Test Questions I dont Know

Question 1

If something has a high price elasticity of demand, what does it say abaout the product

Answer 1

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.

Question 2

What is an advantasge to ERP systems?

Answer 2

very flexibile and aids in the decision making process

Question 3

How do you find the net cost of debt

Answer 3

It is the effetive interest rate LESS the taxes

Effective Interet rate * (1 - Tax Rate)

Question 4

How would you go about finding return on investment

Answer 4

Net income / Investment

Most cases it is net income divided by the average assets (Average year 1 and 2)

Question 5

How would you describe the elasticity of insulin

Answer 5

it is perfectly inelastic….a dead ass veritcal line in relation to price

Question 6

Margin of Safety Forumla

Answer 6

Current Sales - Breakeven Sales

Breakeven Sales can be found by doing Fixed costs / CM Ratio

Question 7

The NPV method of budgeting operates under the assumption of reinvetment at what rate?

Answer 7

the discount rate actually used in the analysis

Question 8

Risk appetite has been exceeded when

Answer 8

liklihood of negative events significantly exceed the reisdual risk

Question 9

A depreciation tax shield is essentially what

Answer 9

a decrease in income taxes

Question 10

Does ABC deal with short term or long term? and what about variable/fixed costs

Answer 10

ABC has to do with long term stuff, and the fixed costs become variable cost

Question 11

When doing weighted average cost of capital what component is adjusted for tax

Answer 11

you need to find the after tax cost of debt which is cost of debt * (1 - Tax Rate)

Question 12

What decreases inflation

Answer 12

decrease demand and increase supply

Question 13

Effective ANNUAL interest rate equation

AND

Effective Interest Rate

AND

How to find Annual Percentage Rate

Answer 13

(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

Question 14

How do you find compunded interest, or the FV of a note

Answer 14

FV = Principle (1 + I) ^n

Where n is number of periods, if multi year do periods per year * number of years

Question 15

What changes cost wise when you take on a special order with excess capacity?

Answer 15

Just the variable costs, fixed costs wouldnt change baby just think about its

Question 16

Components of Residual income formula

Answer 16

Investment x Hurdle rate = Required Return

Income - Required Return = Residual Income

Question 17

If youre given a bunch of shit with regard to finding COGM, how would you do it

Answer 17

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

Question 18

Payback Formula, and what do you adjust for

Answer 18

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

Question 19

High Low method and steps

Answer 19

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.

Question 20

Relating to COSO, what aspect of CRIME has to do with financial reporting competencies?

Answer 20

Control Enviroment, brings up HR and Org structure.

Question 21

WTF is a futures contract? Tell me about the types of transactions that are related to futures contracts

Answer 21

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

Question 22

WTF is a forward contract? Tell me about the types of transactions that are related to forward contracts

Answer 22

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.

Question 23

What does working capital management effectively do

Answer 23

Matches the economic life of an assset with the instrument used to finance it

Question 24

Using Marginal Analysis on a make vs. buy what do you do to find the unit cost

Answer 24

DM, DL, VMOH, and the AVOIDABLE Costs (Fixed usually) are the ones that need to be used.

Question 25

Discounted Cash Flow Method (Cost of Retained Earnings)

Answer 25

(Dividend at the end of one year / Current market price) + Growth

Question 26

Bond Yield plus risk premium method/formula

Answer 26

Pretax cost of long term debt + Market Risk Premium

Question 27

How do you calculate growth rate

Answer 27

(ROA * Rention) / (1 - (ROA * Retention))

OR

ROE * Retention

Question 28

Return on Sales

Answer 28

EBIT / Sales

Question 29

How do you calculate Degree of Leverage (DOL)

Answer 29

%Change in EBIT / % Change in Sales

Question 30

How do you find the value of a levered firm

Answer 30

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)

Question 31

Times Interest Earned

Answer 31

EBIT / Interest Expense

Question 32

What is trade credit

Answer 32

thats where the company doesnt take the discount and routinely pays on the 30th day ya know? Stretch it out!

Question 33

How do you calculate the cost of factoring

Answer 33

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

Question 34

How do you calculate PV of an annuity?

Answer 34

Cash Flow from annuity * (1 - PV Factor) / r

Question 35

Difference in Trailing vs. Forward PE

Answer 35

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

Question 36

What is the PEG formula?

Answer 36

Its forward PE divided by stock

P0 / EPS1) / (G