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CPA REVIEW - BEC > VARIOUS FORMULA > Flashcards

VARIOUS FORMULA Flashcards

1
Q

Price Elasticity of Demand

A

% Change in QD
_____________
% Change in Price

> 1 Elastic P up TR down

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2
Q

Income Elasticity of Demand

A

% Change in QD
_____________
% Change in Income

+ Normal Inelastic
- Substitute Elastic

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3
Q

Cross Elasticity of Demand

A

% Change in QD X
______________
% Change in P of Y

+ Substitute Inelastic
- Complement Elastic

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4
Q

Price Elasticity of Supply

A

% Change in QS
_____________
% Change in P

> 1 Inelastic

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5
Q

Marginal Cost

A

MC = VC per unit = AVC per unit

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6
Q

Returns to Scale

A

% increase in output
________________
% change in input

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7
Q

Multiplier Effect
Increase in Output
Equilibrium GDP

A

Change in Spending
________________
MPS

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8
Q

Marginal Propensity to Save

A

Change in Savings
_______________
Change in Disposable Income

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9
Q

Marginal Propensity to Consume

A

Change in Spending
________________
Change in Disposable Income

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10
Q

Personal Disposable Income

A

MPS + MPC

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11
Q

MPS

A

1 - MPC

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12
Q

Total Cost Formula

A

Y= a + b(x)

FC + VC

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13
Q

CAPM

Capital Asset Pricing Model

A

Rate of Return = RFR + b (ERR - RFR)

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14
Q

Beta Analysis

A

b > 1 high systematic risk

b

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15
Q

WACC

A

% share in Capital X Rate of Return

add all three

debt securities
PS
CS

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16
Q

Binomial Option Model

A

Create a tree

% of probability (MP - EP)
____________________
1 + interest %

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17
Q

Payback Period

A

Investment
_________
Annual Cash Inflows

if uneven annual cash inflows:

make a table, add inflows until it totals the investment

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18
Q

Discounted Payback

A

Investment
_________________________
Discounted Annual Cash Inflows

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19
Q

Accounting Rate of Return

A

Increase in Acctg Net Income
________________________
Average Investment

Average Investment = compute for the current year net of depreciation then get the average of the ending balances for both years

Accounting net income - deduct depreciation and add tax benefit

20
Q

Net Present Value

A

PV Cash Inflows - PV of Investment (same amount)

To get the total PV of cash inflows: at hurdle rate

Make a table
Get the PV for each year (use hurdle rate)
Add up all years

Positive NPV - accept
Negative NPV - reject

21
Q

Profitability Index

A

NPV
_______
Investment

22
Q

IRR or Time Adjusted Rate of Return

A

PV of Future Cash Outflows (Investment)
________________________________
Annual Cash Inflow

= PV factor

Then look for this PV factor in the table to get the % rate of return

Then compare this to the predetermined rate of return/minimum acceptable rate of return

IRR should be > or = the desired rate of return
to be acceptable

23
Q

Stated interest rate Simple

A

P x R x T

2,000 x 6% x 2 yrs = 240

24
Q

Compound Interest Rate

A

P x (R) power of time

25
Q

Effective Interest Rate

A

2,000 X 6% X 2 = 240
2000 - 240 = 1760

ERR = 240
_____
1,760

26
Q

APR Annual Percentage Rate

A

the effective interest rate for fraction of a year

27
Q

APR formula

A

Computed as simple interest

2,000 x 6% x 90/360 (OR .25 or 4 times)

= 30

APR = 30
——– x 4
1,970

APR = 6.08%

28
Q

Ranking of interest rates

A

Stated rate 6%
Compound 6.18%
Effective Int 6.82% highest

APR 6.08% lowest
Effective APR 6.13%

29
Q

Real interest rate

A

Nominal rate + Inflation rate

30
Q

Nominal interest rate

A

Real interest rate - Inflation rate

31
Q

Inflation rate

A

Nominal - Real rate

32
Q

Annual Financing Cost on Receivables

A

% of discount 360 0r 365
_____________ X ______________
1 - % discount total period - discount period

33
Q

Cost of the loan
OR
Effective Rate of the loan

A

Interest Paid
___________________________________
Net funds (Principal - compensating balance)

34
Q

Current Bond Yield

A

Annual Interest Paid
________________
Bond Market Price

35
Q

Yield to Maturity - interest rate computation

A

(1 + r/m) m power - 1

36
Q

Yield to Maturity with Floatation Cost

A

YM = Annual Interest + Face - Bond Price
_______________
# of years
_____________________________
.60 (Bond Price) + .40 (Face Value

Bond Price = Face Value - Floatation Cost
Annual interest - sb before tax

37
Q

Bond Price formula

A

Face Value - Floatation Cost

38
Q

Degree of Operating Leverage

A

% Change in Operating Income
________________________
% change in unit volume

39
Q

Degree of Financial Leverage

A

% change in EPS
______________
% change in EBIT

40
Q

Cash conversion cycle

A

ICP + RCP = PDP

41
Q

RCP = AR collection period

A

Average Receivables
________________
Ave Credit sales per day (365 days)

42
Q

Average Receivables

A

Beg + End
_________
2

OR

Average credit sales per day X collection period (RCP)

CREDIT SALES NOT NET!!!
DO NOT DEDUCT THE DISCOUNT!!!

43
Q

ICP Inventory conversion period

A 
Average Inventory
\_\_\_\_\_\_\_\_\_\_\_\_\_\_
COGS per day
or 
Sales per day
44
Q

Payable Deferral Period

A 
Average Payables
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Purchases per day
or 
COGS per day
45
Q

Annual carrying cost of inventory formula

A

average inventory level X unit cost X cost of capital

average inventory level = order size / 2

46
Q

Operating Cycle

A

ICP + RCP

Inventory conversion period plus AR collection period

CPA REVIEW - BEC (21 decks)

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