Wrong answers Flashcards
When exchange rate for local currency increases than on the payables settlement date?
Exercise option and settle payables with proceeds from option contract at gain
During expected high inflation rate, best investment is
Precious metals b/c its a non-monetary asset whose value increases w inflation.
T-bills and corporate bonds = fixed value = increased inflation = interest rate increase = reduce value
Commodities are better hedge than common stock
COSO governance and culture:
addresses HR standards
Bonds market value:
Floating rate bond: constant
Convertible bonds and callable bonds: fluctuate in value
AP/AR Foreign currency fluctuations
Receivable: settlement gain, the foreign currency must be worth more dollars than on transaction date. If foreign currency denominated, # of foreign currency exchangeable into dollars decreased.
Payables: settlement gain, for there to be loss it must take more dollars to buy same foreign currency. IF foreign currency denominated than # of foreign currency exchangeable into dollars decreased
Inelastic price demand
increase in price = increase in total revenue ie POSTIVE relationship
Calculate new quantity demanded when price increases
= quantity demanded units - (quantity demanded units * elasticity * % price increase)
Using dividend growth model, calculate investors required rate of return?
{$ dividends * (1+growth rate %)/ current share price $ } + growth rate %
Calculate effective interest rate if borrowing is in form of discount note?
Step 1 cash proceeds = Loan principal - (loan principal *interest rate %)
Step 2 effective interest rate = (loan principal * interest rate %)/ cash proceeds
Calculate how much should firm be willing to pay per year for cash management system?
=average daily cash outflows* days added to disbursement * earnings rate
Calculate change in real cost of material?
cost per ton at beginning * (1+inflation%) - cost per ton at end
Calculate cost of equity?
=expected dividend / current share price + growth rate
Calculate safety stock
= reorder point - (lead time *sales per week)
When capitalizing software:
annual amortization % is greater of % of revenue or useful life %
Annual cost of discount
=[360/(Total pay period - discount period)] * [discount %/ (100% - discount)]
3 elements needed to estimate cost of capital
1) current dividends per share
2) expected growth rate
3) current market price of common share
Projected stock price
PEG ratio * g * EPS * (1+ g%)
R&D cost is expensed
Before tech is feasible established… planning cost + design of software + testing of initial project
Remeasurement (temporal) method
- current (year-end) exchange rate all monetary like AR
- historical exchange rate like all NON-monetary like patents, paid in capital, and PPE
Effective interest rate
(loan amount * stated interest %) / (loan amount - comp balance % * loan amount)
Different funds
a) Special revenue: revenue from specific taxes to finance specific gov activities
b) Fiduciary funds: monies donated for specific purposes
c) general funds: ordinary operations of gov unit
d)capital project funds: grants for specific purposes
Finance liability when tranfer takes place
= selling price - fair value
What is COG manufactured and transferred to WIP
Each job calculate than sum = beg WIP + labor + (labor * OH % of labor)
Derivative reported under CF investing section
Derivative that is not designated for hedging purposes nor held for trading
Derivative reported under CF operating section
A derivative with no hedging designation but is being held for training purposes
Derivative reported under CF financing section
A derivative with significant financing element at transition inception
