of transactions that are related to forward contracts
A forward hedge allows to you either buy or sell a particular number of a currency at a certain price and date. These are cutomizable and used for large transactions.
What does working capital management effectively do
Matches the economic life of an assset with the instrument used to finance it
Using Marginal Analysis on a make vs. buy what do you do to find the unit cost
DM, DL, VMOH, and the AVOIDABLE Costs (Fixed usually) are the ones that need to be used.
Discounted Cash Flow Method (Cost of Retained Earnings)
(Dividend at the end of one year / Current market price) + Growth
Bond Yield plus risk premium method/formula
Pretax cost of long term debt + Market Risk Premium
How do you calculate growth rate
(ROA * Rention) / (1 - (ROA * Retention))
OR
ROE * Retention
Return on Sales
EBIT / Sales
How do you calculate Degree of Leverage (DOL)
%Change in EBIT / % Change in Sales
How do you find the value of a levered firm
Value of the unlevered firm + Present Value of Interest Tax Savings
PV of Interest Tax Savings = (Tax Rate * (Int Rate of debt * Debt)) / (Int Rate of Debt)
Times Interest Earned
EBIT / Interest Expense
What is trade credit
thats where the company doesnt take the discount and routinely pays on the 30th day ya know? Stretch it out!
How do you calculate the cost of factoring
1+#2 = Cost to company #3
AR * Fee * (Days in year / Days in period) = #1
THEN: AR less amount withheld = amount subject to interest
THEN: Amount subject * (Interest / # months)* (Days in year / Days in period) = #2
How do you calculate PV of an annuity?
Cash Flow from annuity * (1 - PV Factor) / r
Difference in Trailing vs. Forward PE
Both are equtions of (Price of stock / EPS)
BUT
Trailing uses Price today and EPS of past year
Foward uses Stock price today and EPS projected next year
What is the PEG formula?
Its forward PE divided by stock
P0 / EPS1) / (G
