bec flash cards

Q001.- 7 Principles of Control Environment

Copyright © Joenny King

A001.- Philosophy- Human resources- Reporting competencies- Authority and responsibility- Structure- Ethical Values- Directors

Q002.- Objectives of ERM


A002.- Strategic- High level goals designed to achieve themission- Operations- Achievement objectives through the effectiveand efficient use of resources- Reporting- Reliable reporting- Compliance- Ensuring compliance with laws andregulations

Q003.- Components of ERM- Hint: IS EAR AIM


A003.- Internal environment- Setting objectives- Event identification- Assessment of risk- Risk response- Activities (control)- Information and communication- Monitoring

Q004.- The Internal Control Framework applies to _______;whereas ERM Framework applies to _________.


A004.- Financial Reporting- Entity-wide Management

Q005.- Internal Control Framework: Board of Directors principleattributes


A005.- a. Operates independently- b. Monitors risk- c. Appoints audit committee- d. Oversees quality and reliability

Q006.- Internal Control Framework: Organizational Structureprinciple attributes


A006.- a. Management designs appropriate financial reportingstructures that proves relevant information at appropriatefunctional and business unit levels- b. Management maintains an organizational structure thatfacilitates reporting and other communications regardinginternal control over financial reporting

Q007.- Internal Control Framework: Authority and Responsibilityprinciple attributes


A007.- a. Responsibilities are defined as follows:- 1) Audit committee oversees the process for definingresponsibility for key financial reporting roles- 2) Executive management is responsible for solid internalcontrol- 3) Management is responsible for ensuring all employeesunderstand their responsibilities and adhere to internalcontrol policies- b. Authority is properly limited by position

Q008.- Four components of balanced scorecard


A008.- a. Learning and Growth- b. Customer- c. Business process (efficiency and effectiveness- d. Financial

Q009.- What do Total Productivity Ratios (TPRs) show?


A009.- Value of all output relative to the value of all input

Q010.- Total Productivity is calculated:


A010.- Quantity of output produced / costs of inputs

Q011.- Partial Productivity Ratios (PPRs) reflect...


A011.- the value of all outputs as compared to the value of majorcategories of input- PPRs are only concerned with the quantity of a singleinput and not its price- PPR is calculated as the quantity of of output produceddivided by the quantity of the single input used

Q012.- PPR is calculated:


A012.- quantity of output produced / quantity of the single inputused

Q013.- What is a use of a Pareto Diagram in respect to internalcontrol issues?


A013.- Pareto Diagrams are used to determine the quality controlissues that are most frequent and demand the greatestattention

Q014.- Five elements of the Marketing Mix


A014.- Product- Market segment- Method of Delivery- Communication strategy- Price

Q015.- Theoretical Cost Drivers:- Executional vs Structural cost drivers


A015.- Executional- short term- Structural- long term

Q016.- Prime cost vs Conversion cost


A016.- Prime cost= DL+DM- Conversion cost= DL+MOH

Q017.- Methods to allocate joint costs of joint products


A017.- 1. Allocation by unit volume- 2. Relative net realizable values at split-off point. NRV=sales value less cost of completion and disposal

Q018.- Equivalent Units under FIFO (3 steps)


A018.- Beginning WIP x % to be completed- Units completed - Beg WIP- Ending WIP x % completed

Q019.- Equivalent Units under Weighted Average (2 steps)


A019.- Units completed- Ending WIP x % completed

Q020.- Cost per Equivalent unit calculation under FIFO


A020.- FIFO = Current costs only/EU

Q021.- Nominal GDP


A021.- measures the value of all final goods and services inprices prevailing at the time of production

Q022.- Real GDP


A022.- measures the value of all final goods and services at aconstant price using a GDP deflator.

Q023.- Price Index (GDP deflator) calculation:


A023.- Nominal GDP/GDP deflator- x- 100

Q024.- Composition of Business Cycles


A024.- Expansionary Phase: rising economic activity and growth- Peak: a high point of economic activity- Contractionary Phase: falling economic activity andgrowth, follows a peak- Trough: low point of economic activity- Recovery Phase: follows a trough, economic activitybegins to increase

Q025.- Recession


A025.- two consecutive quarters of falling national output

Q026.- Economic Indicators:- Leading Indicators


A026.- Average new unemployment claims- Building permits- Average length of workweek- Money supply- Prices of selected stocks- Orders for goods- Index for consumer expectations

Q027.- Economic Indicators:- Lagging Indicators


A027.- Prime rate charged by banks- Average duration of unemployment- Bank loans outstanding

Q028.- Economic Indicators:- Coincident Indicators


A028.- Industrial production- Manufacturing and trade sales

Q029.- Aggregate Demand Curve


A029.- illustrates the maximum quantity of all goods andservices that households, firms, and the government arewilling and able to purchase at any given price level

Q030.- Aggregate Supply Curve


A030.- illustrates the maximum quantity of all goods andservices producers are willing and able to produce at anygiven price level

Q031.- Factors that shift the AD curve


A031.- 1. Changes in Wealth- 2. Changes in real interest rates- 3. Changes in consumer expectations- 4. Changes in exchange rates- 5. Changes in governmental expenditures- 6. Changes in consumer taxes

Q032.- Factors that shift the AS curve


A032.- 1. Changes in input prices- 2. Supply shocks

Q033.- Expenditure Approach to measuring GDP


A033.- Government purchases- Gross private Investment- Personal Consumption- Net Exports

Q034.- Income Approach to measuring GDP


A034.- Income from proprietors- Profits from corporations- Interest- Rent- Adjustments for net foreign income- Taxes- Employee compensation- Depreciation

Q035.- Frictional Unemployment


A035.- Normal unemployment resulting from workers routinelychanging jobs or from workers being temporarily laid off

Q036.- Structural Unemployment occurs when:


A036.- Jobs available in the market do not correspond to theskills of the work force- Unemployed workers do not live where the jobs arelocated

Q037.- Cyclical Unemployment


A037.- the amount of unemployment resulting from declines inreal GDP during periods of contraction or recession

Q038.- Natural Rate of Unemployment


A038.- the sum of frictional, structural, and seasonalunemployment

Q039.- Seasonal Unemployment


A039.- the result of seasonal changes in the demand and supplyof labor

Q040.- Full Employment


A040.- the level of unemployment when there is no cyclicalunemployment

Q041.- Demand-Pull inflation


A041.- caused by increase in aggregate demand- a. Increases in government spending- b. Decrease in taxes- c. Increases in wealth- Increases in money supply

Q042.- Cost-Push inflation


A042.- caused by reductions in the short-run aggregate supply- a. increase in oil prices- b. increase in nominal wages

Q043.- Real interest rate


A043.- Nominal interest rate- inflation rate

Q044.- Monetary Policy:- Open market operations (OMO)


A044.- OMO consists of the purchase and sale of governmentalsecurities in the open market

Q045.- Monetary Policy:- Changes in discount rate


A045.- the discount rate is the rate the Fed charges memberbanks for short-term loans

Q046.- Monetary Policy:- Changes in the Required Reserve Ratio


A046.- Required Reserve Ratio(RRR) is the fraction of totaldeposits banks must hold in reserve

Q047.- Describe the relationship between interest rates and thedemand of money


A047.- inversely related- as interest rates rise, it becomes more expensive to holdmoney, thus reducing the demand for money

Q048.- An increase in money supply causes interest rates to_____.


A048.- Fall

Q049.- The long run aggregate supply curve is_______.


A049.- vertical

Q050.- What is functional interdependence?


A050.- it is the participation of nations in world-wide institutionslike NATO or the UN

Q051.- Strategic management usually involves defining the______, identifying the _______, identifying critical__________, and a ________ analysis.


A051.- Strategic management usually involves defining theMISSION, identifying the STRATEGY, identifying criticalSUCCESS FACTORS, and a SWOT analysis.

Q052.- What are the critical success factors of strategicobjectives? Also the elements of a balanced scorecard.


A052.- Financial measures- Internal business process measures- Customer measures- Learning and growth

Q053.- Factors that shift the demand curve on a microeconomicbasis include...- Hint: W.R.I.T.E.N


A053.- changes in Wealth- changes in price of Related goods- changes in consumer Income- changes in consumer Taste- changes in consumer Expectations- changes in Number of buyers served by the market

Q054.- Factors that shift the supply curve on a microeconomicbasis include...- Hint: E.C.O.T.T.


A054.- changes in price Expectations- changes in production Costs- changes in demand for Other goods- changes in Subsidies- changes in production Technology

Q055.- In micro economics a price ceiling may cause a ______;whereas, a price floor may cause a _______.


A055.- In micro economics a price ceiling may cause aSHORTAGE; whereas, a price floor may cause a SURPLUS.

Q056.- Product demand is more elastic when ____ substitutesare available.


A056.- Product demand is more elastic when MORE substitutesare available.- *remember that elasticity is based on how changes inprice will affect the quantity demanded. If there are manyoptions available to the consumer a change in price of oneof the substitutes will will greatly affect the demand of theproduct because consumers will just purchase one of themany substitutes.

Q057.- Product demand is more inelastic when _____ substitutesare available.


A057.- Product demand is more inelastic when FEW substitutesare available.- think... if there are no other viable options in the marketconsumers will be forced to purchase your product, so achange in price will likely have a small/inelastic affect onquantity demanded.

Q058.- The relationship between price elasticity of a product andthe firms total revenue is _______ related.- The relationship between price inelasticity of a productand the firms total revenue is _______ related.


A058.- The relationship between price elasticity of a product andthe firms total revenue is INVERSELY related.- The relationship between price inelasticity of a productand the firm’s total revenue is POSITIVELY related.

Q059.- Are monopolies socially efficient? Why?


A059.- Monopolies are not socially efficient because they tend toproduce at a point where price is greater than marginalcost therefore less output is produced than is sociallyoptimal.

Q060.- As a strategic tool what does value chain analysis help afirm do?


A060.- Value chain analysis used as a strategic tool helps firmsunderstand the importance of perceived value with respectto the market the firm operates in.

Q061.- What are Porters Five Forces?


A061.- Barriers to entry- Market competitiveness- Existence of substitutes- Bargaining power of customers- Bargaining power of suppliers

Q062.- After analyzing Porters Five Forces a the most idealsituation for a firm would be:- _______ Barriers to entry- _______ Market competitiveness- _______ Substitutes- _______ Bargaining power of customers- _______ Bargaining power of suppliers


A062.- HIGH Barriers to entry- LOW Market competitiveness- FEW Substitutes- LOW Bargaining power of customers- LOW Bargaining power of suppliers

Q063.- Unsystematic risk is also known as ________ risk.


A063.- Unsystematic risk is also known as DIVERSIFIABLE risk.

Q064.- Systematic risk is also known as ______ risk.


A064.- Systematic risk is also known as UNDIVERSIFIABLE risk.

Q065.- Factors influencing exchange rates- Trade Factor- relative inflation rates- What is the effect on exchange rates when domesticinflation exceeds foreign inflation?


A065.- When domestic inflation exceeds foreign inflation holdersof domestic currency will purchase foreign currency inorder to flee the weakening currency leading to a greaterdemand for foreign currency and thus making the foreigncurrency more valuable and driving up the exchange rate.

Q066.- Factors influencing exchange rates- Trade Factor- relative income levels- What is the effect of rising domestic income on theexchange rate?


A066.- If income in the domestic country is rising relative to theincome in a foreign country the demand for the domesticcurrency is increasing thus making the domestic currencystronger relative to the foreign currency.

Q067.- Factors influencing exchange rates- Trade Factor- government controls- What is the effect of increasing tariffs on imported goodsfrom a foreign country?


A067.- The tariff will cause the demand for imported goods todecrease thus decreasing the demand for the importingcountry's currency resulting in a stronger domesticcurrency relative to the foreign currency.

Q068.- Factors influencing exchange rates- Financial Factors- relative interest rates- What is the effect of rising interest rates in the domesticcountry?


A068.- If interest rates are rising in the domestic country foreigninvestors seeking a higher return will purchase domesticassets thus driving up the demand for the domesticcurrency leading to a strong domestic currency relative tothe foreign currency.

Q069.- Three types of motives for holding cash


A069.- Transaction: concerned with having enough cash to meetpayments arising from the ordinary course of business- Speculative: concerned with having enough cash to takeadvantage of temporary investment opportunities- Precautionary: concerned with having enough cash tomaintain a safety cushion so that unexpected needs maybe met

Q070.- Cash conversion cycle formula:


A070.- inventory conversion period + receivables collectionperiod-payables deferral period

Q071.- Inventory conversion period formula:


A071.- average inventory / average COGS per day

Q072.- Payables deferral period formula:


A072.- average payables/average purchases per day

Q073.- Number of days receivables outstanding formula:


A073.- average receivables balance/ average daily sales

Q074.- Inventory turnover formula:


A074.- COGS/average inventory balance

Q075.- Economic Order Quantity(EOQ) does not consider_______, nor does it account for costs of ________.


A075.- Economic Order Quantity(EOQ) does not considerstockout costs, nor does it account for costs of safetystock.

Q076.- Economic Order Quantity assumes that carrying costsinclude the following elements:- Hint: SOMII


A076.- Storage- Obsolescence- Materials- Insurance- Interest

Q077.- Economic Order Quantity equation:


A077.- =sqrt 2SO/C- S=annual sales(units)- O=cost per purchase order- C=carrying cost per unit

Q078.- Are rates usually lower or higher when using short-termloans versus long-term loans?


A078.- Lower

Q079.- What are three advantages of using short-term financing?


A079.- 1. Increased liquidity- 2. Increased profitability- 3. Lower costs of borrowing

Q080.- What are the two main disadvantages of using short-termfinancing?


A080.- 1. Increased credit risk- 2. Increase interest rate risk

Q081.- A firm anticipating a higher level of permanent workingcapital will likely deploy short- or long-term financing?


A081.- Long-term

Q082.- Define Operating Leverage


A082.- Operating leverage is a measure of the degree to which afirm using fixed operating costs to magnify the effects of agiven percentage change in sales on the percentagechange in EBIT

Q083.- Degree of operating leverage formula:


A083.- DOL = %change in EBIT/%change in sales

Q084.- Define Financial Leverage


A084.- Financial leverage is the measure of the degree to whicha firm utilizes fixed financial costs to finance operations.

Q085.- Degree of financial leverage formula:


A085.- DFL= % change in EPS/ %change in EBIT

Q086.- Cost of Debt (kdt) formula:


A086.- = [i+(PV-Nd)/2]/[(Nd+PV)/2]

Q087.- When determining the cost of equity using the CAPMmethod the risk premium is calculated:


A087.- Risk Premium= Stocks Beta coefficient x Market RiskPremium- Market Risk Premium(MRP) is the market rate less therisk-free rate

Q088.- Market Risk Premium(MRP) is calculated


A088.- MRP = (market rate - risk free rate)

Q089.- What is the formula for determining the Cost of RetainedEarnings under the CAPM method?


A089.- CAPM= Risk-free Rate + [Beta x (market risk- risk freerate)]

Q090.- ROI can be calculated using two different formulas, whatare the formulas?


A090.- 1. Income/Investment Capital- 2. Profit Margin x Investment Turnover- Profit Margin = income/sales- investment turnover = sales/assets

Q091.- Debt-to-total capital ratio provides indications related to afirms.....


A091.- Long-term debt paying ability.- The lower the ratio the greater level of solvency and thegreater the presumed ability to pay debts.

Q092.- Debt-to-equity ratio indicates...


A092.- the degree of leverage used, the lower the ratio the lowerthe risk involved

Q093.- Disadvantages of holding cash:


A093.- 1. negative arbitrage effect- this occurs when the cost ofinterest exceeds interest income from cash reserves- 2. Increased attractiveness as a takeover target.- 3. Investor dissatisfaction with allocation of assets

Q094.- Methods of speeding up collections include:- Hint: 6 of them


A094.- 1. Customer credit screening- 2. Prompt billing- 3. Payment discounts- 4. EFTs- ensures receipts are deposited quickly- 5. Lockbox systems- bank receives payments directly- 6. Factoring AR

Q095.- Methods to defer payments include:- Hint: 3 of them


A095.- 1. Drafts- 2. Line of credit- 3. Zero balance accounts

Q096.- Five Components of Information Technology


A096.- People- Software- Hardware- Data and Information- Network

Q097.- Data vs Information


A097.- Data: raw facts- Information: organized and processed data that ismeaningful to somebody

Q098.- What are the three primary roles of a businessinformation system in business operations?


A098.- The three primary roles of an information system inbusiness operations include:- 1. Process detailed information- 2. Assist in making daily decisions- 3. Assist in developing business strategies

Q099.- Business information systems allow a business toperform the following functions on data:


A099.- a. collect- b. process- c. store- d. transform- e. distribute

Q100.- Basic audit trail in an accounting information system


A100.- source documents---->journal---->ledger--->trial balance--->financial statements

Q101.- In a computerized environment journals are known as_______.


A101.- In a computerized environment journals are known astransaction files.

Q102.- In a computerized environment ledgers are known as______.


A102.- In a computerized environment ledgers are known asMaster Files.

Q103.- Processing Methodologies- What are the two main methods of performing filemaintenance on a master file?


A103.- Batch Processing- Online Real Time Processing (OLRT)

Q104.- What is batch processing


A104.- Batch processing is a method of performing filemaintenance on a master file. Inputdocuments/transactions are collected and grouped by typeof transaction. These groups, called batches, areprocessed periodically

Q105.- What type of systems is batch processing typically foundin?- Hint* think about the nature of batch processing's timedelay


A105.- Batch processing will typically be found in "traditional"systems where the data does not need to be totally current.

Q106.- What is Online Real Time Processing (OLRT)?


A106.- Transactions are entered and the master files are updatedsimultaneously.

Q107.- What is centralized processing and what are some of itsadvantages/disadvantages?


A107.- Centralized processing environments maintain all dataand perform all data processing at a central location.- Advantages include:- Enhanced data security- & Consistent processing- Disadvantages include:- Possible high costs- Increased need for processing power and data storage- Reduction in local accountability because remotelocations will always blame the central location forprocessing problems- Bottlenecks may occur at high traffic times

Q108.- What are the six most common types of reports in acomputerized environment?


A108.- 1. Demand reports- 2. Periodic scheduled reports- 3. Ad hoc reports- 4. Push reports- 5. Exception reports- 6. Dashboard-style reports

Q109.- What is an ad hoc report?


A109.- Ad hoc reports are reports that do not currently exist butcan be created on demand without having to get a softwaredeveloper involved.- Think about when we had to design queries in MicrosoftAccess. You gave the computers specific demands toscreen data in order for the data to meet your individualneeds.

Q110.- What is a Decision Support System?


A110.- DSS's are an extension of Management InformationSystems (MIS). DSS's are computer based informationsystems that assist management in making decisions.- These systems do not automate decisions, but ratherprovide managers with interactive, computer aided toolsthat combine their subjective judgments and insights withobjective analytical data to guide the decision.

Q111.- What is an Executive Information System (EIS)?


A111.- These systems proved senior executive with immediateand easy access to internal and external information toassist the executives in monitoring business conditions ingeneral.

Q112.- What is a Transaction Processing System?


A112.- Transaction processing systems process and record theroutine daily transactions necessary to conduct thebusiness.- These systems are usually very structured.

Q113.- What are the seven phases in the System DevelopmentLife Cycle (SDLC)?


A113.- 1. System analysis- 2. Conceptual design- 3. Physical design- 4. Implementation and conversion- 5. Training- 6. Testing- 7. Operations and Maintenance

Q114.- System Development Life Cycle- System Analysis phase


A114.- The system analysis phase will involve gathering theinformation needed to purchase or develop a new system.- Usually includes identifying needs of users andmanagers, documenting the needs, and determiningfeasibility.

Q115.- System Development Life Cycle- Conceptual Design phase


A115.- The conceptual design phase involves deciding how theuser needs are going to be met.- Steps:- 1. Identify and evaluate design alternatives- 2. Develop detailed specifications outlining what thesystem needs to accomplish and how it is to be controlled

Q116.- System Development Life Cycle- Physical Design phase


A116.- The physical design phase is where the company will usethe conceptual design to develop detailed specificationsthat are used to code and test the computer programs.- Steps:- 1. Design input/output documents- 2. Write program- 3. Create files and databases- 4. Develop procedures- 5. Develop controls

Q117.- System Development Life Cycle- Implementation and conversion


A117.- The implementation and conversion phase translates theplan into action.- Steps:- a. Install new hardware/software- b. Hire or relocate employees to operate the system- c. Test or modify new processing procedures- d. Establish and document standards and controls- e. Convert new system and dismantle old system- f. Fine tune system

Q118.- System Development Life Cycle- Training


A118.- Train users to use the software and inform them of thenew policies

Q119.- System Development Life Cycle- Testing


A119.- Testing will likely include:- 1. Tests of the effectiveness of documents and reports,user input, operating control procedures, processingprocedures, and computer programs.- 2. Tests of capacity limits and backup and recoveryprocedures

Q120.- System Development Life Cycle- Operation and Maintenance


A120.- The system will be periodically reviewed andmodifications will be made.

Q121.- What is the purpose of forming an information systemssteering committee? Who are its members? What are itsfunctions?


A121.- Information Systems Steering Committees are formed toplan and oversee the information systems function and itaddresses the complexities created by functional anddivisional boundaries.- Its members are usually high level management like thecontroller and managers of the user departments- The functions of an Information Systems SteeringCommittee include:- 1. Setting governing policies for the AIS- 2. Ensuring top-management participation, guidance, andcontrol- 3. Facilitating the coordination and implementation of theAIS.

Q122.- Application controls _____, _____, and ______transaction error and fraud.- Application controls provide reasonable assurance as tosystem....(4 elements)


A122.- Application controls PREVENT, DETECT, and CORRECTtransaction error and fraud.- Application controls provide reasonable assurance as tosystem:- Accuracy- Completeness- Validity- Authorization

Q123.- What are some examples of processing controls?


A123.- Data Matching- File labels- Recalculation of batch totals- Cross-footing

Q124.- What are some examples of Output controls?


A124.- User review of output- Reconciliation- External data reconciliation- Output encryption

Q125.- What is a Strategic Master Plan?


A125.- A strategic master plan shows the projects that must becompleted to achieve long term goals.

Q126.- Proper segregation of duties divides the _____, ______,and ______ functions.


A126.- Proper segregation of duties divides the authorization,recording, and custody functions.

Q127.- What is the difference between a systems analyst andcomputer programmer?


A127.- A systems analyst help users determine their informationneeds and then design the information system- A computer programmer takes the systems analystsdesign and creates an information system by writingcomputer programs

Q128.- What is a security administrator responsible for?


A128.- assigning initial passwords and maintenance of thosepasswords

Q129.- What is the difference between a Database Administratorand a Network Administrator?


A129.- Database Admins are responsible for maintaining andsupporting the database software. This is opposed to aDATA administrator who is responsible for the definition,planning, and control of the data within the database, like ascientist typing information into a computer- A network administrator supports computer networks. Hewill set up and configure the computer network.

Q130.- What is a Digital Certificate?


A130.- A digital certificate is an electronic document, createdand digitally signed by a trusted party, which certifies theidentity of the owners of a particular public key.

Q131.- What are the types of information security policies?


A131.- Program-level policy- Program-framework policy- Issue-specific policy- System-specific policy

Q132.- Information security policies:- Program-level policy


A132.- Program-level policies are used for creating amanagement sponsored computer security program.Basically the mission statement of the IT department.

Q133.- Information security policies:- Program-framework policy


A133.- A program-framework policy establishes the overallapproach to computer security. Basically the IT securitystrategy.

Q134.- Information security policies:- Issue-specific policy


A134.- Addresses specific issues of concern to the organization

Q135.- Information security policies:- System-specific policy


A135.- System-specific policies focus on policy issues thatmanagement has decided for a specific system (e.g.payroll)

Q136.- What is an Electronic Data Interchange (EDI)?


A136.- EDI is computer-to-computer exchange of businesstransaction documents.

Q137.- What are the benefits of an EDI system?


A137.- Reduced handling costs- Increased processing speed

Q138.- What are some of the common costs of an EDI system?


A138.- 1. Legal costs associated with modifying and negotiatingtrade contracts- 2. Hardware costs- 3. Costs of translation software- 4. Costs of data transmission- 5. Costs associated with security, monitoring, and controlprocedures

Q139.- What are the functions of a supply chain managementsystem (SCM)?


A139.- planning- sourcing- making- delivery

Q140.- Information systems risks include:


A140.- Strategic risk- Operating risk- Financial risk- Information risk

Q141.- Information systems security risk:- Strategic risk


A141.- Strategic risk is the risk of choosing inappropriatetechnology.- Take for example, a company chooses a web-basedprogram to share data between offices.- If one office does not have high speed internet then theycannot enter data as quickly as others.

Q142.- Information systems security risk:- Operating risk


A142.- Operating risk is the risk of doing correct thingsimproperly

Q143.- Information systems security risk:- Financial risk


A143.- Financial risk is the risk of having financial resourceslost, wasted, or stolen.

Q144.- Information systems security risk:- Information risk


A144.- Information risk is the risk of loss of data integrity,incomplete transactions, or hackers.

Q145.- Firewalls ______; they do not ______.


A145.- Firewalls deter; they do not prevent

Q146.- Firewall Methodologies- Packet filtering


A146.- Packet filtering examines packets of data as they passthrough a firewall according to the rules that have beenestablished for the source of the data.

Q147.- Firewall Methodologies- Circuit level gateways


A147.- Circuit level gateways only allow data into a network thatwas requested from within the network.

Q148.- Firewall Methodologies- Application level gateways


A148.- Application level gateways aka proxies examine datacoming into the gateway. Most secure but also the slowest

Q149.- Define Sales Volume Variance


A149.- a flexible budget variance that distills volume activityfrom other sales components

Q150.- Sales Volume Variance Formula


A150.- (Actual units sold-Budgeted sales units)x Standard CMper unit

Q151.- Define Sales Mix Variance


A151.- a measure of the change in the number of actual soldunits from those budgeted

Q152.- Sales Mix Variance Formula


A152.- (actual sold units of product- Budgeted sales units ofproduct)x Budgeted product sales mix ratio x budgeted CMper unit of that product

Q153.- Define Market Size Variance


A153.- a measure of the effect the size of the entire market forthe product has on the contribution margin for the firm

Q154.- Market Size Variance Formula


A154.- (actual market size-expected market size0 x budgetedmarket share x budgeted CM per unit

Q155.- Define Market Share Variance


A155.- measures the effect of a firm's market share on the firm'sCM

Q156.- Market Share Variance Formula


A156.- (actual market share - budgeted market share) x actualindustry units x budgeted CM per unit

Q157.- International Risk Assessment- Process Risk


A157.- Process controls, data, and systems used to collect newinformation required by IFRS and accounting policies areinadequate to sustain two reporting systems under GAAPand IFRS

Q158.- International Risk Assessment- System Risk


A158.- New configuration setting and data mappings will need tobe defined, implemented, and embedded into the reportingsystem to facilitate dual reporting in GAAP and IFRS

Q159.- International Risk Assessment- General Business Risk


A159.- Existing contract terms, entities, covenants, etc., willneed to be reassessed to see if and how they conform torequirements under IFRS

Q160.- Strategy links _____ and _____ with related objectives


A160.- mission and values

Q161.- Define Strategic Objectives


A161.- High level goals that support the mission and vision ofthe organization and the manner in which shareholdervalue will be created

Q162.- What is the focus of operations objectives?


A162.- efficiency and effectiveness

Q163.- What is the focus of reporting objectives?


A163.- Relevance, accuracy and timeliness

Q164.- Balanced Scorecard elements


A164.- Financial, Internal business process, Customer, Learningand growth

Q165.- Costs included in product costs under AbsorptionCosting


A165.- 1. DM- 2. DL- 3. MOH, variable and fixed

Q166.- Costs included in product costs undervariable(contribution) approach


A166.- 1. DM- 2. DL- 3. Variable MOH

Q167.- Absorption vs variable costing effects on income:- When production is greater than sales


A167.- When production is greater than sales net income underthe Absorption method will be greater

Q168.- Absorption vs variable costing effects on income:- When sales are greater than production


A168.- When sales are greater than production net income undervariable approach will be greater.- This is true because, under absorption costing, some ofthe fixed MOH from previous period is part of beginninginventory and will be charged to this period's cost of sales

Q169.- No change in inventory:- Absorption Net Income _ Variable Net Income


A169.- No change in inventory:- Absorption Net Income = Variable Net Income

Q170.- Increase in inventory:- Absorption Net Income _ Variable Net Income


A170.- No change in inventory:- Absorption Net Income > Variable Net Income

Q171.- Decrease in inventory:- Absorption Net Income _ Variable Net Income


A171.- Decrease in inventory:- Absorption Net Income < Variable Net Income

Q172.- Breakeven computation in units and sales dollars:


A172.- Total fixed costs/CM per unit= Breakeven point in units- Total fixed costs/ CM ratio= Breakeven point in SalesDollars

Q173.- Target Cost computation:


A173.- Target Cost= Market price-required profit

Q174.- What is the rule for deciding whether to accept a specialorder if there is excess capacity available?


A174.- The selling price must be greater than the variable costper unit

Q175.- What is the rule for deciding whether to accept a specialorder if company is operating at full capacity?


A175.- The selling price must be greater than the CM that wouldhave been produced if the special order were not acceptedand the variable cost per unit of special order

Q176.- DM price variance equation


A176.- Actual quantity purchased x (actual price - standardprice)

Q177.- DM quantity usage variance equation


A177.- Standard price x (actual quantity used - standard quantityallowed)

Q178.- DL rate variance


A178.- Actual hours worked x (actual rate - standard rate)

Q179.- DL efficiency variance equation


A179.- Standard rate x (actual hours worked - standard hoursallowed)

Q180.- Authoritative Standards vs Participative Standards


A180.- Authoritative standards are set exclusively bymanagement; whereas, Participate standards involvemanagement and employees

Q181.- What is a master budget?


A181.- A master budget documents specific short-term operatingperformance goals for a period of time usually less than ayear.

Q182.- What is the ultimate output of a master budget?


A182.- Pro forma financial statements

Q183.- Actual Authority


A183.- All authority that a principal expressly gives to an agentplus any authority that can reasonably be implied from theexpress grant

Q184.- Agent


A184.- One (agent) who acts on behalf of another (principal)

Q185.- Apparent Authority


A185.- Authority that a third party reasonably believes an agenthas based on the principal's holding the hange out asbeing the principal's agent.

Q186.- Appraisal Rights


A186.- Shareholders who are dissatisfied with most fundamentalcorporate changes have an opportunity to dissent anddemand that they corporation pay them the fair value oftheir shares rather than remain shareholders of afundamentally changed corporation.

Q187.- Articles of incorporation


A187.- Formation filing documents of a corporation and are filedwith the state in which the business is located.

Q188.- Articles of Organization


A188.- Formation filing documents of a Limited LiabilityCorporation.

Q189.- Authorized Shares


A189.- Shares described in the articles

Q190.- Business Judgment Rule


A190.- A director will not be liable to the corporation for actsperformed or decisions made in good faith, in a manner thedirector believes to be in the best interest of thecorporation, and with the care an ordinarily prudent personin a like position would exercise.

Q191.- Bylaws


A191.- Contains the rules for running the corporation. They arenot part of the articles of incorporation and are notrequired to be filed by the state.

Q192.- C Corporation


A192.- A corporation that is taxed as an entity distinct from itsowners.

Q193.- Certificate of Authority


A193.- Authority granted by a state authorizing a foreigncorporation to transact business within the state

Q194.- Charging Order


A194.- Court order used by a creditor of an individual partnermay obtain an interest against an individual partner's shareof profits.

Q195.- Closely held Corporation


A195.- The articles of incorporation can eliminate the board ofdirectors and provide that they shareholders shall have thepower of the board, but this is not typical expect in smallcorporations.

Q196.- Common Stock


A196.- Class of stock that will carry with it all rights of stockownership

Q197.- Confessing a Judgment


A197.- Admitting liability in a lawsuit.

Q198.- Consolidation


A198.- One or more corporations joining together to form a newcorporation.

Q199.- Corporate Opportunity Doctrine


A199.- If a director is presented with a business opportunity thatwould be of interest to his corporation, generally the dutyof loyalty prohibits the director from taking the opportunityhimself.

Q200.- Corporation


A200.- Legal entity distinct from its owners and managers. Theyare created by complying with a state incorporationstatute.

Q201.- Corporation by Estoppel


A201.- Under the estoppel doctrine, a party who treats abusiness as if it were a validly formed corporation will beestopped (legally barred) from claiming in a legalproceeding that the corporation was not validly formed.- This applies to third parties who treat the business as acorporation as well as to the business itself

Q202.- Cumulative Preferred Shares


A202.- Shares with a preference usually are entitled to a fixedamount of money before distributions can be made withrespect to nonpreferred shares. With cumulative preferredshares, if a dividend

Q203.- De Facto Corporation


A203.- If all the requirements for incorporation are not met, thebusiness might still be treated as a corporation (andprotect its owners, officers, and directors from personalliability).- If the incorporators made a good faith attempt toincorporate, and operated as if they had incorporated, thebusiness will be treated as a corporation in all respects,except the state may bring an action challenging thecorporation's status.

Q204.- De Jure Corporation


A204.- If all the requirements for incorporation are met, thecorporation is said to be "de jure" and its existence will berecognized for all purposes

Q205.- Debt Securities


A205.- Debt Securities are bonds.- It represents a creditor-debtor relationship with thecorporation whereby the corporation has borrowed fundsfrom "outside investors" and promises to pay.

Q206.- Derivative Action


A206.- When a corporation has a legal cause of action againstsomeone but refuses to bring the action, the shareholdersmay have a right to bring a shareholder derivative action toenforce the corporation's rights.- Such an action may be brought against the director of thecorporation or outsiders.

Q207.- Directors


A207.- Individuals with the general authority and responsibilityfor management of the corporation. In most corporations,the board of directors delegates the power to run thecorporation on a day-to-day basis to the officers.

Q208.- Dissociation


A208.- Change in the relationship of the partners caused by anypartner ceasing to be associated in the carrying on of thebusiness. The remaining partners have the right tocontinue the business.

Q209.- Dissolution


A209.- Upon dissolution, the partnership is terminated and thebusiness must be wound up

Q210.- Dividends


A210.- Distribution of corporate profits as ordered by thedirectors and paid to the shareholders

Q211.- Domestic Corporation


A211.- Corporation incorporated within the state

Q212.- Equity Securities


A212.- Stocks - An instrument representing an investment in thecorporation whereby its holder becomes a part owner ofthe business.

Q213.- Fictitious Name Statutes


A213.- State laws that require persons conduction a businessunder an assumed name to file with the state the nameunder which the business is conducted and the real namesand addresses of all person conducting the business

Q214.- Fiduciary Duty


A214.- Duty of utmost loyalty and good faith owed by an agent toher principal

Q215.- Foreign Corporation


A215.- Corporation doing business in a state other than its stateof incorporation

Q216.- Fundamental Changes


A216.- Issues that might fundamentally change the nature of theentity

Q217.- General Partner


A217.- Person in either a general or limited partnership withunlimited personal liability and the right to take part in themanagement of the business.

Q218.- Greenmail


A218.- When a corporation is faced with the prospect of beingtaken over and the BOD wants to resist the takeoverattempt, it will pay the person or company attempting thetakeover to abandon its takeover attempt

Q219.- Incorporator


A219.- The party responsible for forming the corporation byfiling articles of incorporation with the state.

Q220.- Indemnification


A220.- Duty of a business entity to reimburse those properlyacting on behalf of the entity for losses incurred.

Q221.- Issued Shares


A221.- The corporation issues some or all of the authorizedshares.

Q222.- Joint and Several Liability


A222.- Liability whereby creditors may sure partners jointly orsue partners individually

Q223.- Joint Venture


A223.- An associate of persons with the intent of engaging in asingle business venture for profit.

Q224.- Limited Liablity (of shareholders, limited partners, andLLC members)


A224.- The creditors are prevented from accessing the personalassets of the individual. Their liability is limited to theirinvestment in the entity.

Q225.- Limited Liability Company (LLC)


A225.- Form of business entity that offers its owners (calledmembers) one of the main advantages of the corporateform of business (ie they are not personally liable for theobligations of the company) and all of the tax advantagesof a partnership.- It is a hybrid business organization that combinescharacteristics of corporations, partnerships, and limitedpartnerships.

Q226.- Limited Liability Partnership (LLP)


A226.- An association of 2 or more persons who agree to carryon as co-owners a business for profit.- An LLP differs from a general partnership in that a partnerin an LLP is not personally liable for the obligations orliabilities of the partnership arising from errors, omissions,negligence, malpractice, or the wrongful acts committed byanother partner or by an employee, agent, orrepresentative of the LLP. Neither are the partners liablefor partnership contracts.

Q227.- Limited Partner


A227.- Partner with limited liability as to his personal assets,risking only his investment in the limited partnership.- A limited partner is not an agent of the partnership.

Q228.- Limited Partnership


A228.- A partnership made up of one or more general partnersand one or more limited partners.

Q229.- Locking up the Crown Jewels


A229.- When a corporation is face with the prospect of beingtaken over and the board of directors wants to resist thetakeover attempt, it will give a third party an option topurchase the company's most valuable assets.

Q230.- Members


A230.- Owners of a limited liability company.

Q231.- Merger


A231.- Involves one or more corporations merging into anothercorporation.- One corporation survives the merger and continues inexistence and the other merging corporations cease toexist following the merger.

Q232.- Noncumulative Preferred Shares


A232.- Shares with a preference are usually entitled to a fixedamount of money before distributions can be made withrespect to nonpreferred shares.- Unless the dividend is cumulative the right to a dividendpreference is extinguished if it is not declared for that year.

Q233.- Officers


A233.- Parties elected by the board of directors to managed thecorporation on a day-to-day basis.- They are agents of the corporation.

Q234.- Outstanding Shares


A234.- Shares in the shareholders hands

Q235.- Par Value


A235.- Specific face value placed on stock

Q236.- Piercing the Corporate Viel


A236.- In some circumstances, the courts will hould theshareholders, officers, or directors of a corporation liablebecause the legislative privilege of conducting business incorporate form is being abused.

Q237.- Preemptive Rights


A237.- When a corporation proposes to issue additional sharesof stock, current shareholders often want to purchasesome shares in order to maintain their proportional votingstrength through special rights referred to as "preemptiverights" that must be granted in the articles of incorporation

Q238.- Preferred Stock


A238.- Ownership interest in a company that is preferred insome manner (dividends or assets) over the commonstockholders in the case of liquidation.

Q239.- Promoter


A239.- Individuals who form a corporation. Responsible for theprocurement of commitments for capital that will be usedby the corporation after formation.- Promoters enter into contracts with third parties who areinterested in becoming shareholders and might also enterinto contracts for goods or services to be provided to thecorporation once it’s formed.

Q240.- Proxy


A240.- Written authorization given to third parties for thepurposes of voting shares on behalf of the shareholder.

Q241.- Quorum


A241.- Minimum number of parties that must be present for avalid vote or transaction

Q242.- Registered Agent


A242.- The person on who process may be served if the limitedpartnership, LLC, or corporation is sued.

Q243.- Revised Model Business Corporation Act (RMBCA)


A243.- Uniform law governing corporations that has beenadopted by a slight majority of the states

Q244.- Revised Uniform Limited Partnership Act (RULPA)


A244.- Uniform law governing limited partnerships that has beenadopted by a majority of the states

Q245.- Revised Uniform Partnership Act (RUPA)


A245.- Uniform law governing partnerships that has beenadopted by a majority of the states

Q246.- S Corporation


A246.- Corporation electing to be taxed like a partnership andyet retaining other advantages of the corporation form

Q247.- Scorched Earth Policy


A247.- When a corporation is faced with the prospect of beingtaken over and the board of directors wants to resist thetakeover attempt, it will sell off assets or take out loansthat would make the company less financially attractive.

Q248.- Self-Tender


A248.- When a corporation is faced with the prospect of beingtaken over and the board of directors wants to resist thetakeover attempt, it will make an offer to acquire stockfrom its own stockholders and thus retain control in orderto prevent a takeover.

Q249.- Share Exchange


A249.- Transaction in which one corporation acquires of alloutstanding shares of one or more classes of stock ofanother corporation.- Both corporations continue to exist as separate entities.

Q250.- Shareholder/Stockholder


A250.- Party owning an interest in a corporation. Has a limitedright to manage.

Q251.- Shark Repellant

A251.- When a corporation is faced with the prospect of beingtaken over and the board of directors wants to resist thetakeover attempt, it will amend the articles of incorporationor bylaws to make a takeover more difficult.

Q252.- Short-Form Merger

A252.- A merger whereby a parent corporation owning 90% ormore of a subsidiary corporation may merge the subsidiaryinto the parent without the approval of the shareholders ofeither corporation or the approval of the subsidiary'sboard.

Q253.- Sole Proprietorship

A253.- One person owns the business and manages all of itsaffairs. The sole proprietor is not considered an entityseparate from the business.

Q254.- Statement of Authority

A254.- Document filed with the secretary of state, stating that thepartnership has expanded or curtailed a partner's authorityto enter into transactions on behalf of the partnership.- However, the filing of a limitation does not give thirdparties constructive knowledge of the limitation.

Q255.- Statement of Denial

A255.- A partner listed in a filed statement of partnershipauthority may effectively deny her authority by filing astatement of denial with the secretary of state.

Q256.- Stock Dividends

A256.- Dividends in the corporation's "own authorized butunissued shares"

Q257.- Stock Subscriptions

A257.- Contracts committing parties to the purchase of stock.

Q258.- Treasury Shares

A258.- Issued shares that are sometimes repurchased by thecorporation (called "issued but not outstanding").

Q259.- Ultra Vires Act

A259.- An unauthorized act. Under the RMBCA, a corporationmay include a clause in its articles state the businesspurpose for which the corporation was formed.- A number of states require a purpose clause.- If a corporation undertakes business activities outsidethe clause (or outside the business permitted by statute) itis said to be acting "ultra vires" and may be challenged byadversely affected parties

Q260.- Unlawful Distribution

A260.- A distribution that causes a corporation not to be able topay its debts as they become due in the regular course ofbusiness or causes the corporation's total assets would beless than its total liabilities

Q261.- Voting Agreements

A261.- Shareholders agree among themselves to vote theirshares as the majority of signers directs

Q262.- Voting Trusts

A262.- An agreement of shareholders under which all the sharesowned by the parties to the agreement are transferred to atrustee, who votes the shares and distributes the dividendsin accordance with the provisions of the voting trustagreement.

Q263.- Watered Stock

A263.- Stock that is issued in exchange for property worth lessthan the par value of the stock (the difference between thepar value and the value of the property is deemed to be"water")

Q264.- White Knight

A264.- When a corporation is faced with the prospect of beingtaken over and the board of directors wants to resist thetakeover attempt, it will find a company that the directorswant to merge with.

Q265.- Winding Up

A265.- Liquidation that involves the process of collecting thecorporate or partnership assets, paying the expensesinvolved satisfying creditors' claims, and distributing thenet assets of the business to the appropriate party.

Q266.- What is a joint venture?

A266.- Association of persons or entities with the intent ofengaging in a single business venture for profit.

Q267.- What is necessary to form a general partnership?

A267.- (i) two or more persons- (ii) who agree (expressly or impliedly)- (iii) to carry on as co-owners of a business for profit.

Q268.- When is it necessary for a general partnership agreementto be in writing under the Statute of Frauds?

A268.- When the partners want to enforce an agreement toremain partners for longer than a year.

Q269.- In a partnership, how will partners share profits and/orlosses?

A269.- Unless partners provide otherwise, profits and losses willbe split equally.

Q270.- What are the rights in partnership property?

A270.- 1- Not assignable or mortgageable by partner individually.- 2- Not subject to attachment by individual partner'screditors or for alimony.- 3- Rights vest in surviving partners upon death.

Q271.- What are the rights in partnership interest?

A271.- a)interest is assignable- b)assignee has rights to partner's profit share- c)assignee has no management rights- d)judicial dissolution- e)creditors may attach a partner's interest (chargingorder)- f)upon death, heirs entitled to deceased partner's profitshare.

Q272.- What is the effect of a partner transferring his interest inthe partnership without consent of other partners?

A272.- The transfer does not make the assignee a partner.- The transfee only has the right to receive the assignor'sdistributions.

Q273.- What are the rights of partners?

A273.- 1- Rights in partnership property- 2- Rights in partnership interest- 3- Right to indemnification and contribution- 4- Right to inspect books and records- 5- Right to bring legal action against partnership.

Q274.- Can a limited partnership be formed with limited liabilityfor all partners?

A274.- No

Q275.- What are similarities between a limited partnership and acorporation?

A275.- Both are created under a state statue and require filingwith the state for creation.

Q276.- How are profits and losses allocated among partners?

A276.- Unless there is an agreement between the partners,profits/losses will be allocated in proportion to the value ofeach partners' contributions.

Q277.- Are corporations governed by statute?

A277.- Yes

Q278.- What items MUST be included in the articles ofincorporation?

A278.- 1) Name of corporation- 2) Names and address of the corporation's registeredagent (on whom process may be served if the corp is sued)- 3) The names and addresses of each of the incorporators- 4) The number of shares authorized to be issued- 5) One or more classes of shares must have unlimitedvoting rights.

Q279.- What are the reasons for piercing the corporate veil(disregard of corporate entity)?

A279.- 1) Commingling personal funds with corporate funds- 2) Inadequate capitalization- 3) Committing frauds on existing creditors

Q280.- In order to make a fundamental corporate change, mustthere be a unanimously board approved resolution?

A280.- NO

Q281.- True or False:- In order to make a fundamental corporate change, theshareholders must be given notice and an opportunity tovote on the change.

A281.- TRUE

Q282.- True or False:- For a fundamental corporate change, at least a majority ofall outstanding shares must be cast in favor of approval ofthe change.

A282.- TRUE

Q283.- What are the types of fundamental changes?

A283.- (D) Termination of a corporation/dissolution- (A) Amendments to the articles of incorporation- (M) Merger, consolidation, and share exchange- (S) Transfer of assets outside the regular course ofbusiness (SALE, lease or exchange)

Q284.- Once a dividend is declared, is a shareholder consideredan unsecured creditor?

A284.- Yes

Q285.- What are the Qualitative Characteristics of Accounting?

A285.- 1.Understandability- 2. Usefulness. What are the characteristics ofUsefulness?

Q286.- What are the Objectives of Financial Reporting?

A286.- 1. Provide Information useful for investment and creditdecisions- 2. Provide information useful for assessing cash flowprospects (Amount, timing, uncertainties)- 3. Provide Information about the enterprise's resources,claims to those resources, and changes therein

Q287.- What are the most authoritative sources of guidance inthe Hierarchy of GAAP?

A287.- Statements of Financial Accounting Standards andInterpretations, APB Opinions, and Accounting ResearchBulletins

Q288.- What are the pervasive constraints to FinancialReporting?

A288.- Benefits outweigh the associate costs- Materiality

Q289.- Revenue Recognition criteria

A289.- Revenue must be recognized when both earned (indicatesthe transfer of risk and that substantially all work has beencompleted) and realized or realizable.

Q290.- What is the matching principle?

A290.- Expenses should be recorded in the same period as theirrelated revenues

Q291.- How is full disclosure achieved in financial reporting?

A291.- Through the notes to the financial statements whichcontain additional information considered important forachieving the objectives of financial reporting.

Q292.- What is the principle of conservatism?

A292.- Conservatism governs that gains should be deferred untilthey are both earned and realized or realizable, not solelywhen cash has been received. However, probably lossesshould be recorded immediately as long as it is reasonablyestimable.

Q293.- Comprehensive income

A293.- All income to the entity excluding exchanges withowners.- Net Income- +/- Pension changes in the funded status- Unrealized gains and losses on AFS securities- Foreign currency translation adjustments- Effective portion of cash flow hedges

Q294.- Changes in which balance sheet accounts result inrevenues? expenses?

A294.- Revenues result from an increase in assets or a decreasein liabilities

Q295.- What is the essential quality of an asset?

A295.- An asset signifies that the item will provide futurebenefits and therefore to comply with the matchingprinciple it must amortize these costs of future periodsbenefits.

Q296.- Gross Concept

A296.- Amounts are recorded in their entirety. This applies toexpenses and revenues which are recorded in whole andthen netted together in order to find income fromcontinuing operations.

Q297.- Single Step Income Statement

A297.- Total Expenses are subtracted from

Q298.- Accounting Costs

A298.- Explicit costs of operating a business (e.g. purchases ofinput services)

Q299.- Accounting Profit

A299.- Difference between total revenue and total explicit costs.(no allowance for opportunity costs or other implicit costs)

Q300.- Aggregate Demand

A300.- Maximum quantity of all goods and services thathouseholds, firms, and governments are will and able topurchase at any given price.

Q301.- Aggregate Supply

A301.- Maximum quantity of all goods and services thatproviders are willing and able to produce at any givenprice.

Q302.- Average Fixed Cost (AFC)

A302.- Total fixed cost(TFC)/total output or quantity. AFCdeclines as Output increases.- AFC = TFC/Q

Q303.- Average Product (AP)

A303.- Total product (output) divided by the number of units ofthe variable input required to produce that output level.

Q304.- Average Revenue (AR)

A304.- Total Revenue divided by total output.

Q305.- Average Total Cost (ATC)

A305.- Total cost divided by total output or quantity- ATC = TC/Q

Q306.- Average Variable Cost (AVC)

A306.- Total variable cost (TVC) divided by total output orquantity (AVC = TVC/Q). The average variable cost isconstant regardless of increase or decreases in output.

Q307.- Balanced Budget

A307.- Where taxes and other governmental revenues equalgovernment spending.

Q308.- Best Cost Strategy

A308.- Competitive strategy that combines cost leadershipstrategies with differentiation strategies to give customershigher value for their money.

Q309.- Boycott

A309.- Organized group refusal to conduct market transactionswith a target group or individual (using only socialpressure, not legal obligation).

Q310.- Budget Deficit

A310.- When taxes and other governmental revenues are lessthan governmental spending.

Q311.- Budget Surplus

A311.- When taxes and other governmental revenues are greaterthan government spending.

Q312.- Business Cycle

A312.- Rise and fall of economic activity (GDP) relative to thelong-term growth trend of the economy.

Q313.- Cartel

A313.- A group of firms acting together to coordinate outputdecisions and control prices so that the joint profit of themembers of the cartel will be maximized. The cartel willattempt to create a monopoly.

Q314.- Compensating Balance

A314.- A required minimum amount of funds (10 - 20%) that afirm received a loan or line of credit must keep in a non-interest bearing checking account at the bank.

Q315.- Competitive Strategies

A315.- 1) Cost leadership focused on a broad rang of buyers- 2) cost leadership focused on a narrow range of buyers- 3) product differentiation focused on a broad range ofbuyers- 4) product differentiation focuses on a narrow range ofbuyers- 5) best cost

Q316.- Complements/Complementary Products

A316.- Products that are usually consumed jointly. They arerelated such that a decrease in the price of one product willcause an increase in the demand of the other product.

Q317.- Constant Returns to Scale

A317.- The state in which the long-run average total costs staysthe same as the quantity of output produced increases ordecreases

Q318.- Consumer Price Index (CPI)

A318.- An index that is used to adjust for inflation. It is designedto measure the impact of price changes on the cost of atypical basket of goods purchased by urban consumerhouseholds.

Q319.- Contractionary Monetary Policy

A319.- Reduction of the money supply by the Fed.

Q320.- Core Competency

A320.- Fundamental knowledge, ability, or expertise in a specificsubject area or skill set.

Q321.- Cost Leadership Strategy

A321.- A competitive strategy that emphasizes lowest overallcost.

Q322.- Cost Push Inflation

A322.- Inflation caused by reductions in short-run aggregatesupply

Q323.- Country Risk

A323.- Risk of political and economic uncertainty in a foreigncountry that affects the value of loans or investments inthat country.

Q324.- Covered Interest Arbitrage

A324.- In an interest arbitrage transaction, the foreign exchangerisk can be covered (coverage interest arbitrage) if, at thesame time the investor exchanges the domestic currencyfor the foreign currency to make the foreign investment,the investor also engages in a forward sale of an equalamount of the foreign currency to coincide with thematurity of the investment.

Q325.- Cross Elasticity of Demand

A325.- The percentage change in the quantity demanded of onegood divided by the percentage change in the price of arelated good.

Q326.- Cross Elasticity of Supply

A326.- Percentage change in the quantity supplied of one gooddivided by the percentage change in the price of a relatedgood.

Q327.- Cross Hedging

A327.- Hedging the exposure in one currency by the use offutures, forwards, or other contracts in a second currencythat is correlated with the first currency.

Q328.- Currency Appreciation

A328.- Strengthening of a currency in relation to anothercurrency. Appreciation occurs when, because of a changein currency exchange rates, a unit of currency buys moreunits of another currency.

Q329.- Currency Depreciation

A329.- The weakening of a currency in relation to anothercurrency. Depreciation occurs when, because of a chancein currency exchange rates, a unit of currency buys fewerunits of another currency.

Q330.- Currency Variability

A330.- Overall currency exposure can be assessed byconsidering each currency position together with thatcurrency's variability and the correlations among thecurrencies (how much two currencies tend to increase anddecrease together). The standard deviation of historicaldata serves as one measure of currency variability.Currency variability levels may change over time.

Q331.- Current Method

A331.- The current method of foreign currency translation is themethod required with a firm's books are maintained in itsfunctional currency. Remeasurement into the functionalcurrency is obviously then not required before thetranslation into the reporting currency can be done.Translation gains and losses are reported in othercomprehensive income.

A332.- Unemployment resulting from business cycles, especiallyrecessions or depressions.

Q333.- Deflation

A333.- Sustained decrease in the general prices of goods andservices

Q334.- Demand Pull Inflation

A334.- Demand pull inflation is inflation caused by increase inaggregate demand (i.e., by a rightward shift in theaggregate demand curve)

Q335.- Depression

A335.- Very severe recession.

Q336.- Derived Demand

A336.- Demand for the factors of production of a good caused bythe demand for a final good.

Q337.- Differentiation Strategy

A337.- A product differentiation strategy is a competitivestrategy that emphasizes the perception that their productsare better or have a unique quality that differentiates themfrom competing products.

Q338.- Discount rate

A338.- Interest rate that the Fed charges banks for short-termloans

Q339.- Under the expenditure approach, GDP is the sum of thefollowing four components:

A339.- (G) Government purchases of goods and services- (I) Gross private domestic Investment (nonresidentialfixed investment, residential fixed investment, and changein business inventories)- (C) Personal Consumption expenditures (durable andnon-durable goods, and services)- (E) Net Exports (minus imports)

Q340.- The income approach accounts for GDP is calculated asfollows:

A340.- (I) Income of proprietors- (P) Profits of corporations- (I) Interest (net)- (R) Rental Income- (A) Adjustments for net foreign income andmiscellaneous items- (T) Taxes (indirect business taxes)- (E) Employee compensation (wages)- (D) Depreciation (also known as capital consumptionallowance)

Q341.- Types of unemployment:

A341.- 1) Frictional unemployment- 2) Structural unemployment- 3) Seasonal unemployment- 4) Cyclical unemployment

Q342.- SWOT Analysis stands for:

A342.- Strengths- Weaknesses- Opportunities- Threats

Q343.- Factors the Shift Demand Curve

A343.- (W) Change in Wealth- (R) Changes in price of Related goods- (I) Changes in consumer Income- (T) Changes in consumer Tastes or preferences for aproduct- (E) Changes in consumer Expectations- (N) Changes in the Number of buyers served by themarket

Q344.- Factors that Shift Supply Curves:

A344.- (E) Changes in price Expectations of the supplying firm- (C) Changes in production Costs- (O) Changes in price or demand for Other goods- (S) Changes in Subsidies or taxes- (T) Changes in production Technology

Q345.- What is necessary to form a GP? (3)- The is no requirement of a writing, even if the GP is toown a land, Unless the GP is to last for __________.

A345.- 1. 2 or more persons- 2. who agree (expressly or impliedly)- 3. to carry on as co-owners of a business for profit- 4. more than ONE year.

Q346.- Name the basic characteristic of a partnership regardingthe duration.

A346.- LIMITED LIFE OF ENTITY

Q347.- When a solvent partnership is dissolved and its assetsare reduced to cash, the cash must be used to pay thepartnership's liabilities in the following order: 3 steps

A347.- 1. pay creditors/ split loss- 2. return capita/ split loss- 3 divide profits

Q348.- How partners will share profits and losses?

A348.- 1. will be split EQUALLY, unless provided otherwise,regardless of partner's contributions.- 2. if partner cannot contribute his share of losses, theremaining partners MUST make up the share on a pro ratabasis

Q349.- What are the rights of a partner in specific partnershipproperty?

A349.- 1. the partner has NO RIGHT to possess or transferexcept for partnership purposes.- Thus, the property is not subject to Personal Creditors'claims or ALIMONY.- However, it is subject to a surviving partner'ssurvivorship interest - it belongs to partnership.

Q350.- What is effect of a partner transferring his interest in thepartnership without the consent of the other partners?

A350.- 1. such transfer does not make the assignee a partner- (that can be done only with the consent of other partners)- 2. thus the transferee has no power to manage thepartnership, inspect books vote etc.

Q351.- Is it true that LP can be formed with limited liability for allpartners?

A351.- NO!- you need at least on GP who has unlimited personalliability for all partnership obligations.

Q352.- LLP is similar to GP. The differences are:

A352.- 1. Partners in LLP are not PERSONALLY LIABLE for Tortsof fellow partners, employees, agents.- 2. Liable for their own negligence and who under theirdirect control.- 3. Not personally liable for debts of the LLP. They are onlyliable to the extent of their capital contributions.

Q353.- LLP and LP _________ file with the Sate.- Generally in an LLP, there does not need to be a ______

A353.- MUST- GP

Q354.- What are similarities between a LP and a Corporation?

A354.- BOTH ARE CREATED UNDER A STATE STATUTE ANDREQUIRE FILING WITH THE STATE FOR CREATION.

Q355.- Corporations are governed by ___________

A355.- STATUTE

Q356.- ITEMS INCLUDED IN THE ARTICLES OFINCORPORATION

A356.- 1. the name of the corporation- 2. the name and the address of the corporation'sregistered Agent- 3. the name and the addresses of each of theincorporators- 4. the number of the shares authorized to be issued

Q357.- 1. Commingling personal funds with Corp.- 2. under capitalization- 3. committing fraud- Are the reasons for _________

A357.- piercing the Corp. Veil - courts will hold the shareholders,officers and directors liable

Q358.- Shareholders in the Corp. do not elect the _________, anddo not have the power to remove them.

A358.- OFFICERS

Q359.- Regarding the Fundamental Corp. Changes:- 1. The board must approve a resolution, but there is norequirement of ___________- 2. The shareholders must be given notice and anopportunity to vote on the change. At lease a majority of_____________ must be cast in favor of approval.

A359.- UNANIMITY- ALL OUTSTANDING SHARES

Q360.- Fundamental changes include:

A360.- 1, amendments to the articles of Incorp.- 2. Dissolutions -termination or a corporation- 3. mergers- 4. consolidations- 5. share exchanges- 6. Transfer of assets outside the regular course ofbusiness- Mnemonics :DAMS- Dissolution- Amendments to the articles- Mergers, consolidations and share exchanges- Sale of almost all the Corp's assets outside the regularcourse of business

Q361.- The Shareholders have the status of ___________ once adividend is declared.

A361.- UNSECURED CREDITOR

Q362.- Cumulative preferred dividends are exam favorite- _ they accumulate even if __________- No dividends can be paid to common shareholders until__________- No dividends are due until __________

A362.- NOT DECLARED- ALL CUMULATIVE DIVIDENDS ARE PAID- IT IS DECLARED BY THE BOARD OF DIRECTORS

Q363.- The shareholders can inspect books and record for___________, but shareholders can be denied inspectionfor __________

A363.- Proper purpose- Improper purpose

Q364.- Short-form merger where 90% if the stock is acquired isnot a __________ change

A364.- FUNDAMENTAL - no shareholders approval needed

Q365.- _________ is an option or right to purchase additionalshares of stock securities at a specified price; it does notrepresent indebtedness

A365.- WARRANT

Q366.- Each partner is entitled to an equal share of thepartnership profits and is chargeable with a share of thepartnership losses in ____________ to the allocationmethod described in the partnership agreement. If partnersagree to share profits other than ___________, losses willbe shared similar to _________, absent agreement to dootherwise.

A366.- PROPORTION- EQUALLY- PROFITS

Q367.- A formula for sharing losses will____________ to sharingprofits

A367.- NOT BE APPLIED

Q368.- What is a requirement for a corp. to achieve a successfulvoluntary dissolution?

A368.- A recommendation of dissolution by the board ofdirectors and approval by a majority of all shareholdersentitle to vote

Q369.- A cop. is a legally separate entity distinct form itsshareholders. To transfer interest in corp., one mustsimply ___________.- A partnerships( LP and GP) requires __________ totransfer interest in the partnership.- A limited liability company can follow ____________rules, depending on how it is taxed.

A369.- 1.SELL HIS/HER STOCK- 2. the consent of the other partners- 3. THE PARTNERSHIP OR CORP.

Q370.- A Corp., initial BYLAWS shall be adopted by _________ or_________ or the board of directors may ratify theincorporator's initial bylaws. Generally, the bylaws are therules of conduct for the corporation and are ________contained in the articles of incorporation as they areusually bulky.- The __________ typically note such items as the companyname, the comp. address, the names and the addresses ofpersons composing the initial board of directors, thenumber of authorized shares, the incorporator's name andaddress, and the registered agent's name and address,among other items.

A370.- 1. THE INCORPORATORS OR THE BOARD OFDIRECTORS- 2. NOT- 3. THE ARTICLES OF INCORPORATION

Q371.- What corp. can :- have more than 100 shareholders- have a nonresident alien as a shareholder- has a disadvantage of double taxation when- it pays dividends to its shareholders

A371.- C corp

Q372.- Answer YES or NO for PROPRIETORSHIP- 1. Tax- free distributions and contributions- 2. Earnings accumulate tax-free- 3. Not subject to personal holding tax- 4. No double taxation of income- 5. Single individual as management- 6. Corporation as member/multiple members allowed

A372.- PROPRIETORSHIP- 1. Yes- 2. Yes, pass through individuals but no entity tax- 3. Yes- 4. Yes- 5. Yes- 6. No

Q373.- Answer YES or NO for S CORP.- 1. Tax- free distributions and contributions- 2. Earnings accumulate tax-free- 3. Not subject to personal holding tax- 4. No double taxation of income- 5. Single individual as management- 6. Corporation as member/multiple members allowed

A373.- S CORP.- 1. Yes, under certain circumstances- 2. Yes, pass through individuals but no entity tax- 3. Yes- 4. Yes- 5. Yes- 6. No

Q374.- Answer YES or NO for C CORP.- 1. Tax- free distributions and contributions- 2. Earnings accumulate tax-free- 3. Not subject to personal holding tax- 4. No double taxation of income- 5. Single individual as management- 6. Corporation as member/multiple members allowed

A374.- C CORP.- 1. No- 2. No- 3.No- 4. No- 5. No- 6.Yes

Q375.- Answer YES or NO for LLPARTNERSHIP- 1. Tax- free distributions and contributions- 2. Earnings accumulate tax-free- 3. Not subject to personal holding tax- 4. No double taxation of income- 5. Single individual as management- 6. Corporation as member/multiple members allowed

A375.- LLPARTNERSHIP- 1. Yes- 2. Yes, pass through individuals but no entity tax- 3. Yes- 4. Yes- 5. Yes- 6. Yes

Q376.- What Require shareholder's approval and what not?- Dissolution- Purchase of 55% of another corp. stock- Merger

A376.- Dissolution and Merger Require shareholder's approval

Q377.- A __________ is an association of persons or entitieswith the intent of engaging in a Single Business Venturefor PROFIT

A377.- JOINT VENTURE

Q378.- ___________is the simplest form of business ownership.It is NOT considered an entity separate from the business;nothing needs to be file unless required by the state.

A378.- A SOLE PROPRIETORSHIP

Q379.- List major disadvantages and advantages of soleproprietorship.

A379.- disadvantages:- 1. is personally liable fro ALL obligations of the business.- 2. limited life- advantages:- 1. not double taxation- 2. sole decision maker

Q380.- The key difference between a Joint Venture and a GP isthe fact that JV is formed for __________.- JVs are treated as a Partnerships in most legal aspects

A380.- SINGLE TRANSACTION OR PROJECT OR RELATEDSERIES OF TRANSACTIONS

Q381.- A GP is similar to a sole proprietorship EXCEPT _______

A381.- that there are at least TWO partners

Q382.- List disadvantages and advantages of GP.

A382.- disadvantages :- 1. partners are personally liable for obligations of thepartnership- 2. Transfer of partners interest must be approved by ALLGPs.,- 3. limited life of the GP- Advantages:- 1. no double taxation

Q383.- All partnerships are assumed to be _________ unlessotherwise stated.

A383.- GP

Q384.- _________ is a change in the relationship of the partnerscaused by any partner ceasing to be associated in thecarrying on of the business.

A384.- DISSOCIATION

Q385.- In case of _________ - partners change but thepartnership may or may not continue.- In case of __________ business is wound up, then theentity is terminated.

A385.- DISSOCIATION- DISSOLUTION

Q386.- When a partner Dissociates, the partner's right toparticipate in management ceases.- Actual authority ends but __________ authority continuesuntil the third party given notice.

A386.- APPARENT

Q387.- Partners are ___________ for all contracts entered intoand All torts committed by other partners within the scopeof the partnership business or which are authorized.- Under ___________ liability , each partner is personallyand individually liable for the _________ amount of allpartnership obligations.

A387.- PERSONALLY LIABLE- JOINT AND SEVERAL- ENTIRE AMOUNT - 100%

Q388.- Each partner owes a _________ DUTY to GP and is boundto use P-p property and his best efforts for the benefit ofthe Partnership.

A388.- FUDUCIARY

Q389.- LLP ________ have a perpetual life, unless providedotherwise.

A389.- DOSE NOT

Q390.- Limited partners in LLP are like _________, theycontribute capital , but _________ participate in themanagement of the partnership.

A390.- SHAREHOLDERS- DO NOT

Q391.- Unlike a GP, if there is No agreement, Profit and Lossallocations in LP are based on ____________

A391.- CAPITAL CONTRIBUTIONS

Q392.- ________ is a form of business entity that offers itsowners ( called members) one of the main advantages ofthe corporate form of business - they are not personallyliable for the obligations of the company and all of the taxadvantages of a partnership - flow though taxation.

A392.- LIMITED LIABILITY COMPANY

Q393.- A LLC is a __________ business that combinescharacteristics of corporations, partnership and LP.

A393.- HYBRID

Q394.- Generally, ________ may participate in management ofLLC

A394.- ALL MEMBERS - each member will be an agent of theLLC.

Q395.- An LLC is formed by filing ___________ with the secretaryof state.

A395.- ARTICLES OF ORGANIZATION

Q396.- Voting strength of LLC members are _________ and isbased on ___________

A396.- NOT EQUAL- CAPITAL

Q397.- Profit and loss allocation for the LLC members is basedon __________ and is similar to LP.

A397.- CAPITAL- GP and LLP - is EQUAL , unless otherwise agreed

Q398.- List advantages and disadvantages of the LLC

A398.- Advantages: Limited liability of members, liable only forhis own torts- Disadvantages: may NOT transfer all of his interestwithout the consent

Q399.- _________ is a legal entity distinct from its owners -called Shareholders, and menages.

A399.- A CORPORATION

Q400.- Creation of the Corp. requires filing a document called____________ with the state.

A400.- THE ARTICLES OF INCORPORATION

Q401.- _________ do not have the power to manage the day-to-day operations of a Corp.- Management power is vested in ___________.- They usually delegate their power to run the day-to-dayoperations to __________, whom they select.

A401.- STOCKHOLDERS- DIRECTORS- OFFICERS

Q402.- List advantages (3) and disadvantage of Corp.

A402.- Advantages:- 1. Not personally liable- 2. perpetual life- 3. easy to transfer interest in the Corp. - sell- Double Taxation is main disadvantage

Q403.- The tax laws permit certain Corp. to elect to be Taxed likepartnerships and yet retain the other advantages of theCorp. form

A403.- S corp.

Q404.- There are number of restrictions on S Corp. (5)

A404.- 1. No more than 100 members- 2. Shareholders must be individuals, estates, or certaintrusts- 3. must be domestic corp.- 4. one class of stock- 5. foreign shareholders are not allowed.

Q405.- An agreement among the third party, the corp. and thepromoter that the third party will release the promoter andsubstitute the Corp.

A405.- NOVATION

Q406.- _____ are the rules for running the corp.

A406.- BYLAWS

Q407.- If the incorporators made a good Faith attempt toincorporate - the doctrine is called

A407.- De Facto

Q408.- Foreign corp. is a corp that is ___________- It must obtain a ____________ to transact business.

A408.- not incorporated within the state- Certificate of Authority

Q409.- Individually _________ have no right or power to act -they are not agents but do owe a fiduciary duty

A409.- DIRECTORS- CAN ACT AS A GROUP

Q410.- Corporations need _________ profits and losses amongtheir shareholders

A410.- NOT allocate

Q411.- GR, Shareholder ________ the right to a dividendUNLESS and until the dividend is __________ by the board.

A411.- DO NOT HAVE- DECLARED

Q412.- What is preemptive rights?

A412.- Right to purchase some shares to maintain theirproportional voting strength

Q413.- What is Dissenting shareholder appraisal rights?

A413.- Shareholder who is dissatisfied with most fundamentalcorp.- changes have an opportunity to "dissent" and demandthat the corp. pay them the Fair value of their shares ratherthan remain shareholders of a fundamentally changedcorp.

Q414.- A partnership that has no stated duration is called a__________

A414.- Partnership at will

Q415.- A Corp. may be authorized to- __________ its officers for liability incurred in a Suit ofStockholders.

A415.- INDEMNIFY

Q416.- a partnership that has no stated duration is called

A416.- a partnership at will

Q417.- A limited partnership and a corp. are both createdunder_______ and must __________

A417.- a statute- and must file a copy of their certificate with the properstate authorities.

Q418.- In general, the shareholders must approve any MERGERor CONSOLIDATION except for

A418.- a Short-form merger - if 90% of the stock was acquired.

Q419.- Economic profit =

A419.- revenue - explicit cost - implicit cost

Q420.- Short-Run Aggregate Supply Curve is ____________

A420.- UPWARD SLOPING

Q421.- Long-Run Aggregate Supply Curve is ____________

A421.- VERTICAL

Q422.- During a recession there is _______________ demand.- An Expansionary policy would ___________ gov.spending or ___________ taxes., both of which would___________ the level of aggregate demand.- An expansionary monetary policy would attempt to____________ interest rates.

A422.- insufficient aggregate- increase- cut taxes- increase demand- decrease

Q423.- In a MONOPOLISTICALLY competitive industry, firmsonly earn _________ profits in the long-run. When there isan equilibrium, a firm will operate INEFFICIENTLY withPrice _____________ than MR

A423.- NORMAL- GREATER- P>MR

Q424.- As FULL EMPLOYMENT approaches, demand for goodsand services is rising. This increased Demand usuallycauses and ___________ in Price level . The result is__________

A424.- INCREASE- INFLATION

Q425.- Price freezing would cause ___________

A425.- DEMAND TO EXCEED SUPPLY

Q426.- Reserve ratio =

A426.- RESERVES / TOTAL DEMAND DEPOSITS

Q427.- ____________ is the appropriate index for measuring thechanges in a COMPANY'S PURCHASING POWER

A427.- PPI or WHOLESALE INDEX

Q428.- The mopoly can increase profits by increasing output anddecreasing price as long as ___________. The firm willmaximize profits by continuing to the point at the givenoutput ___________

A428.- MR>MC- MR=MC

Q429.- Firms in a monopolistically competitive industry produce_________products, engage in _________ competition, andface a ____________ demand curve, there are__________to enter the market.

A429.- differentiated- non-price- downward sloping- NO barriers

Q430.- Firms in a porfectly competitive industry porduce a__________ product, engage in _________ competition,and face a ___________ demand curve, thereare__________ to enter the market.

A430.- standardized- price- perfectly elastic- NO barriers

Q431.- Induced investment is the investment made in aneconomy in response to ______________

A431.- CHANGES IN THE LEVEL OF NATIONAL INCOME

Q432.- If inflation in Russia is 10% and in US is 5% , the RussianRuble will___________

A432.- depreciate by 5% and- US $ appreciate by 5%

Q433.- If someone purchases a CALL option, he expects pricesto ____________- If someone purchases a PUT option, he expects prices to____________

A433.- RISE- DECREASE

Q434.- ___________ are the reduction in average total cost ofproduction when a firm expands plant production.

A434.- ECONOMIES OF SCALE

Q435.- Normal profit is

A435.- a cost of resources from an economic perspective- it is a point where, Revenue = Implicit + Explicit costs- Economic profit < accounting profit

Q436.- Net realizable value =

A436.- Sale value - separable costs

Q437.- Economic cost is

A437.- the sum of all explicit and implicit costs of the businessfirm

Q438.- Imputed costs are ________ costs; they are not knownand must be ________.

A438.- implied- estimated

Q439.- A normal profit is

A439.- a cost of resources from an economic perspective.- the amount necessary for the firm to be willing to keepthe resources deployed in the firm.

Q440.- The US balance of trade is decreased by

A440.- US imports.- A favorable balance of trade occurs when exports exceedimports.

Q441.- Natural rate of unemployment - is the rate that

A441.- occurs when there is no cyclical unemployment and theeconomy is producing its potential output

Q442.- Economic profit =

A442.- Total Revenue - Total costs

Q443.- The use of SL vs MACRS depreciation would result in?

A443.- a slightly lower net cash flow- lower NPV- less desirable investment

Q444.- A favorable debt-to-equity ratio means -?

A444.- a higher bond rating -> means lower interest rates forbonds being sold, which lowers the cost of capital forfuture bond issuances.- need to lower % of long-term debt.

Q445.- The marketability of investment-?

A445.- the ability to sell a security for its face market valuequickly

Q446.- What are general characteristics of debt and equityfinancing?- Flexibility- Tax deductibility- EPS Dilution- Increased Risk- Cost (high or low?)- Return (fixed or variable?)

A446.- Debt Equity- Flexibility no yes- Tax deductibility yes no- EPS Dilution no yes- Increased Risk yes no- Cost low high- Return fixed variable

Q447.- Aggressive WC management- more risk

A447.- ↑CL ratio to non-current liabilities- low current ratio- Focus on high profitability potential, despite the cost ofhigh risk and low liquidity

Q448.- Conservative WC Management- less risk

A448.- ↑CA ratio to non-current assets- high current ratio, long operating cycle

Q449.- Net working capital

A449.- (Current assets) - (Current liabilities)- Liquidity

Q450.- The average inventory level when the EOQ model andSafety Stock is used = ?

A450.- 1/2 of the EOQ + SS

Q451.- Absorption costing assigns the fixed costs as

A451.- a product costs.

Q452.- Variable costing considers the fixed costs as

A452.- expense in the period incurred

Q453.- A/R are at the optimal level when

A453.- Carrying costs = Opportunity costs

Q454.- Annual carrying cost for inventory =

A454.- average inventory x Carrying cost per unit

Q455.- Bond/ stock order in case of default (5 items)

A455.- 1Corporate bonds- 2 Convertible bonds- 3 Preferred stock- 4 Convertible preferred stock- 5 Common stock

Q456.- Weighted Average Cost Of Capital - WACC=

A456.- All else equal, the WACC of a firm increases as the beta and rate ofreturn on equity increases, as an increase in WACC notes a decreasein valuation and a higher risk.- The WACC equation is the cost of each capital componentmultiplied by its proportional weight and then summing:= E/V × Re + D/V × Rd × (1- Tax)- Where:- Re = cost of equity- Rd = cost of debt- E = market value of the firm's equity- D = market value of the firm's debt- V = E + D- E/V = percentage of financing that is equity- D/V = percentage of financing that is debt- Tax = corporate tax rate

Q457.- What Does Capital Structure Mean?

A457.- A mix of a company's long-term debt, specific short-term debt,common equity and preferred equity. The capital structure is how afirm finances its overall operations and growth by using differentsources of funds.- Debt comes in the form of bond issues or long-term notes payable,while equity is classified as common stock, preferred stock orretained earnings. Short-term debt such as working capitalrequirements is also considered to be part of the capital structure.- A company's proportion of short and long-term debt is consideredwhen analyzing capital structure. When people refer to capitalstructure they are most likely referring to a firm's debt-to-equity ratio,which provides insight into how risky a company is. Usually acompany more heavily financed by debt poses greater risk, as thisfirm is relatively highly levered.

Q458.- Cost of capital decrease, The return on capital

A458.- increase

Q459.- Debt carries the_______cost of capital and is tax_______

A459.- lowest- deductable

Q460.- The higher the tax rate the incentive to use _______financing

A460.- Debt

Q461.- Classify risk into two broad categories -

A461.- D Diversifiable risk- U Unsystimatic ( non-market specific)- N Nondiversifiable Risk- S Systematic (Market)

Q462.- A Poison pur clause is a covenant that obliges theborrower to

A462.- to repay the bonds if a large quantity of common stock isheld by a single investor and the bond rating isdowngraded.

Q463.- Opportunity costs are part of _________ cost.- Explicit costs are ___________ costs.

A463.- IMPLICIT- NOT IMPLICIT

Q464.- Calculate the DISCOUNTED NET-OF-TAX amount thatrelates to disposal of the asset sold at GAIN.

A464.- Cash received- less- Gain amount X PFV of 1 yr 1 X tax rate

Q465.- To RANK different investments use __________

A465.- PROFITABILITY INDEX

Q466.- CONTRIBUTION MARGIN =

A466.- SALES REV - VARIABLE COSTS

Q467.- CAPITAL STRUCTURE is defined as _________

A467.- the % of debt, preferred stock, and common stock usedfor financing a firms assets.

Q468.- The firm's MARGINAL cost of capital is __________

A468.- a Weighted average of the investors' required returns ofdebt and equity

Q469.- When Corp. is earning EXCESS PROFITS. __________STOCK acts more like ____________

A469.- PARTICIPATING PREFERRED STOCK- EQUITY THAN CUMULATIVE PREFERRED STOCK

Q470.- Cost of retained earnings =

A470.- Dividend 1 / Market Price of the stock +G

Q471.- An indenture is a legal document specifying the_______________

A471.- terms and conditions of a bond issue

Q472.- The firm's FINANCIAL LEVERAGE ___________ whenDEBT-TO-EQUITY RATIO______

A472.- increases- INCREASES,- Repurchase of the Treasury stocks - Decreases EQ.

Q473.- If a company ignores the payment discount (2/10, net 30)what is daily interest rate it is paying ?

A473.- 1. Discount / 100%- discount- 2% / 98%

Q474.- To calculate the cost of a NEW common stock issue use___________Dividend

A474.- Next period dividend -- Current year dividend X (1+G rate)

Q475.- Bonds are issued at PREMIUM if _______

A475.- STATED RATE IS > THAN YIELD TO MATURITY (EFFECTIVE RATE)

Q476.- CAPM Capital Asset Pricing Model =- - is used to estimate the required return on a firm's costof Equity.

A476.- Rfree + Beta (Rmarket - Rfree)

Q477.- A noncollectable bond is _________ risky and sold at___________ yield (price)

A477.- less- lower

Q478.- LETTERS OF CREDIT reduce the risk of loss to Exportersof goods. This is accomplished by having the bankguarantee payment to the ___________. A draft is drawn onthe _________ .

A478.- EXPORTER- IMPORTER

Q479.- Cost per check cleared =

A479.- DSi- D- days saved- S - size of the check- i - daily Interest rate %/360OR- Days saved x Check perDay x Annual % rate

Q480.- CURRENT ASSETS ARE :

A480.- CASH- MRK SEC- A/R- INVENTORY

Q481.- Gross margin =- GM ratio =

A481.- SALES - COGS- GM / SALES

Q482.- Firm's average GROSS RECEIVABLE BALANCE = ?

A482.- average daily sales x average collection period

Q483.- Transfer amount ( principal ) =

A483.- INTEREST EARNED / INTEREST RATE

Q484.- QUICK or ACID-TEST RATIO =

A484.- (CA – INVENTORY) / CL

Q485.- Cash conversion cycle

A485.- Payable – inventory - receivable - collect= Inventory conversion period + Receivables conversionperiod – Payables conversion period

Q486.- Cash conversion cycle

A486.- = inventory conversion period (low)- +Receivable collection period (low)- - payables deferral period (high - delay)

Q487.- inventory conversion period

A487.- average inventory / average cost of sales per day

Q488.- Receivable collection period

A488.- Days sales outstanding = average. Res/ average. salesper day

Q489.- payables deferral period

A489.- average payables / average purchases per day

Q490.- Days sales outstanding DSO (Receivable collectionperiod)?

A490.- DSO = (average Receivables/Sales)×DaysOR- Receivable collection period= average Res/ average salesper day

Q491.- DSO Days sales outstanding?- used for

A491.- 360/ A/R Turnoveror- average A/R / (credit sale / 360 )oraverage A/R / average sales per day- The average # of days required to collect A/R

Q492.- CCC (in days) = Inventory conversion period +Receivables conversion period – Payables conversionperiod

A492.- "Payables conversion period" (or "Days payablesoutstanding") refers to the time "accounts payable" is held(from inventory delivery until cash disbursal).- "Inventory conversion period" (or "Days inventoryoutstanding") refers to the time inventory is held(beginning at the same moment as the "payablesconversion period," i.e. the inventory delivery, and endingwith its sale for a receivable).- "Receivables conversion period" (or "Days salesoutstanding") refers to how long inventory is held (fromthe end of the "inventory conversion period," i.e. the saleof inventory, until cash collection).

Q493.- Payables conversion period =

A493.- (average Accounts Payable / [+∆inventory +COGS])×365 =days holding accounts payable until it's all paid in cash(i.e. time before inventory growth hits cash)= average payables / average purchase per day

Q494.- Inventory conversion period =- OR Inventory T/Over in Days

A494.- average Inventory / (COGS /365)OR- (average Inventory/COGS)×365 = days holding inventoryuntil it's all sold- The average # of days required to sell inventory. ORaverage days sales in Inventory

Q495.- Receivables conversion period =

A495.- average Accounts Rec / (net Sales/ 365)OR- 365/ A/R Turnover= days holding receivables until the last cash collection

Q496.- Inventory Turnover- is indicator of __________- The higher the T/Over ->- It would assist w/identifying______________

A496.- COGoodsS / average Inventory- How quickly inventory is sold is an indicator of Co'sperformance.- The higher the T/Over -> the better the performance- It would assist w/identifying slow-moving & obsoleteinventory.- average Inventory = (Beg + End)/2- End Inventory = Beg + Purchases - GOGS

Q497.- Receivables Turnover Ratio =- is indicator of ____________- Faster T/Over gives credibility to the ______________- Low T/Over -______________- High T/Over -______________

A497.- Net sales / Average net receivables- Quality of A/R and the success of the firm in collectingoutstanding A/R.- Faster T/Over gives credibility to the Current and Acid-Test ratios.- Low T/Over - Collection problems- High T/Over - Collections are good

Q498.- (Days Sales Outstanding) Average Collection Period =

A498.- 365 / Receivables Turnover Ratio= average AR /credit sales/ 360

Q499.- days sales in Inventory- OR average age of inventory =

A499.- 360 / inventory turnover,- Inventory T/over=COGS/ average inventory= (average inventory / COGS) × 360 = average Inventory /sales cost per day

Q500.- Residual income RI =

A500.- Reported net income- (Desired rate of return x Invested Capital)

Q501.- return on sale OR NET Profit margin=- GROSS (profit) margin =

A501.- net income / sales revenue.- GROSS (profit) margin = (sales - COGS) / sales

Q502.- capital turnover

A502.- sales / Capital

Q503.- 1.Cost of common stock - Ks?- 2. Cost of preferred stock ?- 3.Cost of retained earnings =

A503.- Dividend / Net Proceeds + G,- G - is a growth rate- Net Proceeds = Price x (1-flotation %) - other charges- 2. Dividend 1 / Market price (1-flotation%) - underpricing- 3.Dividend 1/ Market Price of the stock +G

Q504.- Current Ratio- is indicator of ____________- Selling Inventory on Account will _________ this ratiob/se ______________- The higher - ________

A504.- CA/CL- The ability to generate cash to meet short-termobligations- Selling Inventory on Account will INCREASE this ratiob/se A/R > Inventory => CA ↑- The higher - the better

Q505.- Safety stock =

A505.- (max lead time - average lead time) x usage,- Usage = annual demand / business days

Q506.- Reoder Purchase point =

A506.- average lead time x usage + safety stock

Q507.- Degree of total leverage =

A507.- = % change in NI / % change in Sales= DOL x DFL= Degree of Operating Leverage x Degree of FinancialLeverage

Q508.- Annual Percentage Rate - APR

A508.- By law, credit card companies and loan issuers mustshow customers the APR- For example, a credit card company might charge 1% amonth,- but the APR is 1% x 12 months = 12%.- APR= Effective periodic rate * # of periods

Q509.- compound interest

A509.- FV = Principal × (1+i)^n,- where n = number of periods- i - PERIODIC RATE - annual rate/ n

Q510.- DOL = ?

A510.- (% Δ in EBIT) / (% Δ in SALES)- High degree of operatingleverage - firm's profits more sensitive to Δ in SALES- Operating leverage involves using a large proportion offixed costs to variable costs in the operations of the firm.The higher the degree of operating leverage, the morevolatile the EBIT figure will be relative to a given change insales, all other things remaining the same.

Q511.- DFL=?

A511.- [% Δ in EPS (or % Δ in NI)] / (% Δ in EBIT)

Q512.- Effective Interest Rate =

A512.- Interest / net proceeds,- net proceeds = principal - Interest- COMPENSATINGbalance

Q513.- To calculate factoring the receivables -

A513.- 1. annual cost = interest + fees to factor - savings- 2. annual cost / usable funds

Q514.- Cost of factoring =

A514.- (interest charged + monthly fees *12 - $$ saved)/ $$$received

Q515.- Discount CF from Depreciation of an asset

A515.- CF= cost of an asset x MACRS depreciation rate x tax ratex PV factor of 1

Q516.- the cost of the bond =

A516.- interest / $$ received- After tax cost = interest / $$ received * ( 1-tax rate)- Or- [interest payment - tax savings ( interest X tax rate)] / $$received

Q517.- The effective annualized % cost of financing =

A517.- {[(Face value + transaction costs)/ borrowed amount]- 1}x periods- (interest + transaction costs) / usable funds × periods

Q518.- What is the calculation for the interest payment on abond?

A518.- Stated rate of interest X Par value

Q519.- ROI is affected by

A519.- Profit margin= NI / Sales- and- Capital Turnover rate = Sales/ Invested capital- ROI = NI / average invested Capital

Q520.- Reorder Purchase point =- SStock =

A520.- = average lead time x usage + safety stock (SS)= (Max - average lead time) x usage

Q521.- The Effective Annualized % cost of financing =

A521.- ((Face value + transaction cost) / amount borrowed) - 1) xperiods

Q522.- A bank charges a rate of 1.5% per month on their creditcard. What Effective Annual Rate (EAR) are they chargingtheir customers.

A522.- EAR is equal to (1+ APR/12) to the 12th power minus 1.(1+.18/12) to 12th power minus 1.- 19.6% APR is the periodic rate (1.5) times the number ofperiods per year (12) or 18%

Q523.- NPV vs IRR methods

A523.- NPV - highlights amounts, more conservative, assumesreinvestment at hurdle rate- IRR - focuses decision makers on %, more aggressive,assumes reinvestment at IRR, less reliable.

Q524.- Pay Back period (present value factor) =

A524.- net incremental investment/ net annual cash flows- No consideration of time

Q525.- When do you accept IRR?

A525.- when IRR>hurdle (targeted RRR) rate- Reject when IRR< or = hurdle (targeted) rate- IRR> RRR when NPV =0

Q526.- Compute after tax cash flow

A526.- = Pre-tax cash flow x (1- tax rate)

Q527.- 4 steps to calculate NPV

A527.- 1. Compute after tax cash flow= Pre-tax cash flow x (1- taxrate)- 2. Add depreciation benefit = Depreciation x tax rate- 3. Multiply result by appropriate present value of annuity.- 4 Subtract initial Cash outflow- (Investment)

Q528.- Pay back period =

A528.- Net initial investment / Increase in annual net after - taxcash flow- or = Net initial investment / (operating savings + savingsgenerated by depreciation)= Net initial investment / [Operating savings x (1-tax rate) +depreciation exp x tax rate]- Increase in annual net after - tax cash flow = initialinvestment / payback period

Q529.- When do you accept NPV?

A529.- Investment should be made if NPV >0.- If company has unlimited funds- NPV > or =0.

Q530.- NPV is superior to IRR because

A530.- it is flexible enough to consistently handle either unevencash flows or inconsistent rates of return for each year ofthe project.

Q531.- Accounting rate of return =

A531.- (annual savings - Depreciation)/ Required investment

Q532.- Profitability index =

A532.- (PV of cash flows) / Initial investment- If Profitability index > 1 --> NPV > 0- It provides the means to rank capital projects w/ differentamounts of investment

Q533.- What Does Present Value Interest Factor Of Annuity -PVIFA Mean?

A533.- A factor which can be used to calculate the present valueof a series of annuities.- The initial deposit, earning interest at the periodic rate (r),perfectly finances a series of (N) consecutive dollarwithdrawals.- PVIFA is also a variable used when calculating thepresent value of an ordinary annuity (is an annuity whosepayments are made at the end of each period).- PVIFA = [- (1 + r)^-N]/r

Q534.- What Does Present Value Interest Factor - PVIF Mean?

A534.- Using the PVIF works best when you are attempting todiscount one value in the future.

Q535.- What Does Internal Rate Of Return - IRR Mean?

A535.- The discount rate often used in capital budgeting thatmakes the net present value of all cash flows from aparticular project equal to zero.- => PV factor x cash inflows = cash investment, solve forPV factor

Q536.- Popular methods of capital budgeting include

A536.- net present value (NPV), internal rate of return (IRR),discounted cash flow (DCF) and payback period.

Q537.- accounting rate of return (ARR)

A537.- = (Net Cash flow - Depreciation) / investment- - Does not consider the time value of money, It focuseson income and not CFlow- Definition 1: Straight-line' method of estimating averagereturns from an investment, it uses accrual based financialstatements instead of compounded or discounted cashflows. Also called book value method, financial statementmethod, or simple rate of return.- Definition 2: Ratio that expresses the earnings beforeinterest and taxes (EBIT) as a percentage of the capitalemployed at the end of an accounting period.

Q538.- Return on investment ROI ?

A538.- Income / Invested Capital- OR- Return on Sales (Profit Margin) x Capital Turnover= Net income/Sales x Sales / Invested capital- Disadvantage - may lead to rejecting projects that yieldpositive cash flows.

Q539.- Net Present Value =

A539.- = the PV of an investment's future net cash flows minusthe initial investment.- If positive, the investment should be made (unless aneven better investment exists), otherwise it should not.- the method that recognizes the time value of money bydiscounting the after- tax cash flows over the life of aproject, given the company's minimum desired rate ofreturn.

Q540.- The payback period serves as a fair approximation of ?

A540.- of the annuity factor value used in estimating the IRR

Q541.- ROI return on investment =- Disadvantage -

A541.- net income/ Invested capitalOR- profit margin (return on Sale) x investment Turnover- Disadvantage - may lead to rejecting projects that yieldpositive cash flows.

Q542.- NPV =

A542.- CF- investment

Q543.- Probability formula

A543.- 1) find Change in Market Value- 2) Probability factor X Change in value = Cost ofinvestment

Q544.- The method that recognizes the time value of money bydiscounting the after-tax cash flows over life of a project,given the company's minimum rate of return is

A544.- NET PRESENT VALUE METHOD

Q545.- The discounted payback period id the length of the timerequired

A545.- for discounted cash flows to recover the cost of theinvestment.- Investment = PVF year1 x CF year1 + PVF year2 x CFyear2...

Q546.- If the discount rate is increased, the PV of the future cashflows will ________

A546.- decrease

Q547.- The profitability index is also known as

A547.- the excess present value index.- it is a variation of NPV

Q548.- Short-term interest rates are generally ______ than long-term rates

A548.- LOWER

Q549.- The payback method doesn't take into account__________

A549.- the life of the asset, its salvage value or depreciation.

Q550.- Profitability index =- NPV =- PROJECT Profitability index =

A550.- PV of CF / Investment- PV of CF - Investment- NPV/ Investment

Q551.- As Interest Rate get higher, the PV FACTOR for the samenumber of periods becomes ___________

A551.- smaller.- Smaller FVFactor - HIGHER % RATE

Q552.- The DISCOUNTED PAYBACK PERIOD is the length oftime required for discounted cash flows to recover the costof the investment. If the DCB is 3 years than INVESTMENT=

A552.- RV of CF YEAR 1 + PV of CF YEAR 2 + PV of CF YEAR 3

Q553.- A program that converts a source program intoinstruction codes that the central processing unit canexecute is called

A553.- A language processor

Q554.- Central element of Management Information System MISis

A554.- Processing of data items is based on decision models.

Q555.- One reason to use RAID - array of inexpensive disks - isto ensure that

A555.- if one drive fail, all data can still be reconstructed

Q556.- Critical software application programs should be storedon the server in

A556.- Object code

Q557.- ____________ provides instructions to perform a task orjob. It would tell the operating system how to schedule,allocate resources and retrieve data.

A557.- Job control language

Q558.- A program that converts PROCEDURE-ORIENTEDlanguage to machine language is

A558.- A compiler

Q559.- A distributed/decentralized processing environmentworks best when

A559.- significant volumes of data are generated at many remotelocations and the user requires immediate access to thedata.

Q560.- Specialized programs that perform routine and repetitivefunctions are called

A560.- Service programs

Q561.- Cyclical fluctuations, random variations, seasonalvariations and secular trend are all components of

A561.- time series analysis

Q562.- ID of users who have permission to access data elementsin database is found in the

A562.- database schema

Q563.- Which method would provide the best data security for afirm that uses a wide area network WAN?

A563.- End-to-end encryption

Q564.- implementing locking procedure could lead to

A564.- Deadly embraces.- Data locking ensures consistent processing

Q565.- Exponential smoothing is a statistical method that isuseful as a sales forecasting technique.- Exponential smoothing weights current data heavier than

A565.- older data- It is used to smooth forecast variation.

Q566.- ___________ usually involves two or more computersfunctioning simultaneously and allows the sharing of acentral memory during processing

A566.- Multiprocessing

Q567.- ___________ allows multiple programs to be executed atexactly the same time

A567.- Multiprogramming

Q568.- In the systems development cycle, coding is part of the

A568.- detailed design phase

Q569.- The system development cycle consists of (5)

A569.- analysis- conceptual design- detailed design- implementation- operation

Q570.- Which characteristic distinguishes electronic datainterchange (EDI) from other forms of electroniccommerce?

A570.- EDI transactions are formatted using STANDARDS thatare uniform worldwide

Q571.- Online access controls include :

A571.- authorized user code numbers- passwords- list of all files and programs and a record of the type ofaccess each user is entitled to have for each file andprogram

Q572.- A computer system flowchart provides the overall view ofthe inputs, processes and outputs of __________

A572.- an information system.

Q573.- When evaluating internal control of an entity thatprocesses sales transactions on the internet, an auditorwould most concern about the:

A573.- potential for computer disruption in recording sales

Q574.- One of the risks in distributed system is

A574.- database INTEGRITY (unity, wholeness ) might not bepreserved during a network or computer failure

Q575.- Who is responsible for authorizing transactions and forcorrecting errors?

A575.- Users

Q576.- Who is responsible for preventing unauthourized physicaland logical access to the system?

A576.- Security management

Q577.- Routines that utilize the computer to check the validityand accuracy of TRANSACTION data during input arecalled

A577.- edit programs- they reject those transactions whose data do not meetpreestablished standards of data quality

Q578.- The computer operating system performs scheduling,resource allocation and date retrieval functions based on aset of instructions provided by the

A578.- JOB CONTROL LANGUAGE

Q579.- Librarian and production control are most likely to beincluded w/in

A579.- the Operation area of the system department

Q580.- A decision table indicates the

A580.- Alternative logic conditions and actions to be taken in aprogram

Q581.- Operating documentation includes

A581.- equipment configuration, program and data files, anddescription of conditions that may require programinterruption.

Q582.- Intranets ( private networks) are characterized by

A582.- higher security risk and lower costs

Q583.- Managing the IS function includes

A583.- charging user departments for computer services, projectdevelopment planning and responsibility accountingprinciples

Q584.- Validity check use when

A584.- the data is misspelled of transposed- has typing errors

Q585.- Optical character recognition OCR software

A585.- converts images of paper documents as read by scanningdevice into text computer files

Q586.- Shareware is

A586.- a program that can be freely copied and tested beforepurchase.- It does NOT transfer data

Q587.- Linked list is a file structure that

A587.- has a field that has the address of the next record

Q588.- Components of the data processing cycle?

A588.- Collection- refinement (classifying and/or batching)- processing- maintenance (calculation and storage)- output

Q589.- Authorization controls are implemented usingCOMPATIBILITY TESTS and ACCESS CONTROLMATRICES

A589.- COMPATIBILITY TESTS - determine if the user isauthorized to perform the desired action.- ACCESS CONTROL MATRICES- 1) is a list of authorized user ID and passwords and- 2) a list of all files, data and programs and the accesseach user has to them

Q590.- The implementation phase of an acct. softwareapplication would include :

A590.- obtaining and installing hardware, documenting userprocedures, training users, and entering test data.

Q591.- A DBMS (database management system) are complexsoftware package which permits users to

A591.- access information From data base.- DBMS provides for access and identification security,concurrent use of data and backup and recovery.- It DOES NOT run application programs.

Q592.- The TRANSFORMATION component of IS has which ofthree subsystems?

A592.- Storage, arithmetic-logic, control subsystem.

Q593.- If a database has integrity,

A593.- this means that the database has only CONSISTENT data.

Q594.- The purpose of a cycle processing control is to mitigatethe risk of :

A594.- missing or improper transactions

Q595.- REMOTE BACH processing avoids the need of having

A595.- a CPU at each user location

Q596.- Systems analysis is assigned to

A596.- SYSTEM ANALYST- who helps users to analyze their infoand design IS

Q597.- Computer operations are assigned to

A597.- Computer OPERATORS.- Programmers should never have access to computeroperations

Q598.- Operating systems and compilers assigned to

A598.- SYSTEM PROGRAMMERS, who use the design developedby the analysts to develop an IS and write the computerprograms.

Q599.- 5 components of an IT system are:

A599.- people- procedures- data- software- IT infrastructure

Q600.- Help desks are usually a responsibility of ____________

A600.- computer operations

Q601.- How makes sure that :- a log is kept of all inputs, data processing operation,stored data, and system output- source data have been properly approved- transactions are processed correctly- inputs and outputs are reconciled- records of input errors are maintained- data-related errors are sent to the users who originatedthe transaction fro correction- there is adequate rotation of operator duties

A601.- CONTROL GROUP

Q602.- ____________ authorize and record transactions, usesystem output and are responsible for CORRECTINGERRORS.

A602.- USERS

Q603.- An IS's _________ is a committee that establish overallpolicy and directions for an organization’s IS.

A603.- STEERING COMMITTEE

Q604.- Initiating input/output operations, allocating memory andresponding to interrupts is a functions of- ______________- 2. Translating source code to object code is a functionsof _________- 3. Creating load module libraries is a functions of_________- 4. Mapping virtual views onto base tables is a functions of_________

A604.- 1. OPERATING SYSTEM- 2. COMPILERS AND INTERPRETERS- 3 LINKAGE EDITOR- 4 DATABASE MANAGEMENT SYSTEM

Q605.- Knowledge-based systems use symbolic processingbased on ___________ - rules-of-thumb.

A605.- HEURISTICS

Q606.- A computer system that allows management to makeunstructured decisions concerning company futureis___________

A606.- A STRATEGIC INFORMATION SYSTEM

Q607.- _____________ connects dissimilar networks- _____________ connects network segments

A607.- GATEWAY- BRIDGE

Q608.- A program that converts a source program intoinstruction codes that CPU can execute is called

A608.- LANGUAGE PROCESSOR

Q609.- Sales Volume variance =

A609.- (Actual units sold - Budgeted sales units) x Standardcontribution per unit- Like Q variance : AQ x SP - SQ x SP

Q610.- Prime costs are ________ costs

A610.- variable

Q611.- Sale in UNITS =

A611.- sale / sale per unit

Q612.- Summary:- What are the six main formulas for calculatingbreakeven?

A612.- CM = SRev - Var Costs- CMU = SPU - VCU- BPU = TFC/CMU- BPD = TFC/CMR- CMR = CM/SRev- BP w/Targeted Profit = TFC/CMU or CMR

Q613.- Calculate Equivalent units W-average and FIFO

A613.- Units completed ___________ XXX- Ending WIP % x completed + XXX- Weighted-average Equivalent units =XXX- Beginning WIP % x completed - XXX- FIFO Equivalent units ________=XXX

Q614.- PRICE VARIANCE?

A614.- (1) AQ X AP ____(2)AQ x SP_____ (3) SQ x SP- PRICE VARIANCE = (1) – (2)- Materials purchase price variance- Labor rate variances- Variable OH spending variance

Q615.- QUANTITY VARIANCE?

A615.- QUANTITY VARIANCE = (2) – (3)- Materials quantity variance- Labor efficiency variances- Variable OH efficiency variance- (1) AQ X AP ____(2)AQ x SP_____ (3) SQ x SP

Q616.- To calculate the difference in NI using Variable costing VSAbsorption costing:

A616.- If level of Production if > than level of sale -> NI underVariable costing is < than under Absorption costing.To calculate- 1) Difference in units = Production – sale units.- 2) Difference in NI = (1) X Fixed cost / production units.- Variable costing = DL + DM + Variable OH.

Q617.- Formation of General Partnership

A617.- No formalities.- Can be formed by verbal or written agreement, or mereconduct.

Q618.- Liability of Owners of a General Partnership

A618.- Unlimited personal liability for all partnership obligations.

Q619.- Management of General Partnership

A619.- Owners can manage directly or can agree to appoint amanaging partner.

Q620.- Transferability of a General Partnership

A620.- Partnership cannot transfer ownership interest withoutunanimous consent.

Q621.- Taxation of a General Partnership

A621.- "flow through" taxation.

Q622.- Formation of a Limited Partnership

A622.- Formalities:- File Certificate of Limited Partnership with state.

Q623.- Liability of owners of a Limited Partnership

A623.- General Partner: unlimited personal liability- Limited Partner: Only investment is at risk.

Q624.- Management of Limited Partnership

A624.- General Partner(s) is(are) exclusive manager(s)- Limited Partners cannot manage.

Q625.- Transferability of Limited Partnership

A625.- Partners cannot transfer ownership without unanimousconsent.

Q626.- Taxation of Limited Partnership

A626.- "flow through" taxation, but limited partners have passiveloss restrictions.

Q627.- Formation of a Corporation

A627.- Formalities:- File Articles of Incorporation or Corporate Charter withstate

Q628.- Liability of owners of a Corporation

A628.- Shareholders generally not personally liable beyond theirinvestment.

Q629.- Management of a Corporation

A629.- Managed by Board of Directors, who appoint officers torun day-to-day operations.

Q630.- Transferability of Corporation

A630.- Shareholders are free to transfer ownership interestunless they agree otherwise.

Q631.- Taxation of corporation

A631.- Income taxed at corporate level and taxed again toshareholders when dividends are distributed.

Q632.- Formation of S Corp

A632.- Formalities:- File Articles of Incorporation or Corporate Charter withstate.- File 'S' election

Q633.- Liability of owners of S Corp

A633.- shareholders generally not personally liable beyond theirinvestment

Q634.- Management of S Corp

A634.- Managed by Board of Directors, who appoint officers torun day-to-day operations.

Q635.- Transferability of S Corp

A635.- Shareholders may transfer ownership unless they agreeotherwise, but can't transfer to foreign or entityshareholders

Q636.- Taxation of S Corp

A636.- "Flow through" taxation but shareholders NOT managinghave passive loss restrictions.

Q637.- Formation of LLC

A637.- Formalities:- File Articles of Organization with state

Q638.- Liability of owners of LLC

A638.- Members generally not personally liable beyond theirinvestment

Q639.- Management of LLC

A639.- Members manage directly or can agree to appoint amanager

Q640.- Transferability of LLC

A640.- Absent agreement otherwise, members cannot transferownership without unanimous consent.

Q641.- Taxation of LLC

A641.- "Flow through" taxation but members not managing havepassive loss restrictions.

Q642.- Formation of LLP

A642.- Formalities:- File Statement of Qualification with state

Q643.- Liability of owners of LLP

A643.- Partners are generally not liable for partnershipobligations unless caused by their own negligence.

Q644.- Management of LLP

A644.- Partners manage directly or can agree to appoint amanaging partner

Q645.- Transferability

A645.- Partners cannot transfer ownership interest withoutunanimous consent.

Q646.- Taxation of LLP

A646.- "Flow through" taxation but partners not managing havepassive loss restrictions.

Q647.- Formation of Sole Prop

A647.- Nothing need be filed.

Q648.- Liability of owner of Sole Prop

A648.- Personally liable for ALL obligations of the business.

Q649.- Life of Sole Prop

A649.- Limited.

Q650.- Tax treatment of Sole Prop

A650.- Flow through

Q651.- Transferability of Sole Prop

A651.- free to transfer interest at will

Q652.- Macroeconomics

A652.- Study of they economy as a whole

Q653.- Microeconomics

A653.- Study of consumers, producers, and suppliers operatingin a narrowly defined market.

Q654.- GDP

A654.- The total market value of all final goods and servicesproduced within the borders of a nation in a particular timeperiod.

Q655.- Nominal GDP

A655.- Measures the value of all final goods and services incurrent prices - no inflation adjustment.

Q656.- Real GDP

A656.- Adjusted to account for changes in the price level (itremoves the effects of inflation using a price index)

Q657.- Price Index/GDP Deflator- (Equation for Real GDP)

A657.- Nominal GDP/GDP Deflator X 100

Q658.- Expansionary Phase

A658.- Rising economic activity (real GDP) and growth.

Q659.- Peak

A659.- A high point of economic activity.

Q660.- Contractionary Phase

A660.- Falling economic activity and growth and follows a peak.

Q661.- Trough

A661.- A low point of economic activity.

Q662.- Recovery Phase

A662.- Follows a trough.- Economic activity begins to increase and return to itslong-term growth trend.- AKA - expansionary phase

Q663.- Recession

A663.- Two consecutive quarters of falling national output.

Q664.- Depression

A664.- A very severe recession.

Q665.- What are three economic indicators?

A665.- 1. leading indicators- 2. lagging indicators- 3. coincident indicators

Q666.- Leading Indicators

A666.- Tend to predict economic activity...- average new unemployment claims, building permits forresidences, average length of the workweek, moneysupply, prices of selected stocks, orders for goods, pricechanges of materials, index of consumer expectations.

Q667.- Lagging Indicators

A667.- Tend to follow economic activity...- Prime rate charged by banks, average duration ofunemployment, bank loans outstanding.

Q668.- Coincident Indicators

A668.- Tend to occur coincident to economic activity...- Industrial production, manufacturing and trade sales.

Q669.- Business cycles result from...

A669.- shifts in aggregate demand and/or aggregate supply.

Q670.- What is the effect of a REDUCTION in demand on GDPand Prices?

A670.- AD curve shifts left.- AD decreases.- GDP decreases.- Price decreases.

Q671.- What is the effect of an INCREASE in demand on GDPand Prices?

A671.- AD curve shifts right.- AD increases.- GDP increases.- Price increases.

Q672.- What is the effect of a REDUCTION of supply on GDP andPrices?

A672.- SRAS shifts left (decreases)- GDP decreases.- Price increases.

Q673.- What is the effect of an INCREASE of supply on GDP andPrices?

A673.- SRAS shifts right (increase)- GDP increases.- Price decreases.

Q674.- What are SIX factors that shift aggregate demand?

A674.- 1. Changes in Wealth- 2. Changes in real interest rates- 3. changes in consumer confidence- 4. Changes in exchange rates- 5. Changes in govt. spending- 6. Changes in consumer taxes.

Q675.- Multiplier effect

A675.- An increase in consumer, firm, or government spending,produces a multiplied increase in the level of economicactivity.

Q676.- Formula for the Multiplier Effect

A676.- 1 / (1-MPC) x Change in Spending- MPC-Marginal Propensity to Consume- MPS-Marginal Propensity to Save- MPS= 1 - MPC

Q677.- What are TWO factors that shift short-run aggregatesupply?

A677.- 1. Changes in input (resource) prices- 2. Supply Shocks

Q678.- Four most commonly cited economic measures.

A678.- 1. real GDP- 2. unemployment rate- 3. inflation rate- 4. interest rates

Q679.- Two methods of measuring/calculating GDP.

A679.- 1. Expenditure Approach- 2. Income Approach

Q680.- Under the expenditure approach, GDP is the sum of whatfour components?- "GICE"

A680.- Government purchases- Investment- Consumption (personal)- net Exports (exports minus imports)

Q681.- Under the income approach, GDP is the sum of what eightcomponents?- "I PIRATED"

A681.- Income of proprietors- Profits of corporations- Interest (net)- Rental income- Adjustments for net foreign income- Taxes (indirect business taxes)- Employee wages- Depreciation

Q682.- Gross National Product

A682.- The market value of final goods and services produced byRESIDENTS of a country in a given time period.

Q683.- Unemployment Rate

A683.- Measures the ratio of the number of people classified asunemployed to the total labor force.

Q684.- Total labor force.

A684.- Includes all non-institutionalized individuals 16 years ofage or older who are either working or actively looking forwork.

Q685.- Formula for unemployment rate.

A685.- #unemployed/total labor force x 100

Q686.- Four types of unemployment.

A686.- 1. frictional- 2. structural- 3. seasonal- 4. cyclical

Q687.- Frictional unemployment

A687.- Normal unemployment resulting from workers routinelychanging jobs or from workers being temporarily laid off.

Q688.- Structural Unemployment

A688.- Jobs available in the market do not correspond to theskills of the work force AND unemployed workers do notlive where the jobs are located.

Q689.- Seasonal Unemployment

A689.- The result of seasonal changes in demand and supply oflabor.

A690.- The amount of unemployment resulting from declines inread GDP during periods of contraction or recession or inany period when the economy fails to operate at itspotential.

Q691.- Natural rate of unemployment

A691.- The normal rate of unemployment.- Sum of frictional, structural, and seasonal unemployment.

Q692.- Full employment

A692.- Level of unemployment when there is no cyclicalunemployment. Does not mean zero unemployment.

Q693.- Relationship between unemployment and output/realGDP.

A693.- Move in opposite directions.

Q694.- Inflation.

A694.- A sustained increase in the general prices of goods andservices.- It occurs when prices on average are increasing overtime.

Q695.- Deflation

A695.- A sustained decrease in the general prices of goods andservices.- It occurs when prices on average are falling over time.Bigger problem than inflation.

Q696.- Inflation/Deflation Rate is measure as...

A696.- % change in Consumer Price Index

Q697.- Consumer Price Index

A697.- A measure of the overall cost of a fixed basket of goodsand services purchased by an average household.

Q698.- Formula for Inflation Rate- (change in CPI)

A698.- (CPI this period - CPI last period)- Divided by CPI last period- Multiply by 100

Q699.- Inflation and Deflation are caused by...

A699.- ...shifts in the aggregate demand and short-run aggregatesupply curves.

Q700.- Demand-Pull Inflation

A700.- Caused by increases in aggregate demand.

Q701.- Cost-Push Inflation

A701.- Caused be reductions in short-run aggregate supply.

Q702.- Relationship of Inflation and Purchasing Power

A702.- Inverse relationship.

Q703.- During a period of inflation, holding monetary assets...

A703.- will hurt those with a fixed amount of money or income.

Q704.- During a period of inflation, holding monetary liabilities...

A704.- will aid those with a fixed amount of debt.

Q705.- Nominal interest rate

A705.- The amount of interest paid or earned measured incurrent dollars.

Q706.- Real interest rate

A706.- the nominal interest rate minus the inflation rate.

Q707.- Money

A707.- Set of liquid assets that are generally accepted inexchange for goods and services.

Q708.- Money Supply

A708.- The stock of all liquid assets available for transactions inthe economy at any given point in time.

Q709.- M1

A709.- Money that is used for purchases of goods and services.Typically does NOT include savings accounts or CDs.

Q710.- M2

A710.- M1 plus liquid assets that cannot be used as a medium ofexchange but that can be converted easily into checkabledeposits or other components of M1.

Q711.- M3

A711.- M2 plus time CDs in excess of $100,000.

Q712.- Monetary Policy

A712.- The use of the money supply to stabilize the economy.

Q713.- Three ways the Fed controls the money supply.

A713.- 1. Open Market Operations (OMO)- 2. Changes in the Discount Rate- 3. Changes in the Required Reserve Rate (RRR)

Q714.- Open Market Operations

A714.- Purchase and sale of government securities in the openmarket.

Q715.- Changes in the Discount Rate

A715.- The interest rate the Fed charges member banks forshort-term (normally overnight) loans.

Q716.- Changes in the Required Reserve Ratio

A716.- Fraction of total deposits banks must hold in reserve.

Q717.- Eight Steps in Strategic Management

A717.- 1. Define the firm's vision and mission statements- 2. Set the goals of the firm- 3. Define the objectives of the firm- 4. Decide what to measure and take a baselinemeasurement- 5. Strategic analysis (SWOT)- 6. Create the strategic plan- 7. Implement the strategic plan- 8. Evaluate and revise the plan as necessary

Q718.- Two broad and distinct paths for achieving organizationgoals

A718.- 1. cost leadership- 2. differentiation

Q719.- Financial objectives

A719.- The improvement of the overall financial outcomes of afirm's strategy.

Q720.- Non-financial objectives

A720.- The improvement of the overall ability of the firm tocompete in the market in the long run, which is the ultimatefocus for overall shareholder wealth maximization.

Q721.- SWOT analysis

A721.- Strengths (internal)- Weaknesses (internal)- Opportunities (external)- Threats (external)

Q722.- Change in Quantity Demanded

A722.- A change in the amount of a good demanded resultingsolely from a change in price - movements along thedemand curve (D).

Q723.- Change in Demand

A723.- A change in the amount of a good demanded resultingfrom a change in something other than the price of thegood - shift of the demand curve.

Q724.- Demand Curve

A724.- The maximum quantity of good consumers is willing andable to purchase at each and every price, all else equal.

Q725.- Fundamental Law of Demand

A725.- Quantity demanded is inversely related to price.

Q726.- Two reasons quantity demanded is inversely related toprice.

A726.- 1. substitution effect- 2. income effect

Q727.- Substitution Effect

A727.- Consumers tend to purchase more/less of a good whenits price falls/rises in relation to the price of other goods.

Q728.- Income Effect

A728.- As prices are lowered with income remaining constant,people will purchase more of all of the lower pricedproducts.

Q729.- Factors that Shift Demand Curves- (WRITEN)

A729.- Changes in Wealth- Change in the price of Related Goods- Changes in Consumer Income- Changes in Consumer Tastes- Changes in Consumer Expectations- Changes in the Number of buyers

Q730.- Fundamental Law of Supply

A730.- Price and Quantity supplied are positively related.

Q731.- Supply Curve

A731.- The maximum quantity of good sellers is willing and ableto produce at each and every price, all else equal.

Q732.- Quantity supplied

A732.- Quantity supplied is the amount of a good that producersare willing and able to produce at each and every price, allelse equal.

Q733.- Change in Quantity Supplied

A733.- A change in the amount producers are willing and able toproduce resulting solely from a change in price -movement along the supply curve.

Q734.- Change in Supply

A734.- A change in the amount of a good supplied resulting froma change in something other than the price of a good - shiftin the supply curve.

Q735.- Factors that shift supply curves- (ECOST)

A735.- Changes in price Expectations of the supplying firm.- Changes in production Costs- Changes in the price or demand for Other goods- Changes in Subsidies or taxes- Changes in production Technology

Q736.- Market Equilibrium

A736.- There are no forces acting to change the currentprice/quantity combination. The market's equilibrium priceand output/qty is the point where the supply and demandcurves intersect.

Q737.- Elasticity

A737.- A measure of how sensitive the demand for or the supplyof a products is to a change in its price.

Q738.- Two ways to measure Price Elasticity of Demand

A738.- 1. Point Method- 2. Midpoint Method

Q739.- Point Method

A739.- %change in qty demanded/%change in price

Q740.- Midpoint Method

A740.- [(Q2-Q1) / (Q2+Q1)] Divided By [(P2-P1) / (P2+P1)]

Q741.- If absolute value of Price Elasticity of demand is < 1.0

A741.- Inelastic

Q742.- If absolute value of Price Elasticity of demand is > 1.0

A742.- Elastic

Q743.- Four market structures

A743.- 1. Perfect/Pure Competition- 2. Monopolistic Competition- 3. Oligopoly- 4. Monopoly

Q744.- Characteristics of Perfect/Pure Competition

A744.- very competitive- no individual firm can influence market price- large number of suppliers and customers actingindependently- very little product differentiation- no barriers to entry- Example: bottled water

Q745.- Characteristics of a Monopoly

A745.- least competitive- strategic plans ignore market share and focus onprofitability- concentration of supply in the hands of a single firm- single firm with unique product- significant barriers to market entry- firm has ability to set output and prices- no substitute products

Q746.- Characteristics of Monopolistic Competition

A746.- plan for enhanced product differentiation and extensiveallocation of resources to advertising, marketing, productresearch, etc.- many sellers compete to sell a differentiated product in amarket- numerous firms w/ differentiated products- few barriers to entry- exert some influence over price and market- significant non-price competition in the market (brandawareness/loyalty)

Q747.- Characteristics of an Oligopoly

A747.- few firms with differentiated products- fairly significant barriers to entry- strongly independent firms- prices tend to be fixed- face a kinked demand curve

Q748.- Kinked Demand Curve

A748.- Firm match price cuts of competitors, but ignore priceincreases- different slopes above and below the prevailing price

Q749.- Five forces that affect the competitive environment

A749.- 1. Barriers to Entry- 2. Market competitiveness (intensity)- 3. Existence of substitute products- 4. Bargaining power of customers- 5. Bargaining power of suppliers

Q750.- Five basic types of competitive strategies

A750.- 1. Cost leadership focused on a broad range of buyers- 2. cost leadership focused on a narrow range (niche) ofbuyers- 3. Differentiation focused on a broad range of buyers- 4. differentiation focused on a narrow range (niche) ofbuyers- 5. Best cost provider (combo)

Q751.- Transaction Exposure

A751.- The potential that an organization could suffer economicloss or experience economic gain upon settlement ofindividual transactions as a result of changes in theexchange rates.

Q752.- Economic Exposure

A752.- The potential that the PV of an organization's cash flowscould increase or decrease as a result of changes in theexchange rates.

Q753.- Translation Exposure

A753.- The potential that assets, liabilities, equity, or income of aconsolidated organization that includes foreignsubsidiaries will change as a result of changes in theexchange rates and defines the effect of exchange ratefluctuations on financial position and operations.

Q754.- Futures Hedge

A754.- Entitles its holder to either purchase or sell a particularnumber of currency units of an identified currency for anegotiated price on a stated date.

Q755.- Forward Hedge

A755.- Same as futures hedge, but much larger amounts.

Q756.- Money market hedge

A756.- Uses international money markets to plan to meet futurecurrency requirements.

Q757.- Transfer Pricing

A757.- Claim profits in the country with the lowest tax rate.

Q758.- How to calculate NPV?

A758.- 1. calc after tax cash flows=annual net cash flow x (1-taxrate)- 2. add depr benefit =depr x tax rate- 3. multiply result by appropriate PV of an annuity- 4. subtract initial cash outflow- Result=Net Present Value

Q759.- How to calculate payback period?

A759.- net initial investment / increase in annual net after - taxcash flow

Q760.- What are the two advantages of the Payback method?

A760.- 1. easy to use and understand- 2. emphasis on liquidity

Q761.- What are the four limitations of the payback method?

A761.- 1. time value of money is ignored- 2. projected cash flows after initial investment is requiredare not considered- 3. reinvestment of cash flows is not considered- 4. total project profitability is neglected.

Q762.- Describe the Discounted Payback Method.

A762.- Computes the payback period using expected cash flowsthat are discounted by the project's cost of capital (alsoreferred to as "breakeven time method" or BET)

Q763.- What are the two advantages of the NPV method?

A763.- 1. flexible- 2. can be used when there is no constant rate of returnrequired for each year of the project

Q764.- What is the limitation of the NPV method?

A764.- Does not provide the true rate of return on theinvestment.

Q765.- What are the 5 steps to determine IRR?

A765.- 1. determine life of asset (#periods)- 2. calc payback period- 3. determine which table to use PV of annuity or PV of $1- 4. find closest factor to payback period using the numberof periods- 5. interest rate that corresponds is IRR.

Q766.- What are the three limitations of IRR?

A766.- 1. unreasonable reinvestment assumption- 2. inflexible cash flow assumptions- 3. evaluates alternatives only based on interest rates

Q767.- What is the profitability index?

A767.- PV net future CF/PV net initial investment

Q768.- Formula: Working Capital

A768.- CA-CL=WC

Q769.- Current ratio

A769.- CA/CL

Q770.- Quick (Acid Test) ratio

A770.- (Cash + market securities + receivables) divide by CL

Q771.- What are three motives for holding cash?

A771.- 1. transaction motive- 2. speculative motive- 3. precautionary motive

Q772.- What are three disadvantages of high cash levels?

A772.- 1. negative arbitrage effect- 2. increased attractiveness as a takeover target- 3. investor dissatisfaction w/ allocation of assets

Q773.- What is the formula for the annual cost/APR of a quickpayment discount?

A773.- [360 / (pay period - discount period)] × (discount / 100 –discount)

Q774.- What are two ways to expedite deposits?

A774.- 1. EFT- 2. Lock box systems

Q775.- What are four methods to delay payments?

A775.- 1. defer payments- 2. drafts (checks)- 3. line of credit- 4. zero balance accounts

Q776.- What is the cash conversion cycle formula?

A776.- inventory conversion period (low)- + receivables collection period (low)- - payables deferral period (high)

Q777.- What is the formula for the inventory conversion period?

A777.- Average inventory/average cost of sales per day

Q778.- What is the formula for the receivables collection period?Days sales outstanding (DSO)

A778.- average receivables/average sales per day

Q779.- What is the formula for the payables deferral period?

A779.- average payables/average purchases per day

Q780.- What is the computation of the annual cost of factoringA/R?

A780.- 1. AR * fee%- 2. AR-withheld * interest- 3. subtotal: cost to company- 4. subtract collections expense saved- 5. subtotal: net cost- 6. net cost/amt subject to interest- =APR

Q781.- What is the formula for # days receivables outstanding?(average collection period)

A781.- ending AR/Average daily sales

Q782.- What are the four carrying costs of inventory?

A782.- 1. storage costs- 2. insurance costs- 3. opportunity costs of inventory investment- 4. lost inventory due to obsolescence or spoilage

Q783.- What is the formula for the Re-order point?

A783.- safety stock + [lead time × #units sold per day / week]

Q784.- What is the formula for inventory turnover?- For average days sales in inventory?

A784.- COGS / Average inventory balance- 365 / inventory turnover- OR EI / COGS×365

Q785.- The Economic Order Quantity model assumes what 5carrying costs?- (SOMII)

A785.- S- Storage- O- Obsolescence- M- Materials- I- Insurance- I- Interest

Q786.- What is the formula for the EOQ Equation?

A786.- E = square root of 2SO/C- E: Order size (EOQ)- S: Annual Sales (units)- O: cost per purchase order- C: carrying cost per unit

Q787.- What is the formula for Accounting Rate of Return (ARR)?

A787.- increase in expected average annual NI- divided by:- Net initial investment

Q788.- What are the three Risk Preferences?

A788.- 1. Risk-Indifferent- 2. Risk-Averse- 3. Risk-Seeking

Q789.- What is the definition of Risk-Indifferent?

A789.- An attitude toward risk where an increase in the level ofrisk would not result in an increase in management’srequired rate of return.

Q790.- What is the definition of Risk-Averse?

A790.- An attitude toward risk where an increase in the level ofrisk would result in an increase in management’s requiredrate of return.

Q791.- What is the definition of Risk-Seeking?

A791.- An attitude toward risk where an increase in the level ofrisk would result in a decrease in management’s requiredrate of return.

Q792.- What is diversifiable risk?

A792.- Unsystematic, firm-specific (strikes, lawsuits, regulatoryactions, loss of a key account)

Q793.- What is Nondiversifiable risk?

A793.- Systematic, (war, inflation, int'l incidents, political events)

Q794.- Which risk preference?- Certainty equivalent < expected value

A794.- Risk averse

Q795.- Which risk preference?- Certainty equivalent = expected value

A795.- Risk indifferent

Q796.- Which risk preference?- certainty equivalent > expected value

A796.- Risk seeking

Q797.- Interest Rate Risk

A797.- fluctuations in the value of the instrument in response tochanges in interest rates

Q798.- Market Risk?

A798.- the exposure of a security or firm to fluctuations in valueas a result of operating w/in an economy.

Q799.- Credit Risk?

A799.- exposure to credit risk includes a company's inability tosecure financing or secure unfavorable credit terms as aresult of poor credit ratings

Q800.- Default Risk?

A800.- it is possible that its debtors may not repay the principleor interest due on their indebtedness.

Q801.- What is the stated interest rate?

A801.- The rate shown in the agreement of indebtedness.

Q802.- What is the effective interest rate?

A802.- The actual finance charge associated with a borrowingafter reducing loan proceeds for charges and fees relatedto a loan origination.

Q803.- How do you compute the effective interest rate?

A803.- Interest Paid Divided by net proceeds= effective interest rate

Q804.- How do you compute APR?

A804.- Effective interest rate X periods in a year=APR

Q805.- What is the formula for Effective APR?

A805.- I = stated interest rate- p = compounding periods per year- (1+(i/p))^p - 1

Q806.- What is operating leverage?

A806.- The degree to which a firm uses fixed operating costs.

Q807.- What is the formula for a firm's degree of operatingleverage (DOL)?

A807.- % change in EBIT/%change in sales

Q808.- The higher the operating leverage...

A808.- implies that a relatively small change in sales (increase ordecrease) will have a greater effect on profits andshareholder value.- the greater its profitability (and risk!)

Q809.- What is financial leverage?

A809.- The degree to which a firm uses fixed financial costs.

Q810.- What is the formula for a firm's degree of financialleverage (DFL)?

A810.- %change in EPS/%change in EBIT

Q811.- The higher the financial leverage...

A811.- implies that a relatively small change in EBIT (increase ordecrease) will have greater effects on profits andshareholder value.- the greater its profitability (and risk!)

Q812.- What is the formula for combined leverage (DCL)?

A812.- %change in EPS/%change in salesOR- DOL × DFL

Q813.- What is the theoretical optimal capital structure?

A813.- A mix of financing instruments that produces the lowestWACC.

Q814.- How do you compute the weighted average interest rate?

A814.- Effective annual interest payments/debt cash available

Q815.- How do you compute WACC?

A815.- (cost of equity × %equity in capital structure) + (WA costof debt × %debt in capital structure)

Q816.- What is the relevant cost of long-term debt?

A816.- kdx: the after tax cost of raising long-term funds thruborrowing.

Q817.- What are the Net Proceeds?

A817.- Nd: funds actually received by the firm from the sale ofbonds (gross-flotation costs)

Q818.- What is the Pre-tax cost of debt?

A818.- kdt: the cost of debt before considering the tax shieldingeffects of the debt= market rate= yield to maturity

Q819.- What is the formula for the Pre-tax cost of debt (kdt)?

A819.- PV = par value- I = annual interest pymts $$$- Nd = net proceeds- n = number of years to maturity- I + (PV - Nd) / n divided by (Nd + PV) / 2

Q820.- What is the formula for the after-tax cost of debt (kdx)?

A820.- KDT×(1 - tax rate)

Q821.- What is the abbreviation of cost of preferred stock?

A821.- kps

Q822.- Abbreviation of Net proceeds of preferred stock?

A822.- Nps

Q823.- Abbreviation of Preferred stock cash dividends?

A823.- Dps

Q824.- What is the formula for the cost of preferred stock (kps)?

A824.- Dps / Nps

Q825.- What is the abbreviation for cost of retained earnings?

A825.- kre

Q826.- What are the three common methods of computing kre?

A826.- 1. Capital Asset Pricing Model (CAPM)- 2. Discounted Cash Flow (DCF)- 3. Bond Yield plus Risk Premium (BYRP)

Q827.- What are the four key assumptions of the CAPM?

A827.- 1. cost of RE = risk free rate plus a risk premium- 2. risk premium = risks associated with the entire marketrisk- 3. risk premium is the product of systematic/non-diversifiable risk- 4. arbitrage pricing theory assumes multiple risks s/bconsidered as part of capital asset pricing, not simply onerisk.

Q828.- What is the risk-free rate?

A828.- krf: US T-bills

Q829.- What is the formula for the cost of RE using the CAPM?

A829.- kre = krf + [bi x (km - krf)]- km = market rate

Q830.- What is the formula for the cost of RE using theDiscounted Cash Flow (DCF)?

A830.- kre = (D1/P0) + g- D1:dividend/share @ end of 1 year- P0:current price of outstanding CS- g: constant rate of growth in dividends

Q831.- What is the formula for the cost of RE using the Bond-Yield-Plus-Risk-Premium (BYRP)?

A831.- kre = kdt + PMR- kdt: pre-tax cost of LT debt- PMR: mkt risk premium

Q832.- What are the three advantages of short-term financing?

A832.- 1. increased liquidity- 2. increased profitability- 3. decreased financing cost

Q833.- What are the two disadvantages of short-term financing?

A833.- 1. increased interest rate risk- 2. increased credit risk

Q834.- What are the two advantages of long-term financing?

A834.- 1. decreased interest rate risk- 2. decreased credit risk

Q835.- What are the three disadvantages of long-term financing?

A835.- 1. decreased profitability- 2. decreased liquidity- 3. increased financing costs

Q836.- Define: working capital financing.

A836.- contemplates the spontaneous financing of currentassets with trade accounts payable and accrued liabilitieswith the expectation that the maturities of current assetswill coincide with the maturities of current liabilities oftentermed maturity matching.

Q837.- Define: letter of credit.

A837.- represents a 3rd party guarantee, generally by a bank, ofobligations incurred by a company.

Q838.- Define: Line of credit.

A838.- represents a revolving line of credit with a bank that isgenerally renewable annually.

Q839.- Define: debenture.

A839.- an unsecured obligation of the issuing company.

Q840.- Define: subordinated debenture.

A840.- a bond issue that is unsecured and that ranks behindsenior creditors.

Q841.- Define: income bonds.

A841.- securities that pay interest only upon achievement oftarget income levels.

Q842.- Define: junk bonds.

A842.- often unsecured - both high risk and high return.

Q843.- Define: mortgage bonds.

A843.- protected from default by a lien on assets of the issuingcompany.

Q844.- What is one formula for ROI?

A844.- Income/Investment Capital- (average assets)- (average PPE + average WC)

Q845.- What is a second formula for ROI?

A845.- Profit Margin X Investment turnover

Q846.- What are two limitations of the ROI?

A846.- 1. short-term focus- 2. disincentive to invest

Q847.- Define: residual income method.

A847.- Measures the excess of actual income earned by aninvestment over the required (target or hurdle) return raterequired by the company.

Q848.- What is the formula for the required return?

A848.- NBV (Equity) X Hurdle rate (CAPM)= required return

Q849.- What is the formula for residual income?

A849.- NI - Required Return = residual income

Q850.- What are the two benefits of the Residual Incomeperformance measures?

A850.- 1. Realistic target rates- 2. focus on target return and amount

Q851.- What are the two weaknesses of Residual Incomeperformance measures?

A851.- 1. Reduced comparability- 2. target rates require judgment

Q852.- What is the formula for the debt-to-total-capital ratio?

A852.- Total Debt / Total Capital- (total capital = debt + equity)

Q853.- What is the formula for the Debt to asset ratio?

A853.- Total debt / total assets

Q854.- What is the formula for the debt-to-equity ratio?

A854.- Total debt / total shareholders' equity

Q855.- What is E-Commerce?

A855.- The electronic consummation of exchange (buying andselling) transactions.

Q856.- What is E-Business?

A856.- A more general term than e-commerce and refers to anyuse of information technology particularly networking andcommunications technology to perform businessprocesses in electronic form.

Q857.- What is EDI?

A857.- Electronic Data Interchange: computer to computerexchange of business transaction documents in structuredformats that allow the direct processing of the data by thereceiving system.

Q858.- What are the costs of EDI?

A858.- 1. Legal costs- 2. Hardware costs- 3. Costs of translation software- 4. Costs of data transmission- 5. Process reengineering and employee training costs foraffected applications- 6. Costs associated with security, monitoring, and controlprocedures.

Q859.- Audit trails in EDI systems should include:

A859.- 1. activity logs of failed transactions- 2. network and sender/recipient acknowledgments

Q860.- Compare: Cost of EDI vs. E-Commerce

A860.- EDI - more expensive- E-Commerce - less expensive

Q861.- Compare: security of EDI vs. E-Commerce

A861.- EDI - more secure- E-commerce -less secure

Q862.- Compare: speed of EDI vs. E-Commerce

A862.- EDI - slower (batch)- E-commerce - Faster (OLRT)

Q863.- Compare: network of EDI vs. E-commerce

A863.- EDI - VAN (private)- E-commerce - Internet (public)

Q864.- What is the importance of B2B?

A864.- 1. speed- 2. timing- 3. personalization- 4. security- 5. reliability

Q865.- What are Enterprise Resource Planning Systems? (ERP)

A865.- A cross-functional enterprise system that integrates andautomates the many business processes that must worktogether in the manufacturing, logistics, distribution,accounting, finance, and HR functions of the business.- Comprised of a number of modules (Peoplesoft)

Q866.- What four characteristics is Supply Chain Managementconcerned with?

A866.- 1. what- 2. when- 3. where- 4. how much

Q867.- What is a Customer Relationship Management System(CRM)?

A867.- Provide sales force automation and customer services inan attempt to manage customer relationships.

Q868.- What are the objectives of CRM?

A868.- 1. increase customer satisfaction- 2. increase revenue/profitability

Q869.- What is an Electronic Funds Transfer (EFT)?

A869.- A form of electronic payment for banking and retailingindustries.

Q870.- What are Application Service Providers (ASP)?

A870.- Provide access to application programs on a rental basis.

Q871.- What are the advantages of ASP?

A871.- 1. lower costs (hw, sw, people)- 2. greater flexibility

Q872.- What are the disadvantages of ASP?

A872.- 1. Possible risks to security and privacy- 2. Possible poor support by the ASP

Q873.- What are the five components of InformationTechnology?

A873.- 1. Hardware- 2. Software- 3. Data- 4. Network- 5. People

Q874.- What is a Business Information System?

A874.- A computer system that can accurately record andsummarize business transactions.

Q875.- What are the five categories of Business InformationSystems?

A875.- 1. Transaction processing systems- 2. Knowledge systems- 3. Management Information Systems- 4. Decision Support Systems- 5. Executive Information Systems

Q876.- What are the three primary roles of Business InformationSystems?

A876.- 1. Process detailed data- 2. Assist in making daily decisions- 3. Assist in developing business strategies

Q877.- Define hardware.

A877.- The actual physical computer or computer peripheraldevice.

Q878.- Define software.

A878.- The systems and programs that process data and turnthat data into information.

Q879.- Define network.

A879.- Made up of the communication media that allows multiplecomputers to share data and information simultaneously.

Q880.- Define people.

A880.- The various job titles and job descriptions associatedwith BIS.

Q881.- Define data.

A881.- Data is raw facts.

Q882.- Define production data.

A882.- Production data is live/real data.

Q883.- Define test data.

A883.- Staging/fake data for testing purposes.

Q884.- Define information.

A884.- Information is organized and processed data that ismeaningful to somebody.

Q885.- What are the five functions performed on data?

A885.- 1. collect- 2. process- 3. store- 4. transform- 5. distribute

Q886.- What is an Accounting Information System (AIS)?

A886.- A type of MIS - also partly a TPS and partly a KS.

Q887.- What are the objectives of an AIS?

A887.- 1. record valid transactions- 2. properly classify those transactions- 3. record transactions at proper values- 4. record transactions in proper accounting period- 5. properly present transactions and related info in thefinancial statements.

Q888.- What are Transaction Processing System (TPS)?

A888.- The systems that process and record the routine dailytransactions necessary to conduct the business.

Q889.- What are Decision Support Systems (DSS)?

A889.- A computer based information system that providesinteractive support for managers during the decisionmaking process. Sometimes called expert systems.

Q890.- What are Management Information Systems (MIS)?

A890.- Provides managerial and other end users withreports/information.

Q891.- What are Executive Information Systems (EIS)?

A891.- Provide senior executives with immediate and easyaccess to internal and external information to assist theexecutives in monitoring business conditions in general.- Assist in strategic (long-term), not daily, decision making.

Q892.- What are the five types of reports?

A892.- 1. Periodic Scheduled Reports- 2. Exception Reports- 3. Demand Reports (pull reports)- 4. Ad Hoc Reports- 5. Push Reports

Q893.- What are Periodic Scheduled Reports?

A893.- Traditional reports that display information in apredefined format and are made available on a regularbasis to end users of the system.

Q894.- What are Exception Reports?

A894.- Produced when a specific condition or exceptions occurs- "Red Flag Reports"

Q895.- What are Demand Reports?

A895.- Information from MIS available on demand - "PullReports"

Q896.- What are Ad Hoc Reports?

A896.- A report that does not currently exist but that can becreated on demand, without having to get a SW developeror programmer involved.

Q897.- What is a Query?

A897.- A specific question made up of various criteria that theend user can pose to the MIS and extract all transactionsor other info that meet those criteria.

Q898.- What are Push Reports?

A898.- Sent to a computer screen or desktop.

Q899.- What is the central processing unit (CPU)?

A899.- The control center of the computer system.

Q900.- What are the two principle components of a CPU?

A900.- 1. The Processor/chip- 2. Primary Storage

Q901.- What is the processor?

A901.- Interprets program instructions and coordinates input,output, and storage devices and performs arithmeticcalculations.

Q902.- What is primary storage?

A902.- Used to store program instructions and data until theprogram instructions can be executed.

Q903.- What are the two components of primary storage?

A903.- 1. random access memory (RAM)- 2. read-only memory (ROM)

Q904.- What is random access memory?

A904.- stores data temporarily while it is being processed.

Q905.- What is read-only memory?

A905.- Permanently store data needed to power the computer

Q906.- What are secondary storage devices? Examples?

A906.- A means to permanently store programs and data.- Ex: hard drives, CD-ROM, magnetic tapes.

Q907.- What are peripherals?

A907.- Devices that transfer data to or from the CPU but that donot take part in the actual processing of the data.

Q908.- What are the two components of peripherals?

A908.- 1. input devices- 2. output devices

Q909.- What are input devices? Examples?

A909.- Supply data to be processed.- Ex: keyboards, mice, scanners, microphones.

Q910.- What are output devices? Examples?

A910.- Transfer data from the processing unit to various outputmedia.- Ex: printers, speakers, monitors.

Q911.- What is system software?

A911.- Programs that run the computer and support systemmanagement operations.

Q912.- What is an Operating System?

A912.- Provides the interface between the user and thehardware.- It defines what commands can be issued and how theyare issued.

Q913.- What is a Database Management System (DBMS)?

A913.- A separate computer program that allows an organizationto create new database and use and work with the data inthe databases after the databases have been created.- It also allows for maintenance.

Q914.- What is a bit?

A914.- A binary digit (0 or 1) with which all computer data isstored.

Q915.- What is a byte?

A915.- A byte is a group of normally 8 bits that can represent aletter or number.- Also called a character.

Q916.- What is a Field?

A916.- A group of bytes in which a specific data element such asan employee number or name is stored - vertical column.

Q917.- What is a record?

A917.- A group of fields that represents the data that is beingstored for a particular entity such as customer or anaccount receivable - horizontal row.

Q918.- What is a file?

A918.- A collection of related records often arranged in somekind of sequence, such as a customer file made up ofcustomer records and organized by customer number.

Q919.- What is a database?

A919.- An integrated collection of data records and data files.- It is comprised of nothing more than stored data.

Q920.- What is database development?

A920.- Procedure where a DBA uses the DBMS to create a new,empty database.

Q921.- What is a database query?

A921.- The process where end users can retrieve specific data orinfo from the database by running a query.

Q922.- What are the two components of database maintenance?

A922.- 1. Effectiveness-function properly- 2. Efficiency-working fast enough

Q923.- What are the five types of databases?

A923.- 1. operational databases- 2. analytical databases- 3. data warehouses- 4. distributed databases- 5. end-user databases

Q924.- What is a data warehouse?

A924.- Stores data from current and previous years often fromboth operational and management databases - data mart.

Q925.- What are the advantages of a DBMS?

A925.- 1. reduction of data redundancy and inconsistency- 2. potential for data sharing- 3. data independence- 4. data standardization- 5. improved data security- 6. expanded data fields- 7. enhanced information timeliness, effectiveness, andavailability

Q926.- What are the disadvantages of a DBMS?

A926.- 1. cost- 2. highly trained personnel are necessary.- 3. increased chances of breakdowns.- 4. possible obscuring of the audit trail- 5. specialized backup and recovery procedures required.

Q927.- What are the two types of networks?

A927.- 1. Local Area Network (LAN)- 2. Wide Area Network (WAN)

Q928.- What is a local area network?

A928.- Permit shared resources (software, hardware, data)among computers within a limited area.

Q929.- What is a node?

A929.- Any device connected to a network.

Q930.- What is a workstation?

A930.- A node (usually a PC) that is used by end users.

Q931.- What is a server?

A931.- A node dedicated to providing services or resources tothe rest of the network.

Q932.- What is a Network Interface Card (NIC)?

A932.- A circuit board installed on a node that allows the node toconnect with and communicate over the network - Ethernetcard.

Q933.- What is transmission media?

A933.- The physical path between nodes on a network.

Q934.- What is a network operating system (NOS)?

A934.- Manages communication over a network.

Q935.- What is a communications device/modem?

A935.- Provides remote access and provides a network with theability to communicate with others.

Q936.- What are the four network topologies?

A936.- 1. Bus Networks- 2. Ring Networks- 3. Start Networks- 4. Tree Networks

Q937.- What is a Bus network?

A937.- Use a common backbone to connect all of the devices onthe network.

Q938.- What is a Ring network?

A938.- Formed in a ring with each device connected to two otherdevices.

Q939.- What is a Star network?

A939.- Formed in a star with each device connected to a central"hub"

Q940.- What is a Tree network?

A940.- Connect multiple stars into a Bus.

Q941.- What is a Wide Area Network?

A941.- Allow national and international communications.

Q942.- What are two types of WANs?

A942.- 1. Value added networks (VAN)- 2. Internet based networks

Q943.- What are Value Added Networks?

A943.- Privately owned and managed communications networksthat provide additional services beyond standard datatransmission.

Q944.- What are four characteristics of VANs?

A944.- 1. private- 2. more secure- 3. expensive- 4. slow

Q945.- What are internet based networks?

A945.- Use Internet protocols and public communicationschannels to establish network communications.

Q946.- What are four characteristics of internet based networks?

A946.- 1. public- 2. less secure- 3. inexpensive- 4. fast, online real time OLRT

Q947.- What is an Intranet?

A947.- Connects geographically separate LANS within acompany (company's private web site just for employees)

Q948.- What is Extranet?

A948.- Permit others to have direct access to the company'snetwork - port/doorway thru firewall to company's intranet.

Q949.- What are transaction files?

A949.- In a computerized environment, journals are calledtransaction files.

Q950.- What are transaction files used for?

A950.- To update master files.

Q951.- What are master files?

A951.- In a computerized environment, ledgers are called masterfiles.

Q952.- What is a master file update?

A952.- In a manual system, transactions are posted from thejournal to the ledger. In a computerized system,transactions are used to update balances in the masterfiles.

Q953.- What are the two types of processing?

A953.- 1. Batch- 2. Online Real Time (OLRT)

Q954.- What is batch processing?

A954.- Input documents / transactions are collected and groupedby type of transaction.- These groups / batches are processed periodically - mayuse either sequential storage devices or random accessstorage devices.

Q955.- What are the steps in batch processing?

A955.- 1. create a transaction file- 2. update the master file

Q956.- What is online real-time processing?

A956.- Transactions are entered and the master files updated asthe transactions are entered.- OLRT systems require random access storage devices.

Q957.- What is centralized processing?

A957.- Maintain all data and perform all data processing at acentral location.

Q958.- What is decentralized (distributed) processing?

A958.- Occurs when computing power, applications, and work isspread out or distributed over many locations.

Q959.- What are the two advantages of centralized processing?

A959.- 1. enhanced security- 2. consistent processing

Q960.- What are the five disadvantages of centralizedprocessing?

A960.- 1. possible high cost- 2. increased need for processing power and data storage- 3. reduction in local accountability- 4. bottlenecks/traffic jams- 5. larger delay in response time

Q961.- What are the four main risks with respect to systems?

A961.- 1. strategic risk- 2. operating risk- 3. financial risk- 4. information risk

Q962.- What is strategic risk?

A962.- The risk of choosing inappropriate technology.

Q963.- What is operating risk?

A963.- The risk of doing the right things in the wrong way?

Q964.- What is financial risk?

A964.- The risk of having financial resources lost, wasted, orstolen.

Q965.- What is information risk?

A965.- The risk of loss of data integrity, incomplete transactions,or hackers.

Q966.- Risks can be divided into what three categories?

A966.- 1. errors- 2. intentional acts- 3. disasters

Q967.- What are errors?

A967.- Mistakes, lost or misplaced data, application or systemsoftware problems or other temporary equipmentproblems, transmission errors, and computer equipmentlost or stolen.

Q968.- What are intentional acts?

A968.- Sabotage, embezzlements, viruses, denial of serviceattacks, and other types of computer fraud.

Q969.- What are disasters?

A969.- Fire- flood- earthquakes- high winds- terrorism- war.

Q970.- In general, what is risk?

A970.- The possibility of harm or loss.

Q971.- What is a threat?

A971.- Any eventuality that represents a danger to an asset or acapability linked to hostile intent.

Q972.- What are the four types of controls?

A972.- 1. general controls- 2. application controls- 3. physical controls- 4. segregation of duties

Q973.- What are file attributes?

A973.- Set to restrict writing, reading, and/or directory privilegesfor a file.

Q974.- What are firewalls?

A974.- A system, often both hardware and software, of user IDsand authentication that prevents unauthorized users fromgaining access to network resources; acting as agatekeeper, it isolates a private network from a publicnetwork.

Q975.- What are five threats in a computerized environment?

A975.- 1. virus- 2. worm- 3. Trojan horse- 4. denial-of-service attack- 5. phishing

Q976.- What is disaster recovery?

A976.- Plans for continuing operations in the event ofdestruction of not only program and data files but alsoprocessing capability.

Q977.- What are the five steps in disaster recovery?

A977.- 1. assess the risks- 2. identify mission-critical applications and data- 3. develop a plan for handling the mission-criticalapplications- 4. determine responsibilities of the personnel involved indisaster recovery- 5. test the disaster recovery plan

Q978.- What is a cold site?

A978.- An off-site location that has all the electrical connectionsand other physical requirements for data processing, but itdoes not have the actual equipment.

Q979.- What is a hot site?

A979.- An off-site location that is "completely" equipped to"immediately" take over the company's data processing.

Q980.- Define System Analyst.

A980.- Architect of the overall computer hardware specifications.

Q981.- What are the two types of Computer Programmers?

A981.- 1. Application programmer/software developer- 2. System programmer

Q982.- What is an application programmer?

A982.- Person responsible for writing/maintaining applicationprograms.

Q983.- What is a system programmer?

A983.- Person responsible for installing, supporting, monitoring,and maintaining the operating system.

Q984.- What are the three types of System Administrators?

A984.- 1. Database Administrator (DBA)- 2. Network Administrator- 3. Web Administrator

Q985.- What is a Database Administrator?

A985.- Person responsible for maintaining and supporting thedatabase software.

Q986.- What is a Network Administrator?

A986.- Person responsible for supporting computer networks.

Q987.- What is a Web Administrator?

A987.- Person responsible for information on a web site.

Q988.- What is a Hardware Technician?

A988.- Person who sets up and configures hardware andtroubleshoots any resulting hardware problems.

Q989.- What is an End User?

A989.- Any workers in an organization who enter data into asystem or who use the information processed by thesystem.

Q990.- What is segregation of duties?

A990.- Dividing responsibilities for different portions of atransaction (authorization, recording, and custody) amongseveral different people or departments. The objective is toprevent any one person from having total control over allaspects of the transaction.

Q991.- Should the duties of system analysts and computerprogrammers be segregated?

A991.- YES!

Q992.- What is a general partnership?

A992.- An association of two or more persons to carry on as co-owners a business for profit.

Q993.- What is a joint venture?

A993.- An association of two or more persons in a singlebusiness venture.

Q994.- What is the difference between a general partnership anda joint venture?

A994.- A general partnership can mean an ongoing relationshipwhereas a joint venture is usually for a one-shot deal.

Q995.- What is a Limited Partnership (LP) ?

A995.- A partnership with at least one general partner and onelimited partner.

Q996.- What distinguishes a Limited Partnership from a GeneralPartnership?

A996.- In a limited partnership, limited partners will enjoyLimited Liability!

Q997.- What is a Limited Liability Partnership (LLP) ?

A997.- A partnership that CARRIES MUCH GREATERPROTECTON from liability than exists in a general orlimited partnership.

Q998.- What does Limited Liability mean?

A998.- Only liable up to personal investment.

Q999.- What does Liability mean?

A999.- Legal responsibility

Q1000.- What is General Partnership Law governed by?

A1000.- Model acts that the states adopt

Q1001.- What is the Uniform Partnership Act (UPA) and RevisedUniform Partnership Act (RUPA)?

A1001.- Model acts that govern partnership law.

Q1002.- Joint ventures are essentially identical to partnershipsand are governed by what?

A1002.- UPA or RUPA, depending on the jurisdiction

Q1003.- What law governs Limited Partnership Law in mostjurisdictions?

A1003.- The Revised Uniform "Limited" Partnership Act (RULPA)?

Q1004.- What act was amended to provide limited liability forpartners?

A1004.- RUPA

Q1005.- RUPA Is functionally a form contract and provides what?

A1005.- Default rules

Q1006.- By agreement, partners may vary most RUPA provisionsbut not prejudice rights of third parties. T or F

A1006.- True

Q1007.- Is a written agreement required in a written partnership?

A1007.- No, unless the partnership will last more than a year

Q1008.- Is an official filing required to form a GeneralPartnership?

A1008.- No

Q1009.- What are the characteristics of a General Partnership?

A1009.- 1. Unlimited Liability for Partners- 2. Pass-thru Taxation- 3. An association of two or more persons to carry on asco-owners a business for profit.

Q1010.- Under RUPA, what is the name of the voluntary statementthat can be filed in the Secretary of State's office?

A1010.- Statement of Partnership Authority

Q1011.- How does pass-thru taxation work?

A1011.- 1. The partnership files an informational return but paysno taxes.- 2. Individual partners pay tax on allocated income,whether or not it is distributed.

Q1012.- When defining the term ASSOCIATION in the definition ofa general partnership, what does Delectus Personaemean?

A1012.- Voluntariness.- 1) Partners choose with whom they'll become partners.- 2) Existing partners must consent to the addition of newpartners.

Q1013.- When defining the term ASSOCIATION in the definition ofa general partnership, what does Intent mean?

A1013.- Not an intent to be "partners", but an intent to enter intothe type of business relationship that the law deems apartnership. CONTENT CTLS FORM.

Q1014.- When defining the term ASSOCIATION in the definition ofa general partnership, what does "two or more personshaving legal capacity mean?

A1014.- Minors can become partners

Q1015.- What does the term Business for Profit exclude?

A1015.- Charitable, religious, & fraternal groups

Q1016.- What does Co-ownership mean?

A1016.- Community of Interest: Sharing capital, control,profits/losses

Q1017.- The sharing of profits and losses is prima facie evidenceof a partnership, unless the profits were received inpayment of what?

A1017.- 1. Debt- 2. Wages of an employee- 3. Rent to a landlord- 4. Annuity to a widow or rep of a deceased person- 5. Interest on a loan- 6. Consideration for the sale of goodwill

Q1018.- What are Purported Partners?

A1018.- Purported Partners. Where persons who are not partnersare treated as such on the estoppel theory.

Q1019.- What is partnership by Estoppel?

A1019.- Not a true partnership, but is a method of fixing liabilityon one who has held themselves out as a partner or hasallowed others to them as partners.

Q1020.- What actions deem a partnership by estoppel?

A1020.- 1. Words or conduct that represent a partnership- 2. Detrimental actions taken by the plaintiff in reliance onthe representation- 3. Representation was reasonably believed by plaintiff

Q1021.- What is the Aggregate Theory versus Entity Theory?

A1021.- The Aggregate Theory is held by UPA where thepartnership is not a separate entity from the partners.- The Entity Theory held by RUPA recognizes thepartnership as a separate entity for most purposes.- Pass-thru taxation still exists in both cases.

Q1022.- What does having a separate entity mean in regards to aGeneral Partnership?

A1022.- That the partnership itself continues to exist, even thoughthe partners may come and go.

Q1023.- Regarding Contractual Liability to third parties, the ACTof a partner in the ordinary course of partnership businessBINDS the partnership with what exceptions?

A1023.- A partner's act in the ordinary course of business doesnot bind the partnership when:- 1)The partner had no authority to act for the pship in theparticular matterAND- 2) The person with whom the partner was dealing knew orhad received notification that the partner lacked authority

Q1024.- If a partner does not act in the ordinary course ofpartnership business, then that act can only bind thepartnership when what occurs?

A1024.- When the other partners authorize the act

Q1025.- A partner binds the partnership and the other partners ifthe partner acts with what types of Authority?

A1025.- Actual Authority- Apparent Authority

Q1026.- What is Actual Authority?

A1026.- Expressed or Implied

Q1027.- What is Implied Authority?

A1027.- Customary- Incidental- Emergency

Q1028.- What is Apparent Authority?

A1028.- Authority that is Clearly seen or understood

Q1029.- In what instances can Apparent Authority NOT exist?

A1029.- 1) When the third party knows of a partner's lack ofauthority, or- 2) The partner's action requires unanimity (ieextraordinary contract)

Q1030.- What does the "Scope" of Authority mean?

A1030.- The "range" of authority covered

Q1031.- The scope of Authority in a Partnership is determined bywhat?

A1031.- 1) Past practices of the partnership- 2) Practices of similar businesses in the area

Q1032.- Give examples of Implied and Apparent Authority.

A1032.- Hire/fire employees, open bank accts, buy supplies, sellinventory, rent office space

Q1033.- After a falling out with Partners B and C, Partner A of theABC Furniture Co. is forbidden - by majority vote - to sellany - partnership property - without the consent of theother partners. If A sells to a customer a couch and thecompany's fleet of seven delivery trucks, which of the twosales if any are within the scope of apparent authority?

A1033.- The sale of the couch is probably within the scope ofapparent authority, but the sale of the trucks probably isnot.

Q1034.- If a partner does not have actual or apparent authority,can the partnership still be liable for the act of the partner?

A1034.- Yes, if the partnership ratifies or formally approves theaction.

Q1035.- What is a tort?

A1035.- A wrongful act

Q1036.- Generally, are Partnerships liable for the Torts of theirpartners?

A1036.- Yes

Q1037.- What is the key question when determining if a Tort hasbeen committed?

A1037.- Was the partner acting within the scope of partnershipbusiness?

Q1038.- What are the three types of torts?

A1038.- Intentional- Unintentional (Negligence)- Strict Liability

Q1039.- For Intentional Torts, when is the Partnership liable forthe Torts of their partners?

A1039.- When the partner is attempting to advance partnershipinterests

Q1040.- Here is an example of an Intentional Tort a Partnership isprobably liable for.

A1040.- In attempting to acquire more prominent shelf space forthe partnership's products in a grocery store carryingthose products, partner A gets into a fist fight with anemployee of a competitor also seeking the shelf space.- The partnership is probably liable.

Q1041.- For Negligence/unintentional cases, when is apartnership liable for the Torts of their partners?

A1041.- When the partner is performing partnership business ifusing partnership owned means to do it.- If using personal means to do partnership business, then,the partnership is liable if the business is a regular part ofpartnership business.

Q1042.- What does RUPA impose Strict Liability on a partnershipfor?

A1042.- Misapplication of Funds received in the course of itsbusiness

Q1043.- Under RUPA, contract and tort liability are typically jointand several. What does this mean?

A1043.- That a creditor may sue any partner and hold that partnercompletely liable without suing the others.

Q1044.- RUPA and most UPA states require in cases of contractand tort liabilities that Assets of the Partnership beexhausted before the partnership creditor can proceedagainst what?

A1044.- Individual assets of Partners

Q1045.- If a partner joins an Existing Partnership, the new partneris generally liable for all subsequent debt, but is liable forpreexisting debt how?

A1045.- Only out of her Firm Contribution.- In other words, liable for preexisting debt only to theextent of the amount contributed when joined thepartnership.

Q1046.- RUPA provides that "Property transferred to or otherwiseacquired by a partnership is property of the partnershipand not of the partners individually." True or False

A1046.- True

Q1047.- Consistent with earlier UPA rules, RUPA provides thatproperty is Partnership Property if acquired in the name ofwhom?

A1047.- 1. the Partnership- 2. In the name of the Partner or Partners with at least oneof the following indications:- In the instrument that transferred title:- a. The person's Capacity as partner- b. The Existence of the Partnership

Q1048.- Property is presumed to be partnership property whenwhat occurs?

A1048.- If purchased with Partnership Assets

Q1049.- When is property Separate from the partnership?

A1049.- When property is acquired in the name of one or morepartners without indication of: Partnership Capacity, orExistence of the Partnership, or without the use ofPartnership Assets.

Q1050.- Partnerships have Entity Ownership of partnershipproperty. What is Entity Ownership?

A1050.- Partnership Property is owned by the Partnership Entity,not by the partners in common.

Q1051.- A partner's Partnership Interest is considered what?

A1051.- Personal Property

Q1052.- What does Partnership Interest give the partner the Rightto?

A1052.- 1. Share in the partnership's Profits- 2. Share in the partnership's Net Assets upon dissolution.

Q1053.- The Creditor Restriction relating to Partnership Propertyis what?

A1053.- No Creditor of an Individual Partner may attachpartnership property to satisfy an Individual Debt.

Q1054.- What is the proper approach for creditors of IndividualPartners?

A1054.- The Charging Order

Q1055.- What is a Charging Order?

A1055.- The judge orders the other partners to pay anyDistribution Due to the debtor partner to that Partner'sCreditor instead.

Q1056.- What does Assignment mean relating to IndividualPartner debt?

A1056.- Debtor partners may Assign (or creditors may seize)ONLY the Individual Partner's Interest in the Partnership(i.e. profits and net assets)

Q1057.- What is the rule regarding using PARTNERSHIPPROPERTY to satisfy the debts of Individual Partners?

A1057.- Individual Partners MAY NOT ASSIGN and creditors ofIndividual Partners MAY NOT SEIZE Partnership Propertyto satisfy the debts of individual partners.

Q1058.- Can an Individual Partner assign his Partnership Interestto an Individual Creditor?

A1058.- Yes

Q1059.- If an individual partner does assign to an individualcreditor his or her partnership interest, does the creditorbecome a Partner?

A1059.- NO

Q1060.- What is Limited Partnership Law governed by?

A1060.- ULPA - Uniform Limited Partnership Act- RULPA - Revised Uniform Limited Partnership Act

Q1061.- If questions regarding Limited Partnership law cannot beanswered by ULPA or RULPA, how then is the questionanswered?

A1061.- By the General Partnership Law

Q1062.- Important CPA Exam Note:

A1062.- Traditionally the AICPA has not asked too manyquestions about limited partnerships specifically.

Q1063.- Define a Limited Partnership.

A1063.- A partnership consisting of at least one general partner(GP) and at least one limited partner (LP).

Q1064.- Give four characteristics of a Limited Partnership.

A1064.- 1. Limited Liability for LPs.- 2. Partnership (Pass-Through) Taxation.- 3. Transferability of LP interests.- 4. Centralized management by GPs.

Q1065.- Regarding Limited Partnerships, what is Forfeit ofControl?

A1065.- Limited partners forfeit right to control their investmentand, in exchange, are accorded limited liability.

Q1066.- Regarding Limited Partnerships, how can GeneralPartners become Limited Partners?

A1066.- By Purchasing Limited Partnership Interests

Q1067.- Regarding Limited Partnerships, what is the governinglaw in most states?

A1067.- RULPA

Q1068.- Regarding Limited Partnership Formation, what is theonly way a Limited Partnership can be formed?

A1068.- By filing the appropriate documents at the secretary ofState's Office

Q1069.- Regarding Limited Partnerships, of the appropriatedocuments filed with the Secretary of State's office, whatmust one of those documents be?

A1069.- A written Limited Partnership Agreement

Q1070.- The Limited Partnership name should indicate its statusby use of what?

A1070.- "Limited Partnership" or "L.P.," or "Ltd.," etc.

Q1071.- Regarding the Limited Partnerships, Creditors of a limitedpartnership who go unpaid will seek to do what?

A1071.- Impose personal liability upon limited partners.

Q1072.- Limited Partners can, in some circumstances, forfeit theirlimited liability. How does this happen?

A1072.- 1. Defective Formation- 2. False Statements- 3. Exercising Control- 4. Use of Name

Q1073.- If a limited partnership is Defectively Formed, an LP maybe held liable if what occurs?

A1073.- If he knew or should have known that no certificate hadbeen filed- OR that one erroneously referred to him as a generalpartner.

Q1074.- Liability for a LP for forming a Defective LimitedPartnership extends only to what?

A1074.- (a) extends only to third parties who, reasonably believedbased on the LP's conduct that he was a GP, extendedcredit to the partnership- (b) may be terminated by the filing of an appropriatecertificate with the Secretary of State's office and thewithdrawing from participation in profits.

Q1075.- Regarding False Statements, how does a LP forfeit limitedliability?

A1075.- Whan an LP- (a) signs an LP certificate knowing that it contains falsestatements or omissions,- or (b) learns of such misrepresentations and fails toamend or cancel it.

Q1076.- If an LP takes part in the CONTROL of the partnershipbusiness, he may forfeit limited liability, extending ony towhat?

A1076.- Persons who transact business with the LP believing,based on the LP's conduct, that the LP is a GP.

Q1077.- A limited partner does not take part in control by virtue ofthe following:

A1077.- a. being a contractor for or an agent or employee of thelimited partnership,- b. consulting with and advising a general partner,- c. acting as surety for the limited partnership orguaranteeing its loans,- d. taking any action required or permitted by law to sueon behalf of the limited partnership,- e. requesting or attending a meeting of the partners,- f. winding up the partnership,- g. exercising any right permitted to limited partners, or- h. voting on any important partnership matter.

Q1078.- If an LP knowingly PERMITS HIS NAME to be used in thename of the limited partnership, FORFEITS his limitedliaability only extending to what?

A1078.- Persons who extend credit to the limited partnership andhave no knowledge that the LP is not a GP.

Q1079.- What are three rights and responsibilities of LimitedPartners?

A1079.- 1. LP powers should be set out in LP agreement.- 2. LPs often have veto power over certain "extraordinary"acts by GPs.- 3. LPs usually have power to replace GPs.

Q1080.- What are the Information and Inspection Rights of aLimited Partnership?

A1080.- 1. A limited partnership must maintain and permit theinspection by limited partners of all important partnershiprecords.- 2. Access to Courts- 3. LPs have the right to file derivative suits, just likecorporate shareholders.

Q1081.- In a Limited Partnership, what is assignable and notassignable?

A1081.- 1. A limited partner's INTEREST (share of profits andassets on dissolution) IS ASSIGNABLE.- 2. A limited partner's rights to inspect, to bringderivatives suits, etc. are not assignable NOTASSIGNABLE, unless they are assigned to a substitutelimited partner.

Q1082.- In a Limited Partnership, what are the general partner'sright and responsibilities?

A1082.- A. Unlimited personal liability, and- B. Greater fiduciary (trust) duty owed to limited partners.

Q1083.- In a Limited Partnership, how should Profits and Lossesbe allocated?

A1083.- In the manner provided in the written partnershipagreement.

Q1084.- How should Partners who lend money to the LimitedPartnership be repaid?

A1084.- They should share in distributions along with outsidecreditors.

Q1085.- Regarding allocation of Profits and Losses in a LimitedPartnership, can the partnership agreement provide thatthe LPs and GPs be treated equally?

A1085.- Yes

Q1086.- What are the two Fiduciary duties that a partner owes theother partners?

A1086.- Loyalty and Care

Q1087.- What is the Duty of Loyalty?

A1087.- No CCAD - Can Computers Ace Deers?- 1. No Competition;- 2. No Conflicts of Interest;- 3. No Appropriation of a partnership business opportunity- 4. No Disclosure of confidential information.- Note: Appropriation = take for own use- As far as conflicts of interest, transactions between apartner and the partnership are fully permissible if certaincriteria (including notice and fairness) are met.

Q1088.- What is Duty of Care?

A1088.- "Refraining from engaging in:- Grossly negligent or reckless conduct- Intentional misconduct, OR- A knowing violation of law

Q1089.- How should partners Discharge their duties to thepartnership and other partners per RUPA?

A1089.- Consistently with the obligation of good faith and fairdealing

Q1090.- The partners' fiduciary obligations in UPA jurisdictionsare roughly analogous to those just spelled out for RUPA.T or F

A1090.- True

Q1091.- Define Macroeconomics

A1091.- Macroeconomics is the study of the economy as a whole.- It examines the determinants of national income,unemployment, and inflation and how monetary and fiscalpolicies affect economic activity.

Q1092.- Define GDP

A1092.- Gross Domestic Product - total market value of all finalgoods and services produced within the borders of anation.- Includes the output of foreign-owned factories in the U.A.but excludes the output of U.S. owned factories operatedabroad.

Q1093.- Define Nominal GDP

A1093.- the value of all final goods and services in current prices(no inflation adjustment).

Q1094.- Define Real GDP

A1094.- Value of goods and services in constant prices. GDP isadjusted to account for changes in the price level.Removes inflation by using a price index.

Q1095.- Real GDP Formula

A1095.- = ((Nominal GDP) / (GDP Deflator)) x 100- ** GDP Deflator is the price index.

Q1096.- Real GDP per Capita

A1096.- Real GDP divided by population.- Used to compare standards of living across countries oracross time. Measure of economic growth.

Q1097.- What are the 5 business Cycles?

A1097.- 1. Expansionary- 2. Peak- 3. Contractionary- 4. Trough- 5. Recovery (aka Expansionary)

Q1098.- Definition of a Recession

A1098.- two consecutive quarters of falling national output (GDP).

Q1099.- Define - Depression

A1099.- Severe recession, characterized by long periods ofstagnation in business activity and high unemploymentrates.

Q1100.- Leading indicators (before)

A1100.- Average unemployment claims- building permits for residences- average length of the workweek- money supply- prices of selected stocks- orders for goods- price changes of materials- index of consumer expectations

Q1101.- Lagging indicators (after)

A1101.- Prime rate charged by banks- average duration of unemployment- bank loans outstanding

Q1102.- Coincident indicators (during/contemporaneously)

A1102.- Industrial production- manufacturing and trade sales

Q1103.- What is the effect on Aggregate Demand, GDP and pricewhen the demand curve shifts LEFT?

A1103.- Aggregate Demand down- GDP down- Price down- **leads to contraction in economy

Q1104.- What is the effect on Aggregate Demand, GDP and pricewhen the demand curve shifts RIGHT?

A1104.- Aggregate Demand up- GDP up- Price up- **leads to expansion/recovery

Q1105.- What is the effect on short run aggregate supply, GDPand price when the supply curve shifts RIGHT?

A1105.- SRAS up- GDP up- Price down

Q1106.- What is the effect on short run aggregate supply, GDPand price when the supply curve shifts LEFT?

A1106.- SRAG down- GDP down- price up

Q1107.- What are the primary factors that shift AggregateDemand?

A1107.- Changes in:- Wealth- Real Interest Rates- Consumer Confidence (expectations about the futureoutlook)- Exchange Rates- Government Spending- Consumer Taxes

Q1108.- Define - multiplier effect

A1108.- Increase in consumer, firm or government spendingproduces a multiplied increase in the level of economicactivity. The muliplier effect results from the marginalpropensity to consume (MPC).

Q1109.- Multiplier Formula

A1109.- = (1/(1-MPC)) x change in spending- **MPC is typically less than 1 b/c ppl tend to save part oftheir income. Thus, 1-MPC is the marginal propensity tosave (MPS).

Q1110.- Factors that shift SHORT run aggregate supply

A1110.- 1. Changes in input (resource) prices.- 2. Supply Shocks (shortages/excess resources)

Q1111.- What are the 2 methods for measuring GDP?

A1111.- Expenditure Approach- Income Approach

Q1112.- What are the Components of the Expenditure Approach?

A1112.- G -Government purchases of goods/services- I - gross private domestic Investment- C - personal Consumption expenditures- E - net Exports (exports minus imports) - can be anegative #- **mnemonic: GICE- GPD = G + I + C + E

Q1113.- How do you calculate GDP using the Income Approach?

A1113.- mnemonic: IPIRATED- Income of proprietors- Profits of corporations- Interest (net)- Rental income- Adjustments for net foreign income and misc income- Taxes (indirect business taxes)- Employee compensation (wages)- Depreciation (aka capital consumption allowance)

Q1114.- Formula for NDP

A1114.- Net Domestic Product = GDP - Depreciation

Q1115.- Define GNP

A1115.- Value of final goods and services produced by residentsof a country in a given time period.- Example: BMW produces cars in U.S. - counts as GDP butnot GNP b/c it is foreign owned.

Q1116.- Formula for NNP

A1116.- Net National Product =- GNP - Depreciation

Q1117.- Formula for National Income

A1117.- NNP - Sales Tax (indirect business taxes)

Q1118.- Formula for PI

A1118.- Personal Income = National Income +/- various adj:- NI less:- undistributed corp profits (RE)- Net interest- Contributions for social measures (soc securitycontributions)- Corporate income taxes- Plus:- Government transfer pmts to individuals- Personal interest income- Business transfer payments/dividends

Q1119.- Calculate Disposable Income

A1119.- DI = PI - personal taxes- Income households have available to spend or save.

Q1120.- Unemployment Rate Formula

A1120.- unemployment rate = (# unemployed/total labor force) x100- Note: unemployed is a person over 16 who is available forwork and has actively sought employment- Note 2: total labor force includes all non-institutionalizedppl 16+ who were working or actively looking for work.

Q1121.- Identify the types of unemployment

A1121.- 1. Frictional- 2. Structural- 3. Seasonal- 4. Cyclical

Q1122.- Define Consumer Price Index

A1122.- CPI is a measure of the overall cost of a fixed basket ofgoods and ervices purchased by an averae household.Note: PPI is the producer price index, which focuses onpurchses by firms).

Q1123.- Formula for Inflation Rate

A1123.- Change in CPI = Inflation Rate- (CPI this period - CPI last period) / CPI last period x 100

Q1124.- Formula for Real Interest Rate

A1124.- Nominal Interest Rate - Inflation Rate

Q1125.- M1, M2 and M3 defined (money supply)

A1125.- M1 - $ used for the purchase of goods / services (coins,currency, and checkable deposits).- M2 - M1 plus liquid assets that cannot be used as amedium of exchange (savings, mmf, CD's less than$100,000)- M3 - M2 plus CD's greater than $100,000.

Q1126.- Ways the FED controls the money supply

A1126.- 1. Open Market Operations (OMO) (t-bills and bonds)- 2. Changes in Discount Rate (int rate charged to banks forST loans)- 3. Changes in the Required Reserve Ratio (RRR) (fractionof total deposits banks must hold in reserve).

Q1127.- Identify the steps (in order) in strategic managment(strategic positioning)

A1127.- 1. Define the firm's vision and mission statements.- 2. Set the goals of the firm- 3. Define the objectives of the firm- 4. Decide what to measure and take a baselinemeasurement (critical success factors)- 5. SWOT (strategic)- 6. Create the strategic plan- 7. Implement the strategic plan- 8. Evaluate and revise the plan as needed.

Q1128.- Define change in demand

A1128.- Change in the amount of good demanded resulting from achange in something OTHER THAN price. (shift in thedemand curve)

Q1129.- Define change in QUANTITY demanded

A1129.- Change in the amount of a good demanded resultingSOLELY from a change in price. (movement along thedemand curve)

Q1130.- Identify the factors that shift the demand CURVE

A1130.- Mnemonic: WRITEN- Changes in:- Wealth- price of Related goods (subs/complements)- consumer Income- Tastes/preferences- consumer Expectations- Number of buyers in a market

Q1131.- Identify the factors that shift the supply CURVE

A1131.- Mnemonic: ECOST- Expectations of the supplying firm (prices)- production Costs- Other goods price/demands (ie new iphone vs. oldiphone)- Subsidies/taxes- production Technology (improvements)

Q1132.- What is the effect of a simultaneous change in demandand supply on the equilibrium?

A1132.- Demand and Supply - Increase (Decrease)- Quantity - Increase (Decrease)- Price - Indeterminate

Q1133.- Price Elasticity - supply/demand >1.0

A1133.- Elastic

Q1134.- Price Elasticity - supply/demand < 1.0

A1134.- Inelastic

Q1135.- Unit Elastic

A1135.- Supply / Demand = 1

Q1136.- Cross Elasticity

A1136.- % change in the quantity demanded (or supplied) of onegood caused by the price change of another good.

Q1137.- Cross Elasticity: What type of good is it if the coefficientis positive, negative, or zero?

A1137.- Positive – Substitutes- Negative – Complements- Zero - Unrelated products

Q1138.- Positive Income Elasticity

A1138.- Demand increases as income decreases.- Normal Good (premium foods such as steak and lobster)

Q1139.- Negative Income Elasticity

A1139.- Demand decreases as income increases.- Inferior good (canned veggies or hamburger)

Q1140.- What are the 4 Market structures (from most competitiveto least comp.)

A1140.- 1. Perfect/Pure Competition- 2. Monopolistic- 3. Oligopoly- 4. Monopoly

Q1141.- Attributes of Perfect Competition

A1141.- 1. No barriers to entry- 2. Large # of suppliers and customers- 3. Very little product differentiation- 4. No individual firm can influence the market price of itsproduct nor shift the market supply sufficiently to make agood more scarce or abundant.

Q1142.- Attributes of a Monopoly

A1142.- 1. Strategic plans will likely focus on profitability, notmarket share- 2. Single firm w/ a unique product- 3. Significant barriers to entry- 4. set output and prices- 5. No substitute products

Q1143.- Attributes of Monopolistic Competition

A1143.- 1. Numerous firms with differentiated products- 2. Few barriers to entry- 3. Ability to exert some influence over price and market- 4. Significant non-price competition in the market (brandloyalty.

Q1144.- Attributes of an Oligopoly

A1144.- 1. Few sellers dominate the sales of a product and entryof new sellers is difficult or impossible (automobiles)- 2. Relatively few firms w/ differentiated products- 3. Fairly significant barriers to entry- 4. Prices tend to be fixed.- 5. Tend to face a kinked demand curve

Q1145.- Define: Kinked Demand Curve

A1145.- Firms match price cuts of competitors but ignore priceincreases

Q1146.- What are the characteristics of Stagflation?

A1146.- - Occurs when the economy suffers a recession,characterized by falling output, rising unemployment, andrising price levels.

Q1147.- Advantages and Disadvantages of Payback PeriodMethod

A1147.- Advantages:- Easy to Understand- Emphasis on Liquidity: how long it will take to pay backDisadvantages:- TVM is ignored- Reinvestment cash flows are not considered- Project profitability is neglected- After initial investment is recovered, cash flows after areignored.

Q1148.- Advantages and Disadvantages of DCF

A1148.- Advantages:- Best for long - run decisions- Includes TVMDisadvantages:- Single interest rate, doesn't adjust w/ time

Q1149.- Objective of Payback Period:- Objective of Discounted Payback Period:

A1149.- - After tax cash inflow to recover the initial investment.- Evaluate how quickly new ideas are converted intoprofitable ideas.- **Often used in companies that experience rapid tech.changes.

Q1150.- Advantages and Disadvantages of Discounted Payback:

A1150.- Same as payback period method:- **EXCEPT** it includes TVM

Q1151.- Objective of Net Present Value Method:

A1151.- It focuses an investment that will yield returns in anamount in excess of a management designated hurdle rate.- If NPV is positive = accept

Q1152.- What does NPV ignore?

A1152.- Depreciation (unless it is a tax shield)And- Method of Funding

Q1153.- Which is better NPV or IRR?

A1153.- NPV is considered better b/c it is flexible enough toconsistently handle uneven cash flows or inconsistentrates of return for each year.

Q1154.- Advantages and Disadvantages of NPV:

A1154.- Advantages:- Very flexible and can be used when there is no constantrate of return required for each year of the project- Best SINGLE technique for cap. budgeting.Disadvantage- Does not provide true rate of return on investment, it usesthe management hurdle rate.

Q1155.- How to solve NPV?

A1155.- 1) Calculate Tax Depreciation shield (net of tax)- 2) Calculate Annual Cash Savings (net of tax)- 3) Calculate Salvage Value- (net of tax)- 4) Add inflows from Annual Savings + Tax Shield +Salvage value- 5) Multiply by discount rate ** If annual savings isconstant use OA / if not use PV of $1- 6) Subtract outflow --> Inflow = if positive ACCEPT.

Q1156.- Objective of IRR?

A1156.- IRR is expected rate of return of a project.- "Time adjusted rate of return"

Q1157.- How to solve IRR?

A1157.- 1) Determine life of the Asset- 2) Calculate Payback Period:- Net incremental investment /- Net annual cash flows- 3) Find Proper PV Table- 4) Use your U/L and PP to find IRR

Q1158.- Disadvantages of IRR

A1158.- - Unreasonable reinvestment assumption: assumed toreinvested at IRR, but that is difficult to predict if it willreach the IRR- Inflexible Cash Flow Assumption: IRR is less reliable thanNPV b/c when there are several alternating periods of netcash inflows and net cash outflows or the amounts of thecash flows differ significantly- Evaluates only based on interest rates

Q1159.- What is Capital Rationing?

A1159.- when you have a LIMITED CAPITAL:- You rank projects b/t:- 1) Importance- 2. Ranking and Acceptance: managers will allocatecapital to the combination of projects with max NPV

Q1160.- Three types of Risk Preferences

A1160.- 1) Risk - Indifferent- 2) Risk - Averse- 3) Risk - Seeking

Q1161.- Attributes of Risk - Indifferent

A1161.- Increase in risk would NOT increase required rate ofreturn

Q1162.- Attributes of Risk - Averse

A1162.- Increase in risk would increase required rate of return

Q1163.- Attributes of Risk - Seeking

A1163.- Increase in risk would DECREASE required rate of return

Q1164.- Diversifiable vs. Nondiversifiable Risk

A1164.- Diverse: non-market / unsystematic / firm specific: riskcan be eliminated by diversification- Non-Diversifiable: Market/Systematic Risk Cannot beeliminated through diversification

Q1165.- Accrued L + A/P + Current portion of long-term notepayable =

A1165.- Current liabilities

Q1166.- Cash+ A/R + inventory =

A1166.- Current Assets- Prepaid assets - not CA

Q1167.- Avg. Gross Receivable balance =

A1167.- AVG daily sales x Average collection period

Q1168.- Gross Margin =

A1168.- = ( unit price - unit cost ) x number of units

Q1169.- The debt-to-equity ratio measures the

A1169.- % of total financing provided by creditors (debt)compared to financing by owners.

Q1170.- The interest coverage ratio measures the

A1170.- firm's ability to make required interest payments.- The higher - the greater ability to repay the debt.

Q1171.- The return on Equity reflects the

A1171.- net income that accrued to owners

Q1172.- If there is no provision for allocating losses ->

A1172.- the method used to allocate profits will be used

Q1173.- Inventory T/Over ratio

A1173.- COGS / AVG inventory

Q1174.- List major risks associated with the A/R component of thesystem?

A1174.- Credit may be applied to improper accounts- Updates of credit ratings may be untimely- Financial or management reporting may be inaccurate

Q1175.- EVA % =

A1175.- RCOE % - WACC %,- where RCOE = Oper. income / capital,- WACC = Cost of debt + cost of equity

Q1176.- What costs are relevant in decision making?

A1176.- only INCREMENTAL (fixed or variable)

Q1177.- Seasonality in data may be removed by calculating a

A1177.- WEIGHTED AVERAGE of the data for the four seasonaltime periods

Q1178.- Treating dividends as a residual part of a financialdecision assumes that

A1178.- earnings should be retained and reinvested as long asprofitable projects are available

Q1179.- Interest on long-term debt costs ______ than interest onshort-term debt because

A1179.- more- of risk associated with longer maturity dates

Q1180.- The intercept value is where the line crosses the _____axis.

A1180.- Y axis

Q1181.- The implicit cost of debt financing is the

A1181.- increase in the cost of debt and equity as the debt-to-equity ratio increases

Q1182.- ADRs are receipts issued by a US bank which representsownership rights in

A1182.- a foreign corporation

Q1183.- Cost of asset + increase in WC - tax saved - cash receivedfrom sale of old asset =

A1183.- NET OF INVESTMENT

Q1184.- EBIT=

A1184.- Total revenue - total Var. costs- total Fixed Costs

Q1185.- At what rate company would be INDIFFERENT to theinvestment?

A1185.- at the IRR- CF * IRR ( or annuity factor)= PV of initial investment

Q1186.- How do you solve the problem if CL is known and CurrentRatio will change from 1.75 to 1.5 to 1?

A1186.- CA + incease in Inv / CL + incease in Inv. = 1.5

Q1187.- How to calculate conversion costs transferred to seconddepartment using WA method and normal spoilage isgiven?

A1187.- 1) calc. Equivalent units= completed + spoiled + %completed of end units- 2) Cost per Eq. unit = Total conversion costs / Eq. units- 3) Conversion costs transferred = Cost per unit x ( Goodunits + Normal spoilage)

Q1188.- Leverage refers to the amount of _________ in the firm'sstructure

A1188.- Debt

Q1189.- FIXED OVERHEAD is a Product cost for ABSORPTIONCOSTING at the time of _________ and- a PERIOD COST under Variable costing at time of________

A1189.- SALE- PRODUCTION

Q1190.- What is Job Order Costing?

A1190.- A costing technique used to accumulate costs related tothe production of large, expensive, homogeneous (custom)items. -- Can be used for Service items.

Q1191.- Describe the process of accumulating costs in a job ordercosting system.

A1191.- 1. The costs are accumulated in individual WIP accounts,also called job order cost sheets. The TOTAL of each job(WIP acct) is transferred to the WIP-Control account.- 2. Overhead is applied based on a predetermined rate- 3. When job is complete, the total cost is transferred toFinished Goods.- 4. When sold, costs flow to CGS.

Q1192.- What is Cost of Goods Completed?

A1192.- It is the same as the Cost of Goods Manufactured.

Q1193.- What is Factory Overhead Applied (FOA)?

A1193.- It is the estimated overhead for the period.- This amount is calculated at the beg of the period andthen charged to WIP.- Actual Overhead costs are kept separately and expensed.- Any difference between applied and actual is under oroverapplied overhead.- Under/Over applied overhead is charged to WIP and whensold, to CGS.

Q1194.- How is Factory Overhead calculated?

A1194.- By applying the PDRate to the actual activity units used inproduction.

Q1195.- What is the calculation for the predetermined rate foroverhead?

A1195.- PDR = Estimated Total Manf Cost/Estimated Norm ActivityVolume- * The estimates must be based on attainable standards.

Q1196.- What is Process Costing?

A1196.- A costing technique used to accumulate costs for mass-produced, continuous, homogeneous items which areoften small and inexpensive.

Q1197.- What is the problem that occurs with process costing?

A1197.- Since costs are not accumulated for individual items theproblem becomes one of TRACKING the # of units movingthru WIP into FG and allocating the costs incurred to theseunits on a rational basis.

Q1198.- What complicates the process costing?

A1198.- 1. There may be partially completed goods in beg and endinventories.- 2. Each of the 3 factors of production (DM, DL, FO) maybe at different levels of completion.- 3. Some costs do not occur uniformly across the process;esp DM.- 4. There are two methods for calculating "equivalentunits," FIFO and Weighted Avg. (These are not the same asthe cost flow assumptions in financial acctg0

Q1199.- What is breakeven analysis?

A1199.- The sales level at which sales revenue exactly offsetstotal costs, both variable and fixed.

Q1200.- What is meant by Total Costs in breakeven analysis?

A1200.- Fixed and variable costs, manufacturing andselling/administrative costs

Q1201.- The breakeven point is usually expressed in what?

A1201.- Sales Units or Dollars

Q1202.- What approach is used to calculate breakeven in units?

A1202.- Contribution Margin per Unit Approach

Q1203.- What is contribution margin?

A1203.- The portion of revenues available to cover fixed costs.

Q1204.- What is the formula for calculating contribution margin?

A1204.- Sales Revenue - Variable Costs

Q1205.- What is contribution margin per unit?

A1205.- The dollar amount of the sale an individual unitcontributes to covering fixed costs.

Q1206.- What's the formula for calculating contribution margin perunit?

A1206.- CMU = SPU – VCU- CM = Sales Price per Unit - Variable Costs per Unit

Q1207.- Besides the dollar amount per unit needed to breakeven,what other information can the contribution margin perunit provide?

A1207.- Can provide the # of units needed to breakeven.

Q1208.- How is Sales Price per Unit (SPU) calculated?

A1208.- SPU = Total Sales/# Units Sold

Q1209.- How is Variable Cost per Unit (VCU) calculated?

A1209.- VCU = Total Sales - Fixed Costs/# Units Sold

Q1210.- What is the formula for calculating the breakeven point indollars (BPD)?

A1210.- BPD = BPU x SPU- Breakeven pt in units * Sales Price per unit

Q1211.- When no sales price per unit or variable cost per unit isavailable, what can be used to calculate breakeven point indollars?

A1211.- Contribution Margin Ratio Approach

Q1212.- What three elements must be available to calculate theContribution Margin Ratio?

A1212.- Sales Revenue, total variable costs, total fixed costs

Q1213.- What's the formula for calculating CMR?

A1213.- CMR = (SRev – Vcosts) / SRev

Q1214.- What is the contribution margin ratio?

A1214.- The % of each sales dollar that is available to cover fixedcosts.

Q1215.- Virtually all breakeven questions on the CPA exam can besolved by what two formulas?

A1215.- Breakeven Point in Units &- Breakeven Point in Dollars- BPU - TFC/CMU- BPD - TFC/CMR

Q1216.- What is targeted profit?

A1216.- When you want to sales revenue to cover more thant totalcosts but to also provide a profit.

Q1217.- What is the formula for calculating targeted profit (TP)?

A1217.- TP = TFC + Targeted Profit / CMU or CMR

Q1218.- Breakeven Analysis~~- What is a good way to think about how the contributionmargin approach calculates breakeven?

A1218.- The CM in the denominator must cover the amount in thenumerator.

Q1219.- Summary:- What are the six main formulas for calculatingbreakeven?

A1219.- CM = SRev - Var Costs- CMU = SPU – VCU- BPU = TFC/CMU- BPD = TFC/CMR- CMR = CM/SRev- BP w/Targeted Profit = TFC/CMU or CMR

Q1220.- What is the margin of safety?

A1220.- The diff between budgeted and actual sales (units ordollars) and breakeven sales (units or dollars).

Q1221.- Define Sunk Costs

A1221.- Sunk costs are those that have already been incurred, areunavoidable in the future, and will not vary with the courseof action taken

Q1222.- What is the general definition of opportunity cost?

A1222.- Opportunity cost is the potential benefit lost by selectinga particular course of action.

Q1223.- Define opportunity costs evaluated in considering anopportunity when the firm is operating at capacity.

A1223.- Opportunity cost at full capacity is defined as the netbenefit given up from the best alternative use of thecapacity.

Q1224.- What is the formula for after-tax cost?

A1224.- (1.00-tax rate) × tax deductible cash expense = after taxcost aka net cash outflow.

Q1225.- What is the formula for after-tax benefit?

A1225.- (1.00-tax rate) × tax cash receipt = after tax benefit aka netcash inflow.

Q1226.- The formula for computing a depreciation tax shield is:

A1226.- Tax rate × depreciation deduction = tax savings from thedepreciated tax shield.

Q1227.- What is the formula for the contribution approach?

A1227.- Revenue- Less: Variable Cost- CONTRIBUTION MARGIN- Less: Fixed Costs- NET INCOME

Q1228.- Contribution margin ratio formula:

A1228.- Contribution margin / revenue

Q1229.- What is the absorption formula?

A1229.- Revenue- Less: COGS- GROSS MARGIN- Less: Oper. Exp.- NET INCOME

Q1230.- Formula for breakeven point in units:

A1230.- Total fixed costs / CM per Unit = Breakeven point in units

Q1231.- Formula for breakeven point in dollars:

A1231.- Total Fixed Costs / CM Ratio = Breakeven point in dollars

Q1232.- What is the margin of safety formula?

A1232.- Total Sales - Breakeven Sales = Margin of safety

Q1233.- Define the steps and formula for economic value added.

A1233.- Step 1: Calculate the required amount of return andincome after taxes- Investment * Cost of Capital = Required Return- Step 2: Compare to the required return- Income after taxes - required return = economic valueadded

Q1234.- What is the payback method formula?

A1234.- Net initial investment / Incease in annual net after taxcash flow = payback period

Q1235.- What is risk averse behavior?

A1235.- Risk averse behavior exists when the certainty equivalent< expected value.

Q1236.- What is risk seeking behavior?

A1236.- Risk seeking behavior exists when the certaintyequivalent > expected value.

Q1237.- What is risk indifferent behavior?

A1237.- Risk seeking behavior exists when the certaintyequivalent = expected value.

Q1238.- Distinguish between diversifiable and non-diversifiablerisk.

A1238.- D Diversifiable Risk- U Unsystematic Risk (Non-Market / Firm Specific)- N Nondiversifiable Risk- S Systematic Risk (Mkt)

Q1239.- What is the degree of operating leverage formula?

A1239.- DOL = % Chg in EBIT / % Chg in Sales

Q1240.- What is the degree of financial leverage formula?

A1240.- DFL = % Chg in EPS / % Chg in EBIT

Q1241.- What is the degree of combined leverage formula?

A1241.- DCL = % Chg in EPS / % Chg in Sales

Q1242.- Define Weighted Average Cost of Capital

A1242.- The Weighted Average Cost of Capital (WACC) is theaverage cost of debt & equity associated with the firm'sexisting assets and operations.

Q1243.- What is the pre-tax cost of debt formula (kdt)?

A1243.- kdt = (I+(PV-Nd)/N) / ((Nd+PV)/2)- PV = Par value of the bonds- I = Annual Int payments in $- Nd = Net proceeds from the sale of bonds- n = # of yrs to the bond's maturity

Q1244.- What is the cost of preferred stock formula (kps)?

A1244.- kps = Dps / Nps- Dps = Preferred stock cash dividends- Nps = Net proceeds of preferred stock

Q1245.- What is the cost of retained earnings (Kre), using theCAPM formula?

A1245.- Kre = krf + [bi×(km-kf)]- krf= risk free rate- bi = beta coefficient of the stock- PMR = Market risk premium- km = Market rate

Q1246.- Define the Weighted Average Cost of Capital (retainedearnings) by formula

A1246.- Below is terminology used in the cost of capital and arepart of the WACC formula:- wdx = (weight for) long-term debt- wps = (weight for) preferred stock- wcs = (weight for) common stock equity- kwc = weighted average cost of capital- "k" stands for the specific COST of each type of capital;"w" stands for the WEIGHT of each. So, WACC would be...- kwc = (kdx×wdx) + (kps×wps) + (kcs×wcs)

Q1247.- What is the formula for working capital?

A1247.- CA - CL = WC

Q1248.- What are the three (3) motivations for holding cash?

A1248.- 1. TRANSACTION MOTIVE- A transaction motive for holding cash is concerned withhaving enough cash to meet payments arising from theordinary course of business.- 2. SPECULATIVE MOTIVE- A speculative motive for holding cash is concerned withhaving enough cash to take advantage of temporaryopportunities.- 3. PRECAUTIONARY MOTIVE- A precautionary motive for holding cash is concernedwith having enough cash to maintain a safety cushion sothat unexpected needs may be met.

Q1249.- What is the formula for computing the annual percentagerate of quick payment discounts?

A1249.- (360 / (pay period - discount period)) ×(Discount % / (100%- Discount%))

Q1250.- What is the cash conversion cycle formula?

A1250.- inventory conversion period + receivables collectionperiod - payables deferral period

Q1251.- What is the equation for economic order quantity?

A1251.- Mnemonic: e = (2soc)- or- e = square root of (2so/c)

Q1252.- Name and briefly describe the five major components thatcomprise the information technology of an organization.

A1252.- 1. Hardware- 2. Network- 3. Software- 4. Data- 5. People

Q1253.- Describe the normal series of events in an AccountingInformation System (AIS):

A1253.- 1. Transaction data from source documents is enteredinto the AIS by the end user.- 2. The original paper source documents are filed.- 3. These transactions are recorded in the appro. journal.- 4. The transactions are posted in the general andsubsidiary ledgers.- 5. TBs are prepared- 6. Financial reports are generated.

Q1254.- Name and briefly describe five different types of MISreports.

A1254.- 1. Periodic Scheduled Reports- 2. Exception Reports- 3. Demand Reports- 4. Ad Hoc Reports- 5. Push Reports

Q1255.- What are the various categories of the BusinessInformation Systems?

A1255.- 1. Transactional processing systems.- 2. Knowledge systems.- 3. Mgmt information systems.- 4. Decision support systems.- 5. Executive information systems.

Q1256.- What are the primary roles of the Biz Info Systems (BIS)?

A1256.- 1. Process detail data- 2. Assist in making daily decisions, and- 3. Assist in developing business strategies

Q1257.- What are the reporting risks in a BIS?

A1257.- 1) Strategic Risk- 2) Operating Risk- 3) Financial Risk- 4) Information Risk

Q1258.- Identify functions that should be segregated in an ITdepartment.

A1258.- The duties of systems analysts, computer programmers,and computer operators should be segregated.

Q1259.- Identify the four functions of a DBMS:

A1259.- 1. Database Development- 2. Database Query- 3. Database Maintenance- 4. Application Development

Q1260.- Identify the seven components of a LAN.

A1260.- 1. NODE- 2. Workstation- 3. Server- 4. Network Interface Card (NIC)- 5. Transmission Media- 6. Network Operating System (NOS)- 7. Communications Device.

Q1261.- Identify the two types of networks that can be used toprovide WAN Communications services.

A1261.- VAN - privately own communications networks thatprovide additional services beyond standard datatransmissions- Internet based networks - use internet protocols andpublic communications channels to establish networkcommunications.

Q1262.- List some of the features of the value added network.

A1262.- VAN:- is privately owned- provides additional services- provides good security- uses periodic (batch) processing- may be expensive.

Q1263.- List some of the features of an internet-based network.

A1263.- An internet based network:- uses public communication channels- transmits transactions immediately- is relatively affordable- increases the number of potential trading partners.

Q1264.- What is the difference between the intranet and theextranet?

A1264.- An intranet connects geographically separate LANswithin a company, whereas an extranet permits specifiedexternal parties to access the company's network.

Q1265.- Describe two types of processing used in thecomputerized environment.

A1265.- Batch processing – processing- On-line, real-time (OLRT) processing - immediateprocessing

Q1266.- Identify three types of computer software.

A1266.- System software (programs that run the computer).- Programming languages (generate computer processinginstructions)- Application software (end user programs)

Q1267.- What is a batch control total?

A1267.- A batch control total is a manually calculated total that iscompared to a computer generated total as a means oftesting accuracy and completeness.

Q1268.- What are the advantages and disadvantages ofcentralized processing?

A1268.- Advantages:- Data is secured better, once received.- Processing is consistent (decentralized systems may result ininconsistent processing among regional offices).- Disadvantages:- cost of transmitting large numbers of detailed transaction canbe high- there are increasing processing power and data storageneeds at the central location.- there is a reduction in local accountability- input/output bottlenecks may occur at high traffic times.- there may be a lack of ability to respond in a timely manner toinformation requests from remote locations

Q1269.- Identify some differences and problems that one needs tobe aware of when auditing in a computer environmentrather than in a manual environment.

A1269.- 1. Disappear Audit Trail- 2. Uniform Transaction Processing- 3. Computer Initiated Transactions- 4. Potential for Increased Errors and Irregularities- 5. Potential for Increased Supervision and Review.

Q1270.- List and explain the steps in batch processing.

A1270.- Batch processing is accomplished in two steps:- 1. Create a transaction file: the first step is to create atransaction file by manually (usually) keying the data (dataentry), editing the data for completeness and accuracy,and making any necessary corrections.- 2. Update the Master File: the second step is to updatethe master file by sorting the transaction file into the sameorder as the master file and then updating the relevantrecords in the master file from the transaction file.

Q1271.- What is the basic difference between a databasemanagement system and a database?

A1271.- A database is an integrated collection of data records anddata files.- A database management system (DBMS) is the softwarethat allows an organization to create, use, and maintain adatabase.

Q1272.- What is a data warehouse and what is data mining?

A1272.- A data warehouse is a collection of databases that storeboth operations and management data.- Data mining is the processing of data in a data warehouseto attempt to identify trends and patterns of businessactivity.

Q1273.- What are some advantages of a DBMS?

A1273.- Advantages of a DBMS include:- 1. Data redundancy & inconsistency are reduced.- 2. Data sharing exits- 3. Data independence exists- 4. Data standardization exits- 5. Data security is improved, and- 6. Data fields can be expanded without adverse effects onapplication programs.

Q1274.- What is the basic difference between WANs and LANs?

A1274.- The basic difference between WANs and LANs isdistance.- LANs normally are within a fairly limited distance, andWANs allow much longer distance.

Q1275.- How can the internet be defined?

A1275.- The internet is an international network composed ofservers around the world that communicate with eachother.

Q1276.- What are some of the similarities and differences betweenthe internet, intranets, and extranets?

A1276.- The internet, intranets, and extranets all use internetprotocols and public communication networks rather thanproprietary protocols and networks so that the samebrowsers can be used.- Intranets connect LANs within a company- Extranets allow a company's customers and suppliers toaccess the company's network.

Q1277.- What are three types of programmed controls?

A1277.- 1. input controls- 2. processing controls- 3. output controls

Q1278.- What is the major distinction between batch processingand online processing?

A1278.- The major distinction between batch processing andonline processing is that transactions in a bath processingsystem are processed in batches and not necessarily atthe time those transactions are submitted.- In online processing, transactions are processed as thetransactions are entered.

Q1279.- What is the distinction between centralized anddistributed process?

A1279.- Central processing maintains data and performs dataprocessing at one or more central locations.- Decentralized processing occurs when computing powerand processing are spread out over many locations.

Q1280.- What characteristics of a computerized system might leadto a higher potential for errors and irregularities than inmanual systems?

A1280.- The following:- 1. the opportunity for remote access increases thelikelihood for unauthorized access.- 2. concentration of information means that once securityis breached, the potential for damage is higher- 3. decreased human involvement in processing results ina decreased opportunity for observation of errors- 4. errors of fraud might occur in the design ormaintenance of application programs

Q1281.- What are access controls?

A1281.- Access controls limit access to program documentation,data files, programs, and computer hardware to authorizedpersonnel.- Examples include locks, passwords, user id codes,assignment of security levels, call backs on dial upsystems, setting of file attributes, and use of firewalls.

Q1282.- What is a firewall?

A1282.- A firewall is a system of user identification andauthorization that prevents unauthorized users formgaining access to network controls.

Q1283.- What is disaster recovery and what is the differencebetween a hot site and a cold site?

A1283.- Disaster recovery consists of plans for continuingoperations in the event of destruction of not only programand data files but also processing capability.- A hot site is an offsite location that is completelyequipped to immediately take over a company's dataprocessing.- A cold site is an offsite location that has all the electricalconnections and other physical requirements for dataprocessing, but does not have the actual equipment.

Q1284.- Identify the costs associated with implementing EDI.

A1284.- 1. Legal Costs- 2. Hardware Costs- 3. Costs of translation software- 4. Costs of Data Transmission- 5. Process reengineering and employee training costs foraffected applications- 6. Costs associated with security, monitoring, and controlprocedures.

Q1285.- Define B2B transactions and identify the three differentmarkets.

A1285.- When a biz sells its products or services to otherbusinesses, it is called a B2B transaction.- B2B E-commerce: many businesses buy, sell, trade theirproducts & services w/ other businesses.- Electronic Market: it is very common for B2B transactionsto occur electronically via the internet.- Direct Market: it is also very common for b2b transactionsto occur electronically between businesses where there isa pre-existing relationship.

Q1286.- Identify some advantages of B2B e-commerce.

A1286.- speed- timing- personalization- security- reliability

Q1287.- Define electronic funds transfer (EFT).

A1287.- EFT systems are a major form of electronic payment forbanking and retailing industries.- EFT uses a variety of technologies to transact, process,and verify money transfers and credits between banks,businesses, and consumers.- The FED wire system is used very frequently in EFT toreduce the time and expense required to process cks andcredit transactions.

Q1288.- Define EDI

A1288.- EDI is computer to computer exchange of businesstransactions documents.

Q1289.- How are EDI transactions submitted, and what ismapping?

A1289.- EDI transactions are submitted ina standard data format- Mapping is the process of determining thecorrespondence between elements in a company'sterminology and elements in standard EDI terminology.

Q1290.- What are the characteristics / features of EDI?

A1290.- 1. EDI allows the transmission of electronic documentsbetween computer systems in different orgs.- 2. EDI reduces handling costs and speeds transactionprocessing.- 3. EDI requires that all transactions be submitted in astandard format.- 4. EDI can be implemented using direct links, VANs, orover the internet.

Q1291.- What are some controls for and EDI system?

A1291.- Encryption of data- Activity logs of failed transactions- Network and sender / recipient acknowledgments.

Q1292.- What is e-commerce?

A1292.- E-commerce involves electronic consummation ofexchange transactions.- E-commerce normally implies the use of the internet.

Q1293.- What is B2B?

A1293.- B2B is e-commerce between businesses.

Q1294.- What is supply chain mgmt?

A1294.- supply chain mgmt is the mgmt of an organization'ssupply chain including what, when, where, and how muchfor every sale.

Q1295.- Name the three components of product costs.

A1295.- Direct Materials (DM)- Direct Labor (DL)- Manufacturing Overhead (MO)- Prime Costs = DM + Dl- Conversion costs = DL + MO

Q1296.- Distinguish between product & period cost.

A1296.- Product costs are inventoriable; they become cost ofgoods sold when sold.- Period costs are- expensed in the period incurred.

Q1297.- Determine the standard overhead rate.

A1297.- Standard OH rate = Est. total mfg OH costs / Est. totalactivity level of cost driver.

Q1298.- Define: Executional Cost Driver

A1298.- executional cost drivers are factors that are helpful to thefirm in managing the short term costs of the firm (egrelationships with suppliers, enhancements to productionprocesses, etc.)

Q1299.- Define: Structural Cost Drivers

A1299.- Structural cost drivers are strategic decisions or plansmade by the firm that have a long-term effect on the cost(eg., experience, available technology, etc.)

Q1300.- Define: Relevant Range

A1300.- The relevant range is the range of volume for which theassumptions of the cost driver (ie linear relationship withthe costs incurred) are valid and in which the actual valueof the cost driver exists.

Q1301.- With joint products, what is the treatment of costsincurred before the split-off point?

A1301.- Costs incurred before split off point are sunk costs, notrelevant to further processing decisions.- Joint costs are allocated using one of the followingmethods. Use % of product to total based on a ratio of:- Relative sales value- Net realizable value- Physical units

Q1302.- What type of costs does a standard cost measurementsystem use for determination of manufacturing costs?

A1302.- Standard cost systems use standard costs for allmanufacturing costs (ie raw materials, direct labor andmanufacturing overhead).

Q1303.- What is the difference between job and process costing?

A1303.- Job Costing: With job costing, each unit/batch is uniqueand easily identifiable costs determined by each job.- Example: We print your resume in our print shop.- Processing: With processing costing, continuous massproduced identical units are manufactured and costs aredetermined by activity / process / department.- Example: We process crude oil into gasoloine.

Q1304.- What is an equivalent unit?

A1304.- Used in process costing, equivalent units are fullycompleted and partially completed units during the period.- In applying costs, determine the units, then costs, thenapply then apply the cost flow for cost per unit andallocation of costs.

Q1305.- Name the types of spoilage and indicate the appropriateaccounting treatment.

A1305.- Abnormal: Charge to income of the current period.- Normal: Increase the cost of the product produced (ie.,inventorable).

Q1306.- Define: Activity Base Costing (ABC)

A1306.- ABC is a costing theory that assumes that resourceconsuming activities cause costs and that costs should beassigned to benefiting products based on the activitiesperformed and the resources consumed.- ABC systems often divide costs into multiple activitycenters and identify the activities that drive the costs ineach cost center. Costs are then assigned based upon thevolume of cost drivers at the determined rate per costdriver.

Q1307.- List and define the types of economic costs.

A1307.- Explicit Costs:- Explicit costs are documented out of pocket expenses.- Implicit Costs:- Implicit costs are opportunity costs of inputs supplied bythe owners (equity contributions).

Q1308.- Distinguish between accounting and economic costs.

A1308.- Accounting Costs:- Accounting costs are explicit costs.- Economic Costs:- 1. Economic costs combined accounting (explicit) costsand opportunity (implicit) costs.- 2. Economic costs is a broader concept than accountingcosts.

Q1309.- List and define the three main production concepts.

A1309.- Total Product:- Total product equals the total amount of output "Q".- Marginal Product- Marginal product equals the change in total productresulting from one unti increase in quantity of an inputemployed.- Average Product:- Average product equals the total product divided by thequantity of an input.

Q1310.- Define: Diminishing Marginal Returns

A1310.- Diminishing marginal returns is sometimes referred to asdiminishing marginal product.- The concept refers to the fact that marginal product of aninput typically falls as the quantity of the input increase.

Q1311.- Define: Economies of Scale

A1311.- Economies of scale are reductions in unit costs resultingfrom increased size of operations.

Q1312.- Define: Diseconomies of Scale

A1312.- Diseconomies of sale are increases in average costs ofoperations resulting from problems in managing largescale enterprises.

Q1313.- Define: Strategic Positioning.

A1313.- During strategic positioning, a firm will determine thebest manner to achieve organizational goals and assessthe quality practices of the organization.

Q1314.- What is a Balanced Scorecard?

A1314.- A balanced scorecard is a report a firm produces thathighlights the multiple dimensions of performance,customer satisfaction, and human resource use.

Q1315.- Define: Ideal Standards

A1315.- Ideal standards represent cost that result from perfectefficiency and effectiveness in job performance.

Q1316.- Define: Currently Attainable Standards

A1316.- Currently attainable standards represent costs that resultfrom work performed by employees with appropriatetraining and experience but without extraordinary effort.

Q1317.- Define: Fexible Budget

A1317.- A flexible budget is a budget that can be adjusted to anyactivity level. It shows how costs can vary with productionvolume.- Budgeted total costs = (variable cost per unit * activitylevel) + fixed costs- Fixed costs in total are constant over the relevant rangeof activity.

Q1318.- Identify the direct material variances (two way varianceanalysis).

A1318.- 1. Direct Materials price variance = (AP - SP) * AQ- where AP = actual price., SQ is standard price, AQ actualquantity purchased.- 2. Direct Materials quanity usuage variance = (AQ-SQ)*SP- where AQ is actual quantity used. SQ is actual quantityallowed. SP is standard price.

Q1319.- When calculating the "difference" in variance anlysis,what is the formula?

A1319.- It would be SAD if you forgot this formula:- S: Standard- A: <Actual>- D: DIFFERENCE

Q1320.- Identify the direct labor variances (two way varianceanalysis).

A1320.- 1. Direct Labor rate variance = (SR-AR)*AH- 2. Direct Labor efficiency variance = (SH-AH)*SR- where- AR=Actual Labor Hour- SR=Standard Labor Hour- AH=Actual Hours- SH=Standard Hours

Q1321.- Define: Contribution by SBU

A1321.- Contribution Margin- <Controllable Fixed Costs>- Contribution by SBU represents the difference betweenthe contribution margin (Fixed - Variable Costs) andcontrollable fixed costs (those costs that managers canimpact in less than one year).

Q1322.- What is the purpose of the balanced scorecard?

A1322.- The balanced score card displays performance relative tocritical success factors identified for multiple dimensionsof a business operaton.

Q1323.- List the two alternate formulas of ROI.

A1323.- ROI: Inc / Invest. Capital- ROI: PM* Invest. Turnover- Invest. Turnover = Sales / Assets

Q1324.- Gross Profit Margin

A1324.- Sales - Cost of goods sold)/Sales- Shows percentage of revenues available to coveroperating expenses and yield a profit. Higher is better.

Q1325.- Define Benchmarking

A1325.- Benchmarking is the process of identifying standards forcritical success factors for:- 1. Comparison to actual performance.- 2. Determination of gaps.- 3. Implementation of improvements.

Q1326.- What are best practices?

A1326.- Best practices represent externally determinedbenchmarks from workclass performers.

Q1327.- Identify the costs of quality

A1327.- appraisal costs- prevention costs- internal failure costs- external failure costs

Q1328.- What is the formula for residual income?

A1328.- Net book value- * Hurdle rate- REQUIRED RETURN- If amount of inc. from the inv. exceeds the computedrequired return, performance objectives have been met.

Q1329.- What dimensions or categories of business operationsare frequently identified by the balanced scorecard?

A1329.- F: Finance- I: Internal business Processes- C: Customer satisfaction- A: Advancement of human resource innovation

Q1330.- List the 5 steps in theory of constraint analysis.

A1330.- Mnemonic: IMAR- I: Identify the constraint- M: determine the profitable product Mix- F: maximize the Flow through the constraint- A: Add capacity to the constraint- R: Redesigning the manufacturing process for flexibilityand faster cycle time.

Q1331.- List and define the types of responsibilty segments (orstrategic business units - SBUs) that are used to establishbusiness performance measures.

A1331.- Cost SBU: Managers are held responsible for controllingcosts.- Revenue SBU: Managers are held responsible forgenerating revenue.- Profit SBU: Managers are held responsible for producinga target profit.- Investment SBU: Managers are held responsible for ROI.

Q1332.- Using the "PURE" mnemonic, identify the formulas for 2way variance anlaysis.

A1332.- P: Price D*A- U: Usage D*S- R: Rate D*A- E: Efficiency D*S- D="Difference" (S-A)=D: "SAD"- A=Actual- S=Standard

Q1333.- What is the formula for Cost of Goods Manufactured akaCOGM?

A1333.- Mnemonic: BASE- B: WIP (begin)- A: + DM- A: + DL- A: + MO- S: - WIP (end)- E: COGM

Q1334.- What are cost behavior patterns?

A1334.- Process that allows us to predict how costs change inresponse to changes in production or sales.

Q1335.- What is the goal in analyzing costs?

A1335.- To predict total costs and profit

Q1336.- Very few costs behave consistently across a wide rangeof production or sales volumes. T or F

A1336.- True

Q1337.- Cost behavior patterns must be analyzed under thenotion of what concept?

A1337.- Behavior can only be analyzed within a "relevant range"due to costs not behaving consistently over a wide range

Q1338.- What is relevant range?

A1338.- A range in production volumes where:- 1. Total fixed costs remain constant- 2. Unit Variable costs remain constant- 3. Unit sales price remain constant

Q1339.- All costs behavior patterns are valid only within...

A1339.- A relevant range

Q1340.- In a relevant range, total fixed costs remain constant andunit fix costs do what?

A1340.- Vary inversely

Q1341.- How do total variable costs behave when productionvolume changes?

A1341.- Varies directly

Q1342.- What two techniques are designed to support largeexpensive items, customized, special order, small lots ORlarge batch, homogeneous production?

A1342.- Job Order & Process Costing

Q1343.- What is Job Order Costing?

A1343.- A costing technique that supports large expensiveheterogeneous items, customized special order, individualor small lots

Q1344.- What is Process Costing?

A1344.- A costing technique that supports large batches,homogeneous products

Q1345.- In a job order cost system, where are costs accumulated?

A1345.- In an individual WIP acct (job order cost sheet)

Q1346.- What is done with the total for individual WIP accts underthe job order cost system?

A1346.- The totals are transferred to the WIP control acct

Q1347.- What's the process of a job order cost system?

A1347.- 1. Accumulate costs in an individual WIP acct at theactual costs.- 2. Transfer the total from the individual WIP acct to theWIP ctrl acct.- 3. Apply FO. Charge to WIP ctl and FOA at the std costs.- 4. In over or under amounts in WIP is decreased from orcharged to CGS.- 5. Costs flow from FG to CGS.

Q1348.- What is the acronym utilizing the job order cost system?

A1348.- A Accumulate costs- T Transfer total- A Apply FO- C Costs flow

Q1349.- What's the main issue in process costing?

A1349.- Since costs of goods are not individually tracked, theproblem lies in determining how many units were productsfor the period and assigning a cost to them.

Q1350.- JIT is a pull or push production process?

A1350.- Pull

Q1351.- The production schedule of the traditional "push"production is based on budgeted or actual sales?

A1351.- Budgeted

Q1352.- The production schedule of the "pull" production isbased on budgeted or actual sales?

A1352.- Actual

Q1353.- In a JIT system, as customer orders are received...

A1353.- Goods are scheduled for production

Q1354.- In a JIT system, later steps pull production through...

A1354.- the later steps

Q1355.- In a well managed JIT system, all inventories will be...

A1355.- Eliminated

Q1356.- Name the characteristics that must be present in order fora JIT inventory system to function properly.

A1356.- 1. Many small orders- 2. Timely delivery- 3. Negotiate long contracts w/sm # of suppliers- 4. Raw materials always high quality- 5. Inspection of goods reduced- 6. Order & Pmt Processing costs reduced

Q1357.- JIT production environments are characterized by:

A1357.- 1. Set up quickly- 2. Skilled workforce that can perform multiple tasks- 3. Very low rate of defects

Q1358.- What is backflush costing?

A1358.- A product costing approach that delays costs until goodsare completed or sold.- Costs are not tracked from raw mat to FG/CGS becausetheoretically, in a JIT system, inventory is eliminated.

Q1359.- What does transfer pricing mean?

A1359.- The prices of goods transferred between organizationaldepartments.

Q1360.- Transfer prices are determined by one of three methods.What are the methods?

A1360.- Market Price- Cost-based Price- Negotiated Price

Q1361.- What is Suboptimization?

A1361.- When departmental managers seek to optimize theirindividual best interest rather than the interest of theorganization as a whole.

Q1362.- What is Goal Incongruence?

A1362.- When actions encouraged by the reward structure of thedept conflict with the goals of other depts or theorganization as a whole.

Q1363.- What is Goal Congruence?

A1363.- When the department and division managers makedecisions that are consistent with the goals and objectivesof the organization as a whole.

Q1364.- What helps to ensure goal congruence?

A1364.- The Transfer Pricing Rule

Q1365.- What is the transfer pricing rule (formula)?

A1365.- Transfer Price =- Add'l Outlay Cost per unit + Opp Cost per unit

Q1366.- What are additional outlay costs?

A1366.- VARIABLE Production Costs + Additional Costs to sellincurred by the selling unit- Variable Prod'n costs - DM, DL, Var FO- Other costs - storage, transportation, S&A

Q1367.- In reference to transfer pricing, define opportunity costs.

A1367.- The benefit foregone due to selling internally.

Q1368.- In transfer pricing, opportunity cost only exists when...

A1368.- The selling unit is producing and selling at full capacity.

Q1369.- What is full capacity?

A1369.- Producing AND Selling at full capacity

Q1370.- What is the Opportunity Cost per Unit (OCU) formula =?

A1370.- OCU = SPU – AOU- SPU = Selling Price per unit- AOU = Add'l Outlay Cost per unit

Q1371.- What is another definition of opportunity cost?

A1371.- Sales given up less the add'l outlay cost to produce it

Q1372.- When the selling unit is operating at full capacity and cansell all that it produces, what should the transfer price be?

A1372.- Market Price

Q1373.- What is the theoretical transfer price?

A1373.- Market Price

Q1374.- What should the transfer price be when the selling unithas EXCESS production capacity?

A1374.- Additional Outlay Cost per Unit.

Q1375.- When negotiating transfer prices among divisions, thebuying division's maximum price is?

A1375.- The min price on the open market.

Q1376.- When negotiating transfer prices among divisions, theselling division's minimum price will be?

A1376.- 1) Its direct costs if it has excess capacity or- 2) Its market price if no excess capacity

Q1377.- What are transfer prices based on when using cost-basedpricing?

A1377.- Production Costs

Q1378.- What are the three variations of cost-based pricing whendetermining transfer prices?

A1378.- Variable Cost Pricing- Full Cost Pricing (absorption)- Cost - Plus Pricing

Q1379.- How is the transfer price determined when using thevariable cost pricing method?

A1379.- The price is the cost to produce and sell the item to thepurchasing division.- DM, DL, VFO, FS&A

Q1380.- Under the variable cost pricing method for determiningtransfer prices, should standard or actual costs be used?

A1380.- Standard

Q1381.- Using standard costs provides an incentive for thepurchasing or selling division?

A1381.- Purchasing

Q1382.- How are transfer prices determined when using the fullcost pricing method?

A1382.- By allocating an amount of fixed cost from the sellingdivision to the variable cost of production.

Q1383.- Why is the full cost method for determining transferprices problematic for the organization as a whole?

A1383.- Because the fixed costs become variable costs to thepurchasing division and will understate profitability whenthese costs are used in earnings analyses.

Q1384.- How are transfer prices determined when using the costplus pricing method?

A1384.- Transfer prices are based on the selling divisions add'lcosts per unit plus a fixed dollar amount or percentage ofthe cost.

Q1385.- Under transfer pricing, cost plus pricing have the sameadvantages and disadvantages as what other cost basedmethod?

A1385.- Full Cost Pricing

Q1386.- Under transfer pricing, what does dual pricing mean?

A1386.- Gives both the buying and selling division the price that"works best" for them.

Q1387.- Under dual pricing, what is the transfer price based on forthe selling and purchasing division?

A1387.- Selling Div - Transfers out at Market Price- Purchasing Div - Transfers in at Std Variable Costs

Q1388.- What happens when both the buying and selling divisionsreceive prices that enhance both their profitability?

A1388.- The value of pricing as an incentive for divisions tocontrol cost is lost

Q1389.- Transfer pricing is a useful tool in promoting what?

A1389.- Goal Congruence

Q1390.- How is transfer pricing useful in the internationalenvironment?

A1390.- It can reduce tax liability.- Relating to taxes and import duties when bring productsacross state or international lines.

Q1391.- Why is transfer pricing problematic in decentralizedorganizations?

A1391.- Managers of the buying and selling division tend to seekto maximize their own departmental revenues andminimize their own departmental costs.

Q1392.- When can the selling unit use cost based pricing?

A1392.- When the selling unit has excess capacity

Q1393.- Word of Advice

A1393.- Decisions involving relevant costs are tested lightly onthe exam - usually a single question about one of the fourtypes of decisions per exam.- This is, however, one of the few areas in Planning &Measurement for which questions tend to becomputational rather than conceptual.

Q1394.- What are relevant costs and benefits, in general?

A1394.- Costs and benefits that must be identified in makingcertain production decisions.

Q1395.- What are relevant costs and benefits more specifically?

A1395.- All future COSTS and BENEFITS that DIFFER amongalternatives.

Q1396.- What is another name for relevant costs and benefits?

A1396.- Relevant Factors

Q1397.- What are the four categories of production decisions thatfocus on identifying relevant costs?

A1397.- Please Keep My Angels- Process Further or Sell Now- Keep or Drop- Make or Buy- Accept or Reject

Q1398.- What are the two types of relevant factors?

A1398.- Avoidable Costs (costs)- Opportunity Costs (benefits)

Q1399.- What are avoidable costs?

A1399.- Costs that can be eliminated by choosing one alternativeover another.

Q1400.- What are opportunity costs?

A1400.- Benefits forgone when the selection of one course ofaction prevents another course of action.

Q1401.- What are the two general categories of unavoidable orirrelevant costs?

A1401.- Sunk Costs- Future costs and benefits that DO NOT DIFFER amongalternatives

Q1402.- What are sunk costs?

A1402.- Costs that have already occurred and cannot be changed.

Q1403.- Give examples of the unavoidable future costs andbenefits that will not differ among alternatives.

A1403.- Fixed or allocated costs

Q1404.- When making decisions to process further or sell now,what type of products does this usually involve?

A1404.- Joint products, but not always

Q1405.- What are two important things to note about the jointproduct environment?

A1405.- 1. Products are not separately identifiable until after thesplit-off point.- 2. The costs incurred up to the split-off point cannot beseparated or avoided.

Q1406.- What is the basic concept behind quality management?

A1406.- Customer Satisfaction

Q1407.- What are the three most common measures of customersatisfaction in regards to total quality management?

A1407.- sales returns- warranty costs- customer complaints

Q1408.- Give examples of measures that are NOT measures ofcustomer satisfaction.

A1408.- time required to product the product, design costs,testing costs

Q1409.- What is the definition of "Quality?"

A1409.- How well an item meets its DESIGN specifications

Q1410.- What is the term for the DEGREE to which an item meetsits design specifications and or customer expectations?

A1410.- Quality of Conformance

Q1411.- Define the term for the costs incurred by an organizationto ensure a high quality of performance.

A1411.- Costs of Quality

Q1412.- What are the four costs of quality?

A1412.- Prevention, appraisal, internal failure, external failure

Q1413.- What is strategic management?

A1413.- The process of formulating organizational goals andobjectives, developing tactics to achieve these goals, anddesigning performance measures to evaluate whether thegoals and objectives are being met.

Q1414.- What does the overall organizational strategy define?

A1414.- How the organization competes in the marketplace.

Q1415.- Name one model that has been developed to helpformulate an organization's strategy?

A1415.- "Porter's Five Forces" developed by Michael Porter

Q1416.- What does Porter's Five Forces evaluate in regards tostrategic management?

A1416.- It measures the organization's competitive intensitybased on five dimensions.

Q1417.- HOW does Porter's Five Forces measure competitiveintensity?

A1417.- Based on five dimensions of:- Bargaining power of customers- Bargaining power of suppliers- Threat of new entrants- Threat of substitute products- Intensity of competition- bargaining power of suppliers

Q1418.- Name two generic strategies from Porter's model forcompetition in broad (national & international) arenas.

A1418.- Product differentiation, Cost leadership

Q1419.- Define the third strategy under Porter's model, stemmingfrom segmenting the market.

A1419.- Focus strategy, niche marketing

Q1420.- Competition in market SEGMENTS can be based on whattwo strategies?

A1420.- Low cost (cost focus) or product differentiation (focuseddifferentiation)

Q1421.- What is responsibility accounting?

A1421.- Measurement of management performance based onwhat they can control.

Q1422.- In DECENTRALIZED organizations, management controlis ususally established by...

A1422.- Dividing the organization into segments, responsibilitycenters.

Q1423.- Name four types of responsibility centers.

A1423.- Cost center- Revenue center- Profit center- Investment center

Q1424.- What is a cost center?

A1424.- Segment of organization where NO REVENUE isgenerated & the manager is only responsible for costs.

Q1425.- Give examples of cost centers.

A1425.- Service (custodial), staff (personnel), and productioncenters.

Q1426.- What is a Revenue center?

A1426.- Organizational unit whose manager is responsible onlyfor REVENUES.

Q1427.- Give examples of revenue centers.

A1427.- Sales and Marketing depts

Q1428.- What is a Profit center?

A1428.- Organizational unit whose manager is responsible forREVENUES and COSTS.

Q1429.- Give examples of profit centers.

A1429.- Stores or product lines

Q1430.- What is an investment center?

A1430.- An organizational unit whose manager is responsible forreturn on investments (revenues, costs, & profit)...the sizeof the profit in relation to the investment.

Q1431.- What is responsibility accounting in terms of theaccounting field?

A1431.- The accounting procedures and reports used to measurethe performance of responsibility centers.

Q1432.- Management uses responsibility accounting to support...

A1432.- Goal Congruence

Q1433.- What is goal congruence?

A1433.- When the goals of individual segments/departments meetthe goals of the entire organization

Q1434.- A fundamental concept of responsibility accounting is...

A1434.- Controllability...managers should only be responsible forwhat they can control.

Q1435.- Most managers should not be held responsible for whichcosts?

A1435.- Depreciation and Insurance exp

Q1436.- What is the definition of Business Information Systems(BIS)?

A1436.- DEFINITION is any combination of people, procedures,and computing equipment employed to pursue anorganizational objective. STAKEHOLDERS - get outputfrom system. (can be outside organization)

Q1437.- The Four Major Tasks of any Information System is?

A1437.- The 4 elements are:- a. Input- b. Transformation- c. Output- d. Storage

Q1438.- What is the definition of a Transaction Processing System(TPS)?

A1438.- DEFINITION is it captures the fundamental data thatreflect the economic life of an organization.

Q1439.- What is the definition of a Management InformationSystem (MIS)?

A1439.- DEFINITION is it typically receives information from aTPS, aggregates it, then reports it in a format useful tomiddle management in running the business.

Q1440.- What is a Data Warehouse?

A1440.- DEFINITION is it is a central database for transaction-level data from more than one of the organization's TPSs.- The ability of the data warehouse to relate data frommultiple systems makes it a very powerful tool for ad hocqueries.

Q1441.- What is a Data mart?

A1441.- DEFINITION is it is a subset of an enterprise-wide datawarehouse.

Q1442.- Data Mining - What is it?- What enables it?

A1442.- DEFINITION is it is the search for unexpectedrelationships between data.- It is enabled by a Data Warehouse.

Q1443.- What is a Decision Support System (DSS)?

A1443.- DEFINITION is it is an interactive system that is useful insolving structured and semi-structured problems, that is,those requiring a management decision maker to exercisehis or her insight and judgment.

Q1444.- Does a DSS automate a decision?

A1444.- No.

Q1445.- What is an Expert System (ES)?

A1445.- DEFINITION is it is an interactive system that attempts toimitate the reasoning of a human expert in a given field.- It is useful for addressing unstructured problems whenthere is a local shortage of human experts.

Q1446.- What is Artificial Intelligence (AI)?

A1446.- DEFINITION is it attempts to imitate human decisionmaking, which hinges on a combination of knowledge andintuition.- It is more sophisticated than (ES).- It is designed to perceive, reason, and understand.

Q1447.- What is Business Intelligence (BI)?

A1447.- DEFINITION is it is what gives upper management theinformation it needs to know where the organization is andhow to steer it in the intended direction.- It gives an executive immediate information about anorganization's critical success factors.

Q1448.- What is Enterprise Resource Planning (ERP)?

A1448.- DEFINITION is it is the latest phase in the development ofcomputerized systems for managing organizationresources.- It is intended to integrate IS's all over the organization bycreating one database linked to all of an organization'sapplications.

Q1449.- What is Office Automation Systems (OASs)

A1449.- DEFINITION is it is the word processing, spreadsheet,digital document storage, and desktop publishingapplications familiar to most office workers, that are part ofany organization's IS environment.

Q1450.- Does it matter for a BIS if it is manual or computer-based?

A1450.- The goals of BIS are the same. The risks are different.

Q1451.- List typical IT Personnel titles

A1451.- a. DBA- b. Network Tech- c. Webmaster- d. Computer Operators- e. Librarians- f. System Programmers- g. Application Programmers- h. Help Desk

Q1452.- What is the most common method for building new IS?

A1452.- SDLC Approach.

Q1453.- What is Systems Development Life-Cycle (SDLC)?

A1453.- DEFINTION is it is highly structured and if properlyfollowed it can be helping an organization deploymaintainable, well-documented systems with thefunctionality that was intended.

Q1454.- What are the SDLC Steps?

A1454.- Steps are:- a. Project Definition Phase- b. Feasibility Study- c. Cost Benefit Analysis- d. Project initiation Phase- e. Systems Analysis- f. Systems Design- g. Physical Database Design- h. Program Development- i. Procedure Development- j. Installation & Operation- k. System Maintenance

Q1455.- What functions need to be segregated with IT?

A1455.- List includes:- a. Information Security- b. Systems Development and Maintenance- c. Computer Operations- d. Data Administration- e. End Users

Q1456.- What function does an IT Security Officer perform?

A1456.- Function performed is:- Responsible for formulation and enforcing a formal ISpolicy for all employees and outside parties who accessthe organization's systems.

Q1457.- What is the purpose of Systems Development andMaintenance?

A1457.- The purpose is due to the users of an organizationrequesting new systems created & changes andenhancements to existing systems.

Q1458.- What is the function of Computer Operations?

A1458.- The function is for the smooth running of medium &large-scale computers.- ex) Job scheduling and out production

Q1459.- What is the function of Data Administration?

A1459.- The function is the determination of how theorganization's data should be stores and whatrelationships about the data best achieve theorganization's business objectives.

Q1460.- What is the purpose of a DBA?

A1460.- Purpose is to keep the databases running efficiently

Q1461.- Who or what function is an end user?

A1461.- Function:- Data BELONGS to their department.

Q1462.- What is INPUT

A1462.- DEFINITION is that the system must acquire (capture)data from within or outside of the entity.

Q1463.- What is TRANSFORMATION

A1463.- DEFINITION is that raw materials (data) are converted intoknowledge useful for decision making (information).

Q1464.- What is OUTPUT

A1464.- DEFINITION is that the ultimate purpose of the system iscommunication for results to internal or external users.

Q1465.- What is STORAGE

A1465.- DEFINITION is that before, during, and after processing,data must be temporarily or permanently stored in files ordatabases.

Q1466.- What is a TRANSACTION?

A1466.- DEFINITION is it is a single, discrete event that can becaptured by an information system.

Q1467.- MIS are often classified by function or activity. What arecommon activities?

A1467.- 1. Accounting- 2. Finance- 3. Manufacturing- 4. Logistics- 5. Marketing- 6. Human Resources

Q1468.- For function ACCOUNTING, what are the activities?

A1468.- Activities for function are:- General Ledger- Accounts Receivable- Accounts Payable- Fixed Assets Management- Tax Accounting

Q1469.- For function FINANCE, what are the activities?

A1469.- Activities for function are:- Capital budgeting- Operational budgeting- Cash Management

Q1470.- For function MANUFACTURING, what are the activities?

A1470.- Activities for function are:- Production Planning- Cost Control- Quality Control

Q1471.- For function LOGISTICS, what are the activities?

A1471.- Activities for the function are:- Inventory Management- Transportation Planning

Q1472.- For function MARKETING, what are the activities?

A1472.- Activities for the function are:- Sales Analysis- Forecasting

Q1473.- For function HR, what are the activities?

A1473.- Activities for the function are:- Projecting payroll- Projecting benefits obligations- Employment-level planning- Employee Evaluation tracking

Q1474.- What is a STOVEPIPE SYSTEM?

A1474.- DEFINITION is it is a single-focus system like most MISthat are classified by function or activity.

Q1475.- What is an INTEGRATED SYSTEM?

A1475.- DEFINTION is it links multiple business activities acrossthe enterprise.

Q1476.- What do data warehouses require?

A1476.- THEY require transaction records be converted to astandard format. They are very large repositories.

Q1477.- What is ONLINE ANALYTICAL PROCESSING (OLAP)?

A1477.- It is when data warehouses are accessed using analyticaland graphics tools.

Q1478.- What is an important component of OLAP?

A1478.- Component is drill down analysis.

Q1479.- What is DRILL DOWN ANALYSIS?

A1479.- DEFINITION is when the user is first presented with thedata at an aggregate level and then can display successivelevels of detail for a given date, region, product, etc. untilfinally reaching the original transactions.

Q1480.- What a QUERY-AND-REPORTING-SYSTEM?

A1480.- A data warehouse.- It gets input from various TPS.- However, it does not carry on the operations of theenterprise.- DW's are optimized for retrieval and reporting. TPS is fordata entry.

Q1481.- What are 3 components of the DSS?

A1481.- Components are:- Database- Model- Dialog

Q1482.- What is a DATABASE?

A1482.- DEFINITION, it consists of raw data that are relevant todecisions.- Can come from inside or outside organization.

Q1483.- What is a MODEL?

A1483.- DEFINITION, it is the set of equations, comparisons,graphs, conditions, assumptions into which the data willbe fed.

Q1484.- What is a DIALOG?

A1484.- DEFINITION, it consists of the user interface which allowsthe user to specify the particular set of data to which themodel should be applied.

Q1485.- What is a GROUP DSS?

A1485.- DEFINITION, it aids in the collaborative solution ofunstructured problems. Users in separate areas of theorganization can specify parameters pertinent to theirfunctions.

Q1486.- What are the components of an Expert System?

A1486.- Components are:- Knowledge database- Inference engine- Dialog

Q1487.- What is an ES KNOWLEDGE DATABASE?

A1487.- DEFINITION, It consists of facts and the relationshipsamong those facts.

Q1488.- What is an ES INFERENCE ENGINE?

A1488.- DEFINITION, It is often a series of if/then decisions.

Q1489.- What is an ES DIALOG?

A1489.- DEFINITION, It allows the user to input data relevant tothe current problem which are then filtered through theinference engine and used to query the knowledgedatabase.- Optimal solution is suggested to the user - output.

Q1490.- What are inference procedures based on?

A1490.- The procedures are symbolic processing based onheuristics rather than algorithms.

Q1491.- What is a HEURISTIC PROCEDURE?

A1491.- DEFINITION, it is based on exploratory problem-solvingtechnique that uses self-education methods (feedbackevaluation) to improve performance.- Systems are interactive and provide explanations of theirproblem-solving behavior.

Q1492.- What are FUZZY LOGIC SYSTEMS?

A1492.- DEFINITION, is a form of AI that deals with imprecise dataand problems with multiple solutions.

Q1493.- When are fuzzy logic systems useful?

A1493.- They are useful in the design of industrial controls.

Q1494.- What does fuzzy logic use?

A1494.- It can use linguistic system variables rather than binarydecisions.

Q1495.- What is fuzzy set theory?

A1495.- It allows object to belong partly to multiple sets.- It is useful for the vagueness of real world items wherethey belong to a set only to a degree.

Q1496.- What do fuzzy rule based systems apply?

A1496.- They apply methods to solve real-world problems where asystem is difficult to model and controlled by a humanoperator and ambiguity is common.

Q1497.- Benefits of Fuzzy Logic Systems?

A1497.- They are:- 1. Simplified, reduced development cycle.- 2. Ease of Implementation.- 3. User-friendly, efficient performance.

Q1498.- What are NEURAL NETWORKS?

A1498.- DEFINITION, A collection of processing elements workingtogether to process information much like the humanbrain, including learning from previous situations andgeneralizing concepts.

Q1499.- What are CASE-BASED REASONING SYSTEMS?

A1499.- DEFINITION, use a process similar to that used byhumans to learn from previous, similar situations.

Q1500.- What are RULE-BASED EXPERT SYSTEMS?

A1500.- DEFINITION, function on the basis of set rules to arrive atan answer.- Cannot be changed by the system itself and must bechanged by an outside source aka programmer.

Q1501.- What are INTELLIGENT AGENTS?

A1501.- DEFINITION, programs that apply a built-in or learnedknowledge base to execute a specific, repetitive, andpredictable task.

Q1502.- What is the purpose of BI - Business Intelligence?

A1502.- It gives executives immediate information about criticalsuccess factors for the organization.

Q1503.- What is a DIGITAL DASHBOARD?

A1503.- DEFINITION, it can be displays of bar charts, graphs,other formats etc. grouped by a particular executive'sneeds.

Q1504.- Traditional ERP system does what?

A1504.- Subsystems share data and coordinate their activities.- These are BACK OFFICE functions (aka Internal to theorganization).- Comprehensively, this includes materials requirementplanning, manufacturing resource planning, supply chainmgt, and customer relationship mgt.

Q1505.- What is ERP II?

A1505.- DEFINITION, Current generation has added front officefunction to connect organization with customers,suppliers, owners, creditors, etc..- Allows for supply chain mgt, customer relationship mgt,and partner relationship mgt.

Q1506.- What is the major disadvantage of an ERP?

A1506.- It is complex and extensive so it is costly and difficult toimplement.- Only largest organizations can.

Q1507.- What is Information Resource Management?

A1507.- DEFINITION, includes the mgt of all the forms of IS (WP,Spreadsheet, digital docs, desktop publishing) and needsof users for the information holdings of the organization.(OAS)s

Q1508.- What is the purpose of Financial Reporting systems?

A1508.- 1. Generate information for external users (investors,regulators, creditors).- 2. Form of Financial Statements.- 3. Backward looking at historical data.

Q1509.- General Steps of the Accounting Cycle - included in theaudit trail!

A1509.- Cycle includes:- 1. Entry of source data and file documents (can beelectronic)- 2. Make entries in general and special journals.- 3. Post entry to GL and subsidiary ledgers accounts.- 4. Prepare Trial Balance- 5. Prepare Financial Statements for external reporting.

Q1510.- What is the purpose of Management Reporting systems?

A1510.- Purpose is:- 1. Internal focus on planning, control, and decisionmaking.- 2. Forward looking - forecasting.- 3. Internal uses (no need for GAAP)- 4. Nonfinancial and financial data in flexible formats.- 5. Major element = cost accounting and budgeting.

Q1511.- BIS risks - please list?

A1511.- Include:- 1. System availability- 2. Volatile transaction trails.- 3. Decreased human involvement.- 4. Uniform processing of transactions,- 5. Unauthorized access.- 6. Data Vulnerability- 7. Reduced segregation of duties.- 8. Reduced individual authorization of transactions.- 9. Specialized knowledge.

Q1512.- What is a patch?

A1512.- A patch is a chg or modification to an existing programthat may or may not be authorized.

Q1513.- What is a Job Control Language(JCL)?

A1513.- A JCL is a language that prioritized & controls whenapplication programs are initiated.

Q1514.- What does virtual storage do?

A1514.- The operation system divides a program intopgs/segments and brings only the pgs of the programrequired for execution into memory. Saves time & moneyas unneeded portions of the program remain in less expsecondary storage.

Q1515.- What is a Enterprise Resource Planning system?

A1515.- “Enterprise resource planning (ERP) is an enterprise-wideinformation system designed to coordinate all theresources, information, and activities needed to completebusiness processes such as order fulfillment or billing.- An ERP system supports most of the business systemthat maintains - in a single database - the data needed for avariety of business functions such as manufacturing,supply chain management, financials, projects, humanresources and customer relationship management.

Q1516.- What is a LAN

A1516.- Local Area Network-private computer network within asingle building or relatively small geographic area.

Q1517.- Disaster Recovery & Business Continuation Plan

A1517.- A Disaster Recovery & Business Continuation Planshould allow the firm to (A) Minimize the extent ofdisruption, damage and loss, (C) Resume normaloperations as quickly as possible, (D) train and familiarizepersonnel to perform emergency operations as well asestablish an alternate (temporary) method for processinginformation.

Q1518.- Disaster Recovery & Business Continuity Plans include:

A1518.- priorities, insurance, backup approach, specificassignments, period testing and updating anddocumentation.

Q1519.- Two general types of computer processing systems are:

A1519.- Transaction processing and management reporting

Q1520.- Mgmt Info Sys(MIS) are:

A1520.- designed to provide information for planning organizingand controlling the operations of the business.

Q1521.- Decision Support Systems are:

A1521.- designed to combine data and models, not resolveproblems.

Q1522.- Expert systems:

A1522.- apply specific models to data to provide a specific type ofrecommendation.

Q1523.- What is the main difference between transactionprocessing and management reporting systems?

A1523.- Transaction processing systems generally process alarge volume of transactions where management reportingsystems provide information used to support businessdecisions.

Q1524.- Methods to control access to appropriate users include:

A1524.- passwords and user IDs, menus for EUC accessdatabases, independent review of transactions, restrictinguser ability to load data, requirement of appropriatevalidation, authorization and reporting control when theend user uploads data and record access to companydatabases by the EUC application.

Q1525.- Forms of physical access controls include:

A1525.- Clamps or chains to prevent removal of hard disks orinternal boards, regular backup and control over accessfrom outside are all

Q1526.- Risks associated w/ End User Computing(EUC) include:

A1526.- Management often does not review the results ofapplications appropriately- More client personnel need to understand controlconcepts- End-User applications are not always adequately testedbefore being implemented .

Q1527.- Procedures to control the small computer issue ofsoftware piracy are:

A1527.- Establishing a corporate software policy, maintaining alog of all software purchases and auditing individualcomputers to identify installed software.

Q1528.- What are some security consideration for smallcomputers?

A1528.- Verification of applications being processed should bemade to prevent the system from being used for personalprojects.- Security over data and in-house developed software isimportant as most companies can easily replace hardwarebut may suffer a severe setback if the data and/or in-housedeveloped software is lost.- Purchases of hardware & software should be reviewed forcompatibility, piracy & other issues.

Q1529.- Control implications require that:

A1529.- Applications be adequately tested before use, backup offiles, control access to appropriate users, adequatedocumentation, & application controls & are all examplesof control implications.

Q1530.- AICPA's Trust Services provide:

A1530.- assurance on information systems & present oneframework for analyzing a reliable system.

Q1531.- Physical access controls:

A1531.- Prevent damage or other loss including theft, acts of war,weather, disgruntled employees or others.

Q1532.- The seven factors of the control environment are:

A1532.- Integrity and ethical values- Commitment to competence- Human resource policies and practices- Assignment of authority and responsibility- Management's philosophy and operating style- Board of director's or audit committee participation- Organization

Q1533.- The systems analyst:

A1533.- Analyzes the user environment & requirements & mayrecommend changes to the current system, the purchaseof a new system or design a new system.

Q1534.- A systems flowchart:

A1534.- A tool or diagram used by the systems analyst to definesystem requirements.

Q1535.- The systems analyst is responsible for:

A1535.- ensuring programming and that end user needs are met.

Q1536.- Systems Programmer:

A1536.- is responsible for implementing, debugging andmodifying software.- E.g. include to the operating systems,telecommunications monitoring & database managementsystems.

Q1537.- The Applications Programmer:

A1537.- is responsible for writing testing & debuggingapplications software. These specifications are usuallyprovided by the Systems Analyst.

Q1538.- Program flowchart:

A1538.- is a tool or diagram used by the Applications Programmerto document program logic.

Q1539.- Database Administrator (DBA):

A1539.- is responsible for maintaining the database andrestricting access to the database to authorized users only.

Q1540.- The Operator:

A1540.- is responsible for the daily computer operations of boththe hardware and software.- The Operator mounts tapes, supervises operations on aconsole, accepts inputs and distributes outputs.- The Operator should have documentation available to runprograms but is not responsible for detailed programinformation.

Q1541.- The Librarian:

A1541.- is responsible for custody of the removable media (e.g.magnetic tape, disks) and for the maintenance of programand systems documentation.- Many of these services have been automated.

Q1542.- The Web Administrator/Web Manager:

A1542.- is responsible of overseeing the development, planningand the implementation of a website. This is generally amanagement position.

Q1543.- The Web Master:

A1543.- is responsible for providing expertise and leadership inthe development of a website, including but not limited todesign, analysis, security, maintenance, contentdevelopment and updates.

Q1544.- The Web Designer:

A1544.- is responsible for creating the visual content of thewebsite.

Q1545.- The Web Coordinator:

A1545.- is responsible for the daily operations of the website.

Q1546.- The Internet Developer:

A1546.- is responsible for writing programs for commercial use.Similar to a software engineer or a systems programmer.

Q1547.- The Intranet/Extranet Developer:

A1547.- is responsible for writing programs based on the needs ofthe company.

Q1548.- Control activities categories:

A1548.- general- application- user

Q1549.- General system control activities:

A1549.- affect all computer applications e.g.:- 1-developing new programs and systems,- 2-changing existing programs and systems,- 3-controlling access to programs and data and- 4-controlling computer operations.

Q1550.- The five components of internal control are:

A1550.- a) Control Environment - this is the foundation of all othercomponents;- b) Risk Assessment - the identification and analysis ofrelevant risks to achieve the entity's objectives- c) Control Activities - the policies and procedures toensure management directives are carried out- d) Information and Communication - identification,capture, and exchange of data in a format and time to allowproper tasks and responsibilities to be performed- e) Monitor - The process that assesses the quality ofinternal control performance over time

Q1551.- Process objectives that internal control systems shouldbe designed to achieve include:

A1551.- Operations and Information process goals.

Q1552.- Operations Process Goals should ensure:

A1552.- (1) Effectiveness of operations - Strives to ensure than anintended process is fulfilling its intended purpose (such asproper management authorization for overrides)- (2) Efficient resources - to have enough resources toensure benefits of controls exceed the costs of thosecontrols- (3) Security of resources - protect all tangible andintangible resources.

Q1553.- Information Process Control Goals should ensure:

A1553.- (1) Input validity - where input data be approved andreflect accurate economic events- (2) Input completeness - all valid events are captured- (3) Input accuracy - all events are captured correctly- (4) Update completeness - all events are reflected inrespective master files- (5) Update accuracy - all events are reflected correctlywithin master file.

Q1554.- Control Plans:

A1554.- are policies & procedures that assist in accomplishingcontrol goals.

Q1555.- A combination of control plans must be used to maximizeeffectiveness. Three levels are

A1555.- Control Environment (top level),- Pervasive Control Plans (mid-level)- Application Control (detail level) Plans.

Q1556.- Another way to view control plans is in relation to thetiming of their occurrence:

A1556.- Preventive control plans stop problems from occurring;- Detective control plans discover problems that havealready occurred;- Corrective control plans correct problems that havealready occurred.

Q1557.- Control Objectives for Information and RelatedTechnology - [cobiT] – developed by the InformationSystems Audit and Control Foundation – to provide:

A1557.- guidance on best practices for management andInformation technology.

Q1558.- [cobiT] groups IT control processes into four domains:

A1558.- a) Planning & Organization – Establish strategic vision forthe IT area; develop plan to achieve vision.- b) Acquisition & Implementation – Identify automated andIT solutions; integrate the solutions; manage changes toexisting systems; Manage Change with users.- c) Delivery & Support – Deliver required IT services;ensure security; provide on-going support.- d) Monitor operations.

Q1559.- Three main types of system documentation used byauditors and analysts are:

A1559.- (a) Data Flow Diagrams (DFDs) that illustrate the systemcomponents and functions, data flows among thecomponents and sources, destinations and storage of thedata;- (b) System Flowcharts that illustrate InformationalProcesses (such as logic flows, inputs, outputs, datastorage), Operational Processes (such as physical flows)and- (c) Entity Relationship Diagrams that illustrate the system’s key entities and the relationships among those entities.

Q1560.- Elements of Definition of Partnership

A1560.- 1. Association of agreement or contract- 2. No limit on the number of parties- 3. Persons can be any entities except as prohibited bystate law

Q1561.- Liability of a partner who joins an existing partnership

A1561.- The partner is generally liable for all subsequently-incurred debts, but is liable for preexisting debts only outof her firm contribution

Q1562.- Partnership Interest

A1562.- Personal Property - consists of the right to share in thepartnership's profits

Q1563.- Creditor Restriction

A1563.- No creditor of an individual partner may attachpartnership property to satisfy an individual debt

Q1564.- Partnership Property

A1564.- Owned by the partnership entity, not by the partners incommon

Q1565.- Limited Partnership

A1565.- The partnership consists of at least one general partner(GP) and at least one limited partner (LP)

Q1566.- Right to Manage

A1566.- All partners have equal rights in the management andconduct of business affairs, absent agreement

Q1567.- Right to Profits

A1567.- Absent agreement, profits and losses are to be sharedequally

Q1568.- The Duty of Care

A1568.- Duty is limited to "refraining from engaging in grosslynegligent or reckless conduct, intentional misconduct, or aknowing violation of law"

Q1569.- Partnership Assets include...

A1569.- All partnership property, and any additional contributionsof partners necessary to pay obligations

Q1570.- Three distinct phases of the UPA approach

A1570.- Dissolution, Winding up, and Termination

Q1571.- LLP member liability

A1571.- Liable for their own torts and for the torts of those theysupervise

Q1572.- Formation of Limited Liability Partnerships (LLPs)

A1572.- Must be formed by filing appropriate documents with theSecretary of State

Q1573.- Joint stock companies

A1573.- Organized under a contract normally called the articles ofassociation

Q1574.- Persons Liable for Stock Sold Below Par or AuthorizedPrice

A1574.- 1. The board who allowed the sale- 2. The buyer who paid too little- 3. Transferees who know the buyer paid too little and whopay too little themselves

Q1575.- Redeemable

A1575.- Must be purchased by corporation under specificcircumstances if shareholder requests

Q1576.- Bonds

A1576.- Debt secured by corporate property

Q1577.- Factors Necessary to Overcome Presumption of BoardDiscretion in Issuing Dividends

A1577.- 1. The board acted in bad faith- 2. Funds to pay dividends existed in a legally availablesource

Q1578.- Proper payment of dividends

A1578.- 1. Only out of legally available funds- 2. Only in accordance with applicable preferences

Q1579.- When Dividends Cannot be Distributed

A1579.- 1. If it would make the corporation insolvent, or- 2. If the distribution exceeds the surplus of thecorporation

Q1580.- Common Law Rights

A1580.- General Rule -- shareholders may inspect at proper timesin proper places for proper purposes

Q1581.- Proxies

A1581.- Granting others the right to cast their votes atshareholder meetings

Q1582.- Types of Economic Systems

A1582.- 1. Command Economic System (Communism orSocialism)- 2. Market (Free-enterprise) Economic System

Q1583.- Characteristics of Free-Market Economy

A1583.- 1. Interdependent relationship between individuals andbusiness firms- 2. Production depends on preferences of individuals withability to pay for goods and services- 3. Production depends on availability of economicresources, level of technology, and how business firmschoose to use them- 4. Production depends on sale price being at least equalto production cost

Q1584.- Causes for Change in Aggregate Demand

A1584.- 1. Size of market- 2. Income or wealth of market participants- 3. Preferences of market participants- 4. Change in prices of other goods and services

Q1585.- Principle of Increasing Cost

A1585.- Production costs increase in the short-run as the quantityproduced increases because new resources are not usedas efficiently as those previously used.

Q1586.- What are the variables that change aggregate supply?

A1586.- Changes in:- 1. Number of providers- 2. Cost of inputs- 3. Government taxation or subsidization- 4. Technological advances

Q1587.- What is the slope of a normal supply curve?

A1587.- A normal supply curve has a positive slope - the higherprice the greater the quantity that will be supplied.

Q1588.- Results of a Change in Market Demand (only) onEquilibrium

A1588.- 1. Increase in market demand = Demand curve shifts upand to the right; Decrease in market demand = Demandcurve shifts down and to the left.- 2. Increase in market demand w/no change in supply =Increase in both equilibrium price and equilibrium quantity.- 3. Decrease in market demand w/no change in supply =Decrease in both equilibrium price and equilibriumquantity.

Q1589.- Governmental Influences on Equilibrium Supply

A1589.- 1. Taxation increases the cost and shifts the marketsupply curve up and to the left.- 2. Subsidization decreases the cost and shifts the marketsupply curve down and to the right.

Q1590.- Equilibrium Price

A1590.- 1. Price at which the quantity of a commodity supplied isequal to the quantity of that commodity demanded.- 2. The intersection of the market demand and supplycurves.

Q1591.- Results of a Change in Market Supply (only) onEquilibrium

A1591.- 1. Increase in market supply = Supply curve shifts downand to the right; Decrease in market supply = Supply curveshifts up and to the left.- 2. Increase in market supply w/no change in demand =Decrease in equilibrium price and increase in equilibriumquantity.- 3. Decrease in market supply w/no change in demand =Increase in equilibrium price and a decrease in equilibriumquantity.

Q1592.- Elasticity

A1592.- Measures the percentage change in a market factor as aresult of a given percentage change in another marketfactor

Q1593.- Elasticity of Demand

A1593.- The percentage change in quantity of a commoditydemanded as a result of a given percentage change in theprice of the commodity

Q1594.- Elasticity of Supply

A1594.- The percentage change in the quantity of a commoditysupplied as a result of a given percentage change in theprice of the commodity

Q1595.- What does "Demand is Elastic" mean?

A1595.- If demand is elastic, the percentage change in demand isgreater than the percentage change in price, the elasticitycoefficient is greater than 1 and total revenue will changein the opposite direction as the change in price.

Q1596.- Measures of Elasticity

A1596.- 1. Elasticity of Demand- 2. Elasticity of Supply- 3. Income Elasticity of Demand- 4. Cross Elasticity of Demand

Q1597.- Indifference Curve

A1597.- Various quantities of two commodities that give anindividual the same total utility as plotted on a graph.

Q1598.- Utility

A1598.- Satisfaction derived from the acquisition or use of acommodity

Q1599.- Law of Diminishing Marginal Utility

A1599.- Decreasing utility (satisfaction) is derived from eachadditional (marginal) unit of a commodity acquired.

Q1600.- Marginal Utility

A1600.- The utility derived from each (additional) marginal unit(i.e., from the last unit acquired).

Q1601.- Examples of Variable Costs

A1601.- 1. Raw materials- 2. Most labor- 3. Electricity

Q1602.- Economies of Scale (also Increasing Return to Scale)

A1602.- The long-run average cost curve is decreasing reflectingthat the quantity of output is increasing in greaterproportion than the increase in inputs, largely due tospecialization of labor and equipment.

Q1603.- Law of Diminishing Returns

A1603.- The point at which the quantity of variable inputs beginsto overwhelm the fixed factors resulting in inefficienciesand diminishing return on marginal units of variableinputs.

Q1604.- What is the shape of the demand curve for a firm inPerfect Competition?

A1604.- The demand curve faced by a single firm in a perfectlycompetitive market is a straight horizontal line originatingat the price set by the market (of all firms).

Q1605.- How are long-run profits determined for a firm in perfectcompetition?

A1605.- There are no long-run profits possible in a perfectlycompetitive market. If profits are made in the short-run,more firms will enter the market and increase supply, thusdecreasing market price until all firms just breakeven.

Q1606.- Characteristics of Perfect Competition

A1606.- 1. A large number of independent buyers and sellers,each of which is too small to separately affect the price ofa commodity- 2. All firms sell homogeneous products or services- 3. Firms can enter or leave the market easily- 4. Resources are completely mobile- Buyers and sellers have perfect information- Government does not set prices.

Q1607.- In the long-run, how may a monopoly firm increase itsprofits?

A1607.- A monopoly firm may increase its profits in two ways:- 1. Reduce cost by changing the size if its operations- 2. Increase demand through advertising, promotion, etc.

Q1608.- Typical Reasons Monopolies Exist

A1608.- 1. Control of raw materials or processes- 2. Government granted franchise (i.e., exclusive right)- 3. Increasing return to scale (i.e., natural monopolies)

Q1609.- Characteristics of Monopolistic Competition

A1609.- 1. A large number of sellers- 2. Firms sell a differentiated product or service (similarbut not identical), for which there are close substitutes- 3. Firms can enter or leave the market easily

Q1610.- How are long-run profits determined for a firm inMonopolistic Competition?

A1610.- There are no long-run profits possible in a monopolisticcompetition. If profits are made in the short-run, morefirms will enter the market and lower the demand for eachfirm until each just breaks even

Q1611.- Distinguish between Overt Collusion and Tacit Collusion

A1611.- 1. Overt Collusion = Firms conspire to set output, price orprofit; illegal in the U.S.- 2. Tacit Collusion = Firms follow price charged by theprice leader in the market; not illegal in the U.S.

Q1612.- Characteristics of Oligopoly

A1612.- 1. A few sellers- 2. Firms sell either a homogeneous product (standardizedoligopoly) or a differentiated product (differentiatedoligopoly)- 3. Restricted entry into the market

Q1613.- Demand Curve Shift

A1613.- A demand curve shifts when demand variables other thanprice change.

Q1614.- Price elasticity of demand

A1614.- Percentage change in quantity demanded/Percentagechange in price

Q1615.- Interpretation of the demand elasticity coefficient

A1615.- If the elasticity of demand is greater than 1, demand issaid to be elastic (sensitive to price changes).- If elasticity is less than 1, demand is said to be inelastic(not sensitive to price changes).

Q1616.- Cross-elasticity of demand

A1616.- Measures the change in demand for a good when theprice of a competing product is changed (eg Coke & Pepsi)- Formula: Percentage change in the quantity demanded ofProduct X / Percentage change in the Price of Product Y

Q1617.- Cross-elasticity of demand and the Relationship betweengoods

A1617.- Coefficient of cross-elasticity is positive, Goods aresubstitutes.- Coefficient is negative, Goods are complements.- Coefficient is zero, Goods are unrelated.

Q1618.- Classical Economic Theory

A1618.- Theory holds that market equilibrium will eventuallyresult in full employment over the long run without gov'tintervention.- Does not support the use of fiscal policy to stimulate theeconomy.

Q1619.- Keynesian Theory

A1619.- Theory holds that the economy does not necessarilymove towards full employment on its own.- It focuses on the use of fiscal policy (change in taxes &gov't spending) to stimulate the economy.

Q1620.- Monetarist Theory

A1620.- Theory holds that fiscal policy is too crude a tool forcontrol of the economy.- If focuses on the use of monetary policy to controleconomic growth.

Q1621.- Supply-Side Theory

A1621.- Theory holds that bolstering an economy's ability tosupply more goods is the most effective way to stimulategrowth.- A decrease in taxes (esp for bus's & individuals with highincome) increases employment, savings, & investments &is an effective way to stimulate the economy.

Q1622.- Applied Overhead Calculation

A1622.- Multiply the predetermined overhead rate times the actualnumber of activity units used in production. (Included incost of WIP)

Q1623.- Overhead Rate Formula

A1623.- Estimated total overhead costs/estimated normal activityvolume

Q1624.- Schedule of Cost of Goods Manufactured (WIP)

A1624.- Beg WIP + Direct Mats + Direct Labor + Overhead Applied- Ending WIP = Cost of Goods Manufactured

Q1625.- Direct Materials Used Formula

A1625.- Beginning Direct Materials + Purchases (net) = DirectMaterials Available for Use - Ending Direct Materials =Direct Materials Used

Q1626.- Schedule of Cost of Goods Sold

A1626.- Beginning Finished Goods + Cost of Goods Manufactured= Goods Available For Sale - Ending Finished Goods =Cost of Goods Sold

Q1627.- Conversion Costs Formula

A1627.- Direct labor costs + Factory overhead costs (Note: DL isincluded as a prime cost and a conversion cost)

Q1628.- Accounting for differences between overhead applied andactual overhead

A1628.- Immaterial differences are allocated to COGS. Materialdifferences are prorated to WIP, Finished Goods or COGSbased on respective ending balances

Q1629.- (Applied) Overhead rate formula

A1629.- Estimated total overhead costs/Estimated normal activityvolume

Q1630.- Accounting for Normal Spoilage and Scrap

A1630.- Normal spoilage is included with other costs as aninventoriable product cost

Q1631.- Accounting for Abnormal Spoilage and Scrap

A1631.- Abnormal spoilage is separated and deducted as a periodexpense in the calculation of net income

Q1632.- Accounting for the Sale of Scrap

A1632.- Any money received from the sale of scrap are used toreduce factory overhead (& thereby reduce cost of goodssold)

Q1633.- Behavior of fixed costs

A1633.- Fixed costs remain constant in total regardless ofproduction volume so fixed costs PER UNIT vary -increasing (per unit) when production decreases anddecreasing (per unit) when production increases

Q1634.- Behavior of variable costs

A1634.- Variable costs vary in total, in direct proportion tochanges in production volume.- Variable costs PER UNIT remain constant regardless ofproduction volume.

Q1635.- Account for Difference between Applied and ActualOverhead

A1635.- Immaterial differences are allocated to COGS. (reducesCOGS if overhead is overapplied, increases COGS ifoverhead is underapplied)- Material differences are prorated to WIP, Finished Goodsor COGS based on respective ending balances.

Q1636.- Fixed vs. Variable Costs

A1636.- Fixed costs remain constant in total regardless ofproduction volume. Fixed costs PER UNIT vary.- Variable costs vary in total in proportion to changes inproduction however variable costs remain constant PERUNIT.

Q1637.- Fixed, Variable & Total Costs' behavior when productionvolume changes

A1637.- Unit Costs Total Costs- Fixed Vary Constant- Variable Constant Vary- Total Vary Vary

Q1638.- Absorption Costing

A1638.- assigns all three factors of production (direct material,direct labor and both fixed & variable manufacturingoverhead) to inventory.- Required for external reporting purposes

Q1639.- Direct Costing

A1639.- (aka variable costing) assigns only variablemanufacturing costs (direct material, direct labor &variable manufacturing overhead) to inventory.- Used for internal purposes, cannot be used for externalreporting.

Q1640.- Variable Manufacturing Costs

A1640.- Direct material, direct labor, variable factory overhead

Q1641.- Fixed manufacturing costs

A1641.- Manufacturing costs that do no vary (eg. depreciation,supervisory salaries, property taxes, insurance, etc)

Q1642.- Principal difference between the absorption costing anddirect costing

A1642.- Absorption costing assigns ALL manufacturing costs toproducts while Direct costing only assigns variablemanufacturing costs to products.

Q1643.- Effect of absorption and direct costing on operatingincome

A1643.- Inventory valuation and unit costs will always be greaterusing absorption costing than if direct costing is used (dueto direct costing ignoring fixed overhead)

Q1644.- Absorption & Direct costing effects on Net Income- Units sold = Units produced- Units sold > Units produced- Units sold < Units produced

A1644.- Absorption NI = Direct NI- Absoprtion NI < Direct NI- Absorption NI > Direct NI

Q1645.- Steps to figure Process Costing (FIFO or Weighted Avg)

A1645.- 1. Acct for all units (Beg WIP + Additions = Finished +Spoilage + Ending WIP)- 2. Calculate Equivalent Finished Units (W. Avg: EFU= # ofunits finished + % of complete ending WIP or FIFO: EFU = #of units finished - % of complete beg WIP + % of completeending WIP)- 3. Calculate Unit Costs (W. Avg: Costs in Beg WIP +current costs or FIFO: Current costs ONLY)

Q1646.- Material Price (Labor Rate) Variance

A1646.- Actual Units x Actual Price- Actual Units x Std Price- (A x A > A x S = Unfavorable- A x A < A x S = Favorable)

Q1647.- Labor Efficiency (Material Usage) Variance

A1647.- Actual Hours x Std Rates- Std Hours x Std Rates- (A x S > S x S = Unfavorable- A x S < S x S = Favorable)

Q1648.- Mixed Costs: High-Low Method

A1648.- 1. Variable Costs: Divide the change in costs by thechange in activity- 2. Fixed Costs: Total cost less variable cost equals fixedcosts

Q1649.- Direct Costing

A1649.- Only variable manufacturing costs are considered part ofinventory costs.- Contribution Margin: Selling price less all variable costs.

Q1650.- Direct Cost Unit Costs

A1650.- Direct Manufacturing + Direct Labor + Variable Overhead+ Variable Selling & Admin (Fixed costs NOT included inunit cost!)

Q1651.- Absorption Cost Unit Costs

A1651.- Direct Manufacturing + Direct Labor + Variable Overhead+ Fixed Overhead (Variable Selling & Admin NOT includedin unit cost!)

Q1652.- Direct and Absorptions effect on income

A1652.- If a company produces more than it sells, absorptionshows more profit than direct.- If the company produces less than it sells, absorptionshows less profit than direct.- If the company produces the same amount as it sells,absorption will show the same amount of profit than direct.

Q1653.- Margin of Safety

A1653.- The difference between current sales and breakevensales.

Q1654.- Breakeven Sales

A1654.- Fixed Cost/Contribution Margin Percentage

Q1655.- Does every partner have the power to dissociate from thep/s?

A1655.- Yes

Q1656.- What's rule of notice?

A1656.- For p/s affairs, notice to any individual partner is imputedto all other partners.- Also, any knowledge gained while working on p/s mattersis imputed to all other members of the p/s.

Q1657.- What's the rule of termination?

A1657.- Majority of partners may terminate the authority of apartner, or minority of partners, unless this action wouldbe contrary to a previous agreement.

Q1658.- What's the apparent authority rule?

A1658.- The actions of a partner which are apparently for thecarrying on of the p/s bus in the usual way, but which arenot actually authorized, still will bind the p/s if the 3rd partydon't know of the partner's lack of actual authority.

Q1659.- Explain basic p/s liab!

A1659.- Partner's are jointly & severally liable for contracts & allactions in tort or fraud against any p/s member where thep/s is not an LLP.- The other partners are liable only when it relates to p/sbus.- A person can sue any # of partners they want, losingpartners can have right of contribution and right ofindemnification.

Q1660.- What's the rule of admission?

A1660.- An admission or representation made by any partnerwhile the partner is acting within the scope of her/hisauthority is admissible as evidence against the p/s.

Q1661.- Gen'l limitations to partners without p/s agreement are?

A1661.- 1. Assign the prop of the p/s in trust for the benefit ofcreditors or on the assignee's promise to pay the debt's ofthe p/s.- 2. Dispose of GW of the bus or do any other act thatwould make it impossible to carry on the ord bus of thep/s.- 3. Confess a judgment- 4. Submit a p/s claim or liability to arbitration

Q1662.- What's a statement of authority?

A1662.- The p/s may file a statement of authority outlining theauthority that particular partner or partner's have.

Q1663.- Who has the right & authority to wind up the business?

A1663.- Unless, otherwise agreed, any nonbankrupt partner whohas not dissociated from the p/s wrongfully, or the legalrep's of the last surviving partner.- Remember though also: any partner, the partner's legalrep, or the partner's assignee may petition for winding upby the court.

Q1664.- Are remaining partners allowed to continue the businessafter dissolution?

A1664.- Yes! Only if ALL the partners, including the dissociatingone's waive the right to have the business wound up andterminated.

Q1665.- What is winding up the business?

A1665.- P/S continues after dissolution only for the purpose ofwinding up it's bus then it's terminated! To participate can'thave dissociated wrongfully! Even after termination if apreviously unknown liability is asserted, all of the partnersare still liable.

Q1666.- What are 2 things the courts view as evidence of apartners intent to discontinue?

A1666.- 1) Assignment of partnership interests- 2) Levy of changing order

Q1667.- What are 3 rights available when p/s is rescinded on thegrounds of fraud or misrepresentation?

A1667.- 1. Right to a lien on, or a right to retention of, the surplusof the p/s to secure her/his cap inv & any advances.- 2. After all liability to 3rd persons have been satisfied, theright to stand in the place of creditors for her/his paymentmade on p/s liab.- 3. The right to be indemnified by the person who is guiltyof fraud or misrep.

Q1668.- What's a filing statement of dissolution?

A1668.- Any partner who has not dissociated wrongfully may file astatement of dissolution on behalf of the p/s. After 90 days,this notice gives constructive notice to creditors that theapparent authority of the p/s is ended for all purposesexcept winding up.

Q1669.- Are p/s allowed to be converted & merged by anymanner?

A1669.- yes! By any manner provided by law. In the p/s less thanunanimous consent is req'd.

Q1670.- What 2 proc's are followed when a court decreesdissolution?

A1670.- 1) Accting - determine the dr's and cr's of each partner &court supervises the dist of p/s assets.- 2) Dist Method - Usually the court orders a sale of all p/sassets & applies proceeds 1st to satisfy debts, & then torepay each partners cap acct. Any remaining proceeds stillremaining gets paid to the partners as earnings inproportion to the share of the profits.

Q1671.- What doe capacity mean?

A1671.- Anyone basically!

Q1672.- Can gen'l partners have limited liab?

A1672.- NO!

Q1673.- What's a limited partner?

A1673.- One who contributes cap but don't have an authority orvoice in management of the bus. limited liability tocreditors.

Q1674.- Which p/s does not req a state filing?

A1674.- Gen'l. Everything else does req state filing.

Q1675.- 4 things in RUPA are?

A1675.- 1. Business- 2. Co-ownership (not an agent)- 3. Profit- 4. Capacity

Q1676.- Can an infant be a partner?

A1676.- Yes! To extent of infants power to contract. An infant maywithdraw at ANY time, unless & only to the extent the p/s issubject to creditor's claims.- Infant is liable only to their contribution.

Q1677.- What's an LLP?

A1677.- Liability protection to gen'l partners.

Q1678.- Does a sole prop need to register in each state to do busnationwide?

A1678.- No! Corps and LLC's do however!

Q1679.- What's a dormant partner?

A1679.- One who has a right to participate in management, but isundisclosed & generally inactive, once disclosed has sameliability as any other gen'l partner.

Q1680.- In a limited partnership, who has the authority to bind?

A1680.- Gen'l one's!

Q1681.- What form is partnership return?

A1681.- 1065 & info only!

Q1682.- What's a silent partner?

A1682.- Unlimited liability but don't share in management ofpartnership!

Q1683.- What's a secret partner?

A1683.- One that participates in management but is undisclosed,once disclosed unlimited liab.

Q1684.- Explain entity status!

A1684.- The gen'l rule is that if an entity with 2 or more persons isformed under state law that is not a corp it is taxed as ap/s. A 1 person LLC is disregarded for fed tax purposes &no separate return is req'd, yet it don't lose it's liabilityshield.

Q1685.- Can a partner's int be assigned?

A1685.- Yes.- Assignee is only entitled to receive profits & capital towhich the partner would have been titled. However theassignor remains liable on all p/s debts.- An assignment don't cause a dissociation.

Q1686.- What's a certificate?

A1686.- When p/s is doing business under a fictitious name, itmust file a certificate w the SOS.- Certificate must list the names & addresses of thepartners & the fictitious name of the business.- Fines can occur if failure to comply.

Q1687.- What happens to a p/s int when a partner dies?

A1687.- The partners int descends as personal prop regardless ofthe form in which the firms assets exist.

Q1688.- Explain fiduciary duty!

A1688.- The only fiduciary duties a partner owes to the p/s areduty of care & the duty of loyalty.

Q1689.- What are the rights of an individual partners creditor top/s assets?

A1689.- Can't execute on or attach p/s assets. Creditor's onlyremedy is to obtain a charging order against the debtorpartners interest. The creditor is then entitled to all futuredistributions of assets or surplus due the partner until thejudgment is satisfied.

Q1690.- Can you assign rights in p/s property such as right topossess or use?

A1690.- No, unless all the partners assign their rights in the sameproperty.

Q1691.- Will the act of partner committed within the scope of thepartner's actual or apparent authority bind the p/s?

A1691.- Yes!

Q1692.- 2nd 3 of 9 things p/s agreement may not do are?

A1692.- 1) Bargain away rule that every partner has the power towithdraw from the p/s at any time.- 2) Vary the right of partners to have the p/s dissolved &it's bus wound up.- 3) Vary the right of a court to expel a partner.

Q1693.- What's the principal remedy avail to a partner againsther/his co-partners?

A1693.- A suit in equity for a dissolution & an accounting.

Q1694.- Can widower get interest?

A1694.- Yes

Q1695.- What's the 1st 3 of 9 things the p/s agreement may notdo?

A1695.- 1) Vary the req's for executing, filing, & recording p/sstatements, except the duty to provide copies to all thepartners.- 2) Unreasonably restrict partners or former partnersaccess rights to books- 3) Entirely eliminate fiduciary duties or obligation of goodfaith & fair dealings. Can be modified to certain limits.

Q1696.- What happens when a partner says another person is partof the p/s but they really are not?

A1696.- They become an agent and what they do is binding with3rd parties. Any liability resulting from the misrep extendsonly to the partners who consented to the misrep!

Q1697.- What's the 3rd 3 of 9 things the p/s agreement may notdo?

A1697.- 1) Vary the req to wind up the p/s bus in certain cases.- 2) Vary the law applicable to a LLP.- 3) Restrict the rights of 3rd parties under RUPA.

Q1698.- Does a p/s agreement need to be in writing?

A1698.- No. Only needed if would be in violation of statute offrauds. ex. transfer of real property or bus will last longerthan 1 yr.

Q1699.- Explain limited partners repayment of cont?

A1699.- A limited partner may demand or receive $ in repaymentof their contribution.- However the partner may not do so until all p/s liability tocreditors have been paid or the p/s has sufficient assets topay them.

Q1700.- What does an LLC file w / SOS & county clerk?

A1700.- Articles of organization.

Q1701.- Explain assignment of limited partners interest & rights.

A1701.- A limited partner's interest is considered personalproperty & it's freely assignable. However right's are NOTassignable UNLESS it is to a substituted limited partnerand all other partner's are in agreement & the certificate isamended.

Q1702.- Which p/s formation must be in accordance with strictstatutory requirements?

A1702.- LLP. Must also only be formed in jurisdictions that haveenacted enabling statutes. Certificate must be filed withSOS & county clerk.

Q1703.- List 1st 5 items in Articles of P/S.

A1703.- 1) Firm Name- 2) Names & Addresses of partners- 3) Date p/s becomes effective & intended duration- 4) nature, purpose, & scope of p/s activity- 5) proc for admission of new partners

Q1704.- What happens to a right to property when a partner dies?

A1704.- Surviving partners have duty to account to the estate ofthe deceased for the value of the deceased partner's rightsin the property.

Q1705.- What are the partner's rights to participate inmanagement?

A1705.- All have rights in management & control of the businessunless there is a specific agreement that says not.

Q1706.- List 2nd 5 items in Articles of P/S.

A1706.- 1) Computation of int on p/s cap- 2) Computation of profits & the proportionate share ofprofits & losses attributable to each partner- 3) Powers & duties of the partners- 4) Dissolution proc's & rights- 5) Proc for dist of surplus, including the disposition of thefirm name & GW.

Q1707.- What's the order of dist for settling accts when an LLC isdissolved?

A1707.- 1) Creditors- 2) Capital- 3) Profits

Q1708.- Can a limited partner's name appear in the p/s name?

A1708.- No! Unless it can be designated that they are a limitedpartner.

Q1709.- Once the p/s prop & the prop of the individual partnersare in the hands of the court for distribution, what are thepriorities?

A1709.- 1) P/S creditors have priority is to p/s prop.- 2) Individual creditor's generally have priority as toindividual prop, except for a p/s bankruptcy, wherein thep/s creditor's share pro rata with partner's personalcreditor's.- 3) Rights of secured or lien creditor's.

Q1710.- Asset dist order when p/s is over?

A1710.- Applied in this order:- 1) Those owing to creditor's including partners- 2) Those owing to partner's other than for cap & profits- 3) Those owing to the partner's for cap & profits.

Q1711.- Explain limited partner's share of profits or other comp?

A1711.- A limited partner may receive a share of the profits andother comp, however after the payment assets much begreater than all liability to creditors.

Q1712.- When is a p/s not bound by any partner's acts afterdissociation?

A1712.- 1) The p/s is dissolved because it's unlawful to carry outthe business except when the act is appropriate to wind upp/s affairs.- 2) The partner is bankrupt or has no authority to wind upp/s affairs.

Q1713.- What happens if an individual partner becomes bankruptor insolvent?

A1713.- The claims against her/his property rank as follows:- 1) Those owing to personal creditors- 2) Those owing to p/s creditors- 3) Those owing to partners who have made advances forthe benefit of the p/s.

Q1714.- Are partners liable for the amount necessary to satisfy allthe claims?

A1714.- Yes! If a partner is insolvent or beyond the reach ofjudicial process, the other partners are responsible forthere liab's!- Such contributing partners are liable in the proportion inwhich they share in the profits.

Q1715.- What are the 3 things that allow a dissociated partner tohave their liab's discharged?

A1715.- 1. Agreement- 2. Assumption- 3. Deceased partners NONPARTNERSHIP Property

Q1716.- Does a manager of an LLC have to be a member?

A1716.- No!

Q1717.- Explain dist of p/s assets as stated in RUPA!

A1717.- a. 1st to p/s creditors including any partners, except forunpaid "dist".- b. 2nd to partner's who have previously withdrawn fromp/s, payments to these partners for "unpaid dist" + ret. ofcap. unpaid dist's are any dist a partner is entitled to uponwithdrawal from firm.- c. 3rd, to all partners to the extent of their cap cont &profits.

Q1718.- Can a creditor obtain through court a charge against alimited partner's interest in the p/s?

A1718.- Yes

Q1719.- What are "safe harbors" for limited partners to participatein management provided by RUPA?

A1719.- 1. Being a contractor for, or an agent or employee of thelimited p/s or of a gen'l partner.- 2. Consulting with & advising a gen'l partner regardingthe p/s.- 3. Acting as a surety- 4. Voting on p/s matters

Q1720.- What's a quasi-reorg and what's the steps?

A1720.- Proc that eliminates an acc deficit so the corp can pay divagain.- Steps:- 1) Assets revalued at NRV, but there is no net assetincrease (any loss increases the deficit)- 2) A min amt of the def must be avail in PIC. This may becreated by donation of stock from stakeholders orreduction of the par value.- 3) The deficit is charged against PIC & thus is eliminated!

Q1721.- What's the effect of a stock div on a corps side?

A1721.- Reduce RE & inc legal cap! IT DONT EFFECT ASSETS!

Q1722.- What are constructive dividends?

A1722.- When salaries in closely held corps are unreasonable,IRS counts it as a div!

Q1723.- What are 4 things that an agent is NOT allowed to do?

A1723.- 1. Cant act for 2 prins with conflicting interests unlessboth consent!- 2. Cant deal for their own int!- 3. Cant compete with prin without prins consent.- 4. Cant disclose to others confidential info learned duringthe agency relationship.

Q1724.- Does an agency agreement have to be in writing?

A1724.- No! Unless stat of frauds. ex. selling real prop or greaterthan 1 yr!

Q1725.- What's ratification?

A1725.- Acts performed by 1 who isn’t an agent, or unauthorizedacts by the agent, may be ratified by the prin! A singletrans must be ratified in its entirety or not at all! Can beratified expressly or implied!

Q1726.- In a derivative suit, any recovery goes to whom?

A1726.- The Corp!

Q1727.- Explain cum voting for directors.

A1727.- Each s/h receives votes equal to the # of her/his sharetimes the # of directors to be elected.

Q1728.- Explain a voting trust.

A1728.- stakeholders turn over their voting rights to a trustee fora period not more than 10 yrs. Trustee becomes record s/h.

Q1729.- What's a pooling agreement?

A1729.- Any 2 or more stakeholders may agree to vote theirshares in a given way & must be in writing & signed bythem!

Q1730.- What are the 5 basic rights of a s/h?

A1730.- 1. Derivative action- 2. Asset share on dissolution- 3. Right to vote- 4. Inspect books- 5. Preemptive right to subscribe to new stock

Q1731.- What's a direct action?

A1731.- A s/h has the right to sue for her/his own benefit!

Q1732.- What are 3 s/h control devices?

A1732.- 1. Voting trust- 2. Pooling agreements- 3. Proxy

Q1733.- Explain a proxy.

A1733.- Authorization to vote for another. A stakeholder mayappoint an agent to vote or take other action.

Q1734.- Who in a corp is responsible for appointment & oversightof any audit work performed by an audit firm?

A1734.- Audit Committee!! NOT MANAGEMENT!

Q1735.- Explain the removal of a director.

A1735.- A director can be removed at any time during their term,with or without cause with the consent of stakeholders!

Q1736.- What's an exec committee?

A1736.- It is a common practice in many jurisdictions for the BODto appt an "exec committee" to handle specific matters orthe day-to-day affairs of the corp. This committee MUST becomposed of directors!

Q1737.- What's the bus judgment rule?

A1737.- Courts adopted the bus judgment rule that when the actsor omissions involve a question of policy or bus judgment,a director who acted in good faith will not be heldpersonally liable for "mere errors of judgment or want ofprudence, short of clear & gross negligence!

Q1738.- Is CS entitled to liquidating distributions?

A1738.- Yes

Q1739.- Should AC contain at least one financial expert?

A1739.- yes

Q1740.- What are the 5 gen'l responsibilities of the AC?

A1740.- 1. Oversee the fin reporting process- 2. monitoring the choice of accting policies and prins- 3. monitoring the internal control process- 4. Appt, comp & oversight of the external auditors- 5. Receipt of communications & audit reports directlyfrom the external auditors

Q1741.- What's a quorum?

A1741.- In order for board action to be binding, a simple majorityof the directors must be present at the meeting.Furthermore, a simple majority of those % is sufficient tobind the corp legally, unless the articles call for a higher %.

Q1742.- Explain the powers of the BOD.

A1742.- Gen'ly BOD has the power to manage the bus of the corp,initiate fundamental changes subject to final approval bythe stakeholders, fill vacancies on the board, adopt &amend the bylaws, elect & fix the comp of officers, removeofficers & declare div's!- Directors are personally liable for dividends unless theyacted with due care! Directors have duty to act withreasonable care & loyalty.

Q1743.- Are stakeholders liable in a noncorp?

A1743.- Yes! Pretty much the only time!

Q1744.- Are you allowed to issue a greater # of shares thanauthorized?

A1744.- No!

Q1745.- Does TS only be purchased with a surplus?

A1745.- Yes

Q1746.- Explain participating pref stock.

A1746.- They share ratably with common stakeholders in anyprofit distributions beyond the prescribe preferred rate.Fully participating preferred holders share equally withcommon holders in xs profit dist, while partiallyparticipating holders share in a more fixed manner.

Q1747.- Can the same individual be an officer & director?

A1747.- Yes

Q1748.- Do officers need to be stakeholders in the corp?

A1748.- No

Q1749.- What's respondeat superior?

A1749.- A corp is liable for the tortuous acts of its employees,provided that the acts were committed within the course &scope of employment.

Q1750.- Explain piercing the corp veil.

A1750.- Individual stakeholders may be held personally liable forthe debts of the corp.

Q1751.- When does corp existence begin?

A1751.- At the time of filing & before the certificate is issued.

Q1752.- Who's the promoter?

A1752.- Person who is primarily responsible for forming,arranging for cap & initiating the gen'l bus of the corp. Alsoduties include drawing up corp charter & promoting stocksubscriptions. Also, they are said to be a fiduciary of thenot yet formed corp. good faith, etc.

Q1753.- Explain adoption.

A1753.- To circumvent the harsh results of placing the completefinancial burden on the promoter for preincorp contracts,the crts formulated the theory of adoption. Adoption is theacceptance of the promoters preincorp contract. Can occurin one of 3 ways: statute, agreement or implied.

Q1754.- What are the 4 things an officer has?

A1754.- 1. Authority to contract- 2. Tort liability - the usual rules of agency apply toofficers- 3. Fiduciary duties- 4. SOX

Q1755.- what's the corp opportunity doctrine?

A1755.- A director may not divert to her/himself a bus opportunitybelonging to the corp (ie, one in which the corp has a right,interest, or expectancy) without 1st giving the corp achance to act.

Q1756.- What's the basic corp liab?

A1756.- A corp is liable on the contracts of it's employees & inparticular situations, for torts committed by employees.

Q1757.- Can a corp be liable on preincorp contracts entered intoon behalf of the corp by the promoter?

A1757.- Gen'ly no! can become liable however by adoption.

Q1758.- Explain continuing promoter liab.

A1758.- Even if the corp adopts the contract, the promoterremains personally liability unless one of the followingoccurs:- 1. they state in the contract that he/she are not personallyliable- 2. a novation occurs when a 3rd party creditor agrees tolook to the corp for satisfaction of the contract, therebyreleasing promoter.

Q1759.- Who are incorporators?

A1759.- They sign the AOI. Genly same person as promoter.

Q1760.- When do preincorp subs become binding?

A1760.- Gen'ly courts have held that a subscription for shares in acorp not yet formed is an unenforceable contract due tothe lack of parties. Therefore, some act of acceptance bythe corp, after incorporation is req'd b4 preincorpsubscription agreements will become binding.

Q1761.- What's ultra vires?

A1761.- These are acts by the corp or it's management that arebeyond the scope of corp authority as granted by it'scharter, bylaws, or state laws.

Q1762.- Do conditional subscriptions need to be in writing?

A1762.- yes!

Q1763.- Can capital be contributed in the form of $, prop or svcs?

A1763.- Yes!

Q1764.- What's sec rule 10b-5?

A1764.- Unlawful to:- 1. employ any device or scheme to defraud- 2. make untrue statements of mat'l fact- 3. any fraud activity in the purch or sale of any security ininterstate commerce

Q1765.- What are corps express powers?

A1765.- A corp has the express power to perform any actauthorized by state law, AOI or the bylaws.

Q1766.- What are 4 particular powers that a corp may have but notimplied due to public policy considerations?

A1766.- 1. Gifts- 2. P/S- 3. Surety- 4. Acquiring & reacquiring shares

Q1767.- What's an AC?

A1767.- The AC is an operating committee of board members whoare independent of the corp.

Q1768.- What's a subscription agreement?

A1768.- It's a contract by which the subscriber agrees to purchasea # of shares of corp stock at a sub price specified in theagreement.

Q1769.- Explain what an enforceable preincorp sub is?

A1769.- if INDIVIDUALS agreed to subscribe to corp stock & itappears that each parties promise was dependent on theother parties also subscribing, then an enforceablecontract exists. The subscription is enforceable NOT btwthe corp & each subscriber, but rather among thesubscribers themselves!

Q1770.- When are subscriptions binding for sure?

A1770.- Post-incorp subs! Any agreement after the corp is formedconstitutes a binding obligation to sell or purchase stock.

Q1771.- Does the AOI have to specify the types & # of shares acorp may issue?

A1771.- yes! can't issue greater amt!

Q1772.- What's a foreign corp?

A1772.- One that does bus in any state except the 1 in which it isincorporated.

Q1773.- What is sec rule 16b?

A1773.- Insider Trading - applies to officers, directors & holders ofmore than 10% of the stock.

Q1774.- What are 4 examples of implied powers?

A1774.- 1. power to sue & be sued in the corporate name- 2. power to make or amend corp bylaws- 3. power to acquire, mortgage & transfer prop for corppurposes- 4. power to issue corp bonds

Q1775.- Do directors need to be stakeholders?

A1775.- No

Q1776.- what's legal capital (state capital)?

A1776.- The # of shares issued times their par value or statedvalue. This fund primarily is reserved for the payment ofcreditors in the event of a liquidation. Dividends may NOTcome from this source!

Q1777.- What has to be publicly filed? bylaws or AOI?

A1777.- AOI

Q1778.- Who sets forth the measure of liability to be borne by acorp with regard to it's issued securities.

A1778.- UCC!

Q1779.- what's a defacto corp?

A1779.- Did not comply substantially with mandatory req's. Thisstatus forces 3rd parties to perform on corp contracts &shields stakeholders from direct liab!

Q1780.- Can a corp place certain restrictions on the transfer ofstock?

A1780.- yes- 1. right of 1st refusal- 2. has to be noted on face of stock- 3. restrictions must be reasonable

Q1781.- What are the essential elements of a defacto corp?

A1781.- 1. a valid statute under which the bus could have been inclegally- 2. existence of a corp charter- 3. a good faith effort to incorporate- 4. some good faith business dealings in the corp name

Q1782.- Does a corp recognize a taxable g or L for thecontributions of prop by stakeholders?

A1782.- No!- 1. If tax free to s/h, corps basis is the same as there's- 2. If gain recognized by s/h, corp adds the gain to thebasis

Q1783.- What's a corp by estoppel?

A1783.- In the absence of even a defacto corp, many courts haveprotected stakeholders from 3rd party suits still. If the 3rdparty believed they were dealing with a corp, the crts willnot allow the 3rd party to hold the stakeholders liable onthe contract.

Q1784.- what are the bylaws?

A1784.- They are the rules & regs that govern the internalmanmgmt of a corp.

Q1785.- What's a dejure corp?

A1785.- Under common law, any corp that substantially complieswith the mandatory statutory req's of incorporation isdeemed dejure and it's status cant be attacked by anyoneincluding the state.

Q1786.- What's a quo warranto proceeding?

A1786.- Suit challengin the corp existence.

Q1787.- Explain what noncorp status is.

A1787.- Gen'ly if corp fails to meet any of the protection status, itmay be attacked by anyone. Stakeholders are liable here!

Q1788.- What's the def of contributed cap.

A1788.- The total amount paid for stock when issued, stated capplus paid in surplus.

Q1789.- Explain consideration for it's shares.

A1789.- a corp may only receive certain types & quantities ofconsideration for it's shares.

Q1790.- Explain the legality of a stock transfer.

A1790.- Can be transferred by endorsement & delivery. If a stockcertificate is endorsed in blank, it may be transferred bydelivery alone. A transfer becomes legally effective againstthe corp only when the security is presented to the corp, ora duly appointed agent for registration.

Q1791.- How is a taxable G or L calculated for stock purchased ortraded to a s/h that don't have immediate control (80%rule)?

A1791.- FMV minus the basis of prop exchanged for the stock.

Q1792.- What's respondeat superior?

A1792.- The prin is vicariously liable (liable regardless of whethers/he is at fault) for the torts of an agent if they arecommitted within the scope (actual or apparent) of theagency.

Q1793.- When is respondeat superior not valid against prin?

A1793.- If the agent departs from the performance of her/hisduties & acts on their own. It's usually to benefitthemselves.

Q1794.- Does the promoter have to comply with SEC Act of 1933?

A1794.- Yes! The act req's the filing of a registration statementwith the SEC if securities are to be offered through the mailor through some other means of interstate commerce.Also, each potential purchaser must be provided with aprospectus.

Q1795.- What are some common situations that would make acourt pierce the corp veil?

A1795.- 1. Corp Fraud or corp was formed to do illegal stuff- 2. Undercapitalization- 3. Sub Corp- 4. Loans

Q1796.- Binding contracts brief outline.

A1796.- If principle is:- 1. disclosed - P- 2. partially disclosed - P & A- 3. undisclosed - A only!

Q1797.- Can a fully undisclosed prin ratify?

A1797.- No! Must be fully or partially disclosed! Also, prin was inexistence at the time the act was done!

Q1798.- If a 3rd party withdraws b4 ratification, can prin stillratify?

A1798.- No

Q1799.- Can the law create an agency relationship?

A1799.- Yes.- 1. Estoppel- 2. Rep, Appearance, AA- 3. Necessity

Q1800.- When does a prin not have the right nor power to revokethe agency?

A1800.- If it's an "agency coupled with an interest"!

Q1801.- What can be ratified, a tort or a crime?

A1801.- Tort!

Q1802.- Once ratification occurs, what happens as to the liabilityof the agent?

A1802.- It goes away!- 1. Prin cant charge agent with exceeding it's authority &3rd party can't hold them liable for breach of warranty ofauthority.- 2. Prin cant retract ratification.

Q1803.- Does notice of an agency termination need to be given?

A1803.- Yes! unless terminated by operation of law!- 1. Actual Notice- 2. Constructive Notice (publication)

Q1804.- What are 4 ex of an agency relationship that getsterminated by law?

A1804.- 1. death or insanity by either partner- 2. bankruptcy or insolvency of the prin- 3. bankruptcy of the agent if it affects the agencyrelationship- 4. illegality or impossibility

Q1805.- What are a few things that a s/h is liable for?

A1805.- 1. "watered stock" if less than lawful consideration- 2. unpaid portion of their stock subscription contract- 3. illegal dividends, whether known or unknown, s/h isliable for repayment ONLY to an INSOLVENT corp!

Q1806.- What's the proc for a merger or cons?

A1806.- 1. BOD approves- 2. S/H approves- 3. State filing- 4. Certificate Issued- 5. Appraisal rights- 6. Short-form mergers

Q1807.- What's a SF merger?

A1807.- When one corp owns more than 90% of sub, only BOD ofparent corp needs to approve merger!

Q1808.- Explain an involuntary dissolution.

A1808.- May be brought about by an individual or the state.- 1. Quo Warranto Action - if corp exceeds it's authority,state can bring action for diss!- 2. S/h action - can bring action if BOD did fraud, waste ordeadlocked!- 3. Misc grounds - diss of a corp may arise by expiration ofthe time period set out in the charter, cons or merger.

Q1809.- Who are NOT allowed to be stakeholders of an s-corp?

A1809.- 1. Nonresident aliens- 2. Corps- 3. Foreign trusts

Q1810.- Is an agent liable to the prin for losses cuz of there ownnegligence?

A1810.- yes!

Q1811.- What duties can one NOT be able to appoint an agent?

A1811.- 1. Those that the prin has to perform personally!- 2. Those precluded by statute.- ex. execution of will- 3. Those that the prin CANT perform! ex. a minor cantappt an agent to convey real estate since the minor canvoid the conveyance!

Q1812.- What are the prins duties to an agent?

A1812.- 1. Comp for svcs- 2. Reimbursement of expenses- 3. Indemnification - to imdemnify the agent against lossor liability for acts performed at the prins direction, unlessthey are unlawful.- 4. Compensation for injury

Q1813.- What's A + B = A

A1813.- Merger

Q1814.- What's transfer pricing?

A1814.- Transer pricing is the process of establishing prices usedbtw related parties (typically divisions of the samecompany) for loans, sales or leases of tangible pp,licensing of intangibles & the sale of svcs. This is in effortto increase/decrease income in certain segments for taxpurposes.

Q1815.- Explain unemployment & inflation.

A1815.- ST (philips) - inverse relationship- LT - little to no relationship

Q1816.- What's the full employment act of 1964?

A1816.- US Gov't justified entering a mkt in which mkt forces donot allocate resources efficiently.

Q1817.- What are the 2 prin's taxes are based on?

A1817.- 1. ability to pay (progressive tax system)- 2. derived benefit (like prop taxes paying for trashremoval)

Q1818.- What's intergenerational inequity?

A1818.- If debt-financed expenditures have no future benefit,intergenerational inequity results. Intergenerationalinequity is when one generation pays for a diff generationsbenefit.

Q1819.- Diff btw public and private sectors?

A1819.- Sweater is a private good, only benefits buyer of sweater.- Law Enforcement - public good

Q1820.- What's a VAT?

A1820.- Each entity in production & distribution chain pays tax onthe diff btw its sales & purchases. Consumers ultimatelybear the incidence of a VAT. Under a VAT structure, allentities pay tax, regardless of income. A VAT tax is held toencourage savings because only consumption is taxed(not consumption & savings as the case with an incometax)!

Q1821.- What does absolute adv mean?

A1821.- Abs adv for a good exists when the cost of producing thatgood in one country is less than the cost of producing thatgood in another country.

Q1822.- What are the 3 types of unemployments?

A1822.- Frictional - due to labor mkt mechanics, time btw jobs- Structural - aggregate demand is equal to aggregatesupply, but the nature of the supply don't match the natureof the demand! Mismatch!- Cyclical - aggregate demand is less than the supply

Q1823.- Explain increasing returns to scale.

A1823.- When inputs triple, but outputs more than triple!- As most entities expand output, avg costs of productiondecline due to better use, including specialization ofresources: management, labor & equip.

Q1824.- When will an entity profit from additional resources used?

A1824.- To the pt at which marg rev product = marg resource cost

Q1825.- What's the clayton act?

A1825.- Prohibits mergers if the resulting corp would tend tolessen competition. Also prohibits price discrimination &prohibits director's in common btw 2 competing corps.(1914)

Q1826.- What's the robinson-patman act?

A1826.- Prohibits discounts that are not based on costdifferences to large purchasers. (1936)

Q1827.- What are historical costs?

A1827.- Actual expenditures made in producing a product.

Q1828.- What's the diminishing marginal utility prin?

A1828.- Equal increments of additional consumption of a goodprovide smaller & smaller additional units of utility. Forinstance, the 1st pair of shoes provides more utility thanthe 101st.

Q1829.- What are implicit costs?

A1829.- Implicit costs are amts that would have been received ifresources had been used for other purposes.

Q1830.- What's normal profit?

A1830.- Normal profit is the cost of keeping entrepreneurial skillsin the org! Also called the opportunity cost of using theowner's own resources.

Q1831.- What are the basis for decisions?

A1831.- Marginal Factors! Always what happens by increasingsomething by one unit!

Q1832.- 3 kinds of returns to scale are?

A1832.- Increasing - If all outputs are changed by a factor greaterthan the factor that changes inputs, returns to scaleincreases!- constant - changes are the same for both- decreasing - opposite of increasing

Q1833.- What's the sherman act?

A1833.- Prohibits trade restraint in interstate & foreign trade,including price fixing, boycotts, agreements to divide mkts& resale restrictions. (1890)

Q1834.- What's the celler-kefauver anti-merger act?

A1834.- Prohibits acquiring competitors assets if the result wouldtend to lessen competition. (1950)

Q1835.- Explain what happens in the mkt with shortages &surplus.

A1835.- When a shortage exists, the mkt price will rise & quandemanded will decrease, eliminating the shortage. When asurplus exists, the mkt price will decrease & quandemanded will increase, eliminating the surplus.

Q1836.- What's economic cost?

A1836.- Economic cost is the income that an entity must providein order to attract resource suppliers.

Q1837.- Briefly explain the impact of shifts in demand & supply.

A1837.- An increase in demand when supply don't change willincrease mkt price. Decrease opposite.- If both increase, the output quantity will increase with anindeterminate effect on mkt price.- Say demand increases but supply decreases, the mktprice will increase & an indeterminate effect on outputquantity.

Q1838.- What's economic profit?

A1838.- Economic profit is total revenue less all economic costs.When economic profit is zero, the firm is earning just anormal profit or normal rate of return.

Q1839.- What's cross-elasticity of demand?

A1839.- It measures responsiveness of demand to changes inprice of another good.- Exy

Q1840.- What are production factors also called?

A1840.- Inputs

Q1841.- What's the price elasticity of demand formula?

A1841.- % change in quan demanded / % in price

Q1842.- What's the utility theory?

A1842.- That an individuals goal is to maximize the total utilityfrom avail income. Pants & shoes ex!

Q1843.- What's GDP?

A1843.- The total mkt value of all final goods & svcs producedwithin a specified country. To avoid multiple counting ofthe same production, either only the value added to goodsat each production stage is counted or only the final goodsare counted.- ex. an aircraft engine typically would not be a final good

Q1844.- What are 7 leading indicators?

A1844.- 1. Avg hrs worked per wk by manufacturing workers- 2. Initial unemployment claims- 3. Stock prices- 4. Raw mat'l price change- 5. Residential bldg permits- 6. Vendor delivery times & unfilled durable orders- 7. $ supply changes

Q1845.- What's an example of a vertical merger?

A1845.- Merger along a supply chain.- ex. an iron mine & a steel manufacturer- Horizontal would be 2 entities that are competitors!

Q1846.- What's the def of a peak in a bus cycle?

A1846.- A peak is characterized by high levels of economicactivity & full use of resources.

Q1847.- What's a cartel?

A1847.- A group of oligopolistic firms intentionally joining to fixprices.- ex. OPEC

Q1848.- What's disposable income?

A1848.- Personal income less personal income taxes. Disposableincome is divided btw consumption, int payments &savings!

Q1849.- What tends to offset monopolistic behavior?

A1849.- Foreign competition!

Q1850.- What's national income?

A1850.- NDP plus a country's NI earned abroad less indirect bustaxes.

Q1851.- What's "The Common" (externalities)

A1851.- Assets used in common may suffer poor maintenance.The damage to common assets are called externalities asthe cost is external to the abusers!

Q1852.- What's it called when demand & supply intersect on agraph?

A1852.- Mkt equilibrium!

Q1853.- In all the E (elasticity) formulas, what's common in thenumerator?

A1853.- % change in quantity (either demanded or supplied)!

Q1854.- Explain the cross-elas coefficient.

A1854.- Exy = if +, goods are sub's, if -, goods are complements, if0, goods are unrelated!

Q1855.- Explain the accelerator theory.

A1855.- Accelator theory states that cap investment is related tothe rate of change in national income.- ex. an increase in cap investments is the only way tomeet any increased demand. The process of investing tomeet demand continues to accelerate. Once a recovery isstarted, it creates a momentum that continues for sometime.

Q1856.- What business or industries that perform much betterthan avg during expansions & much worse than avgsduring recessions called?

A1856.- Cyclical!

Q1857.- What's real per-captia output?

A1857.- GDP / by population, adj 4 inflation. It is used as ameasure of the standard of living.

Q1858.- What's personal income?

A1858.- National income plus transfer payments (such as corpprofit distributions & ss benefits) less both corp inc taxes& undistributed profits & less ss contributions!

Q1859.- What's GNP?

A1859.- The total mkt value of all goods & svcs produced withresources froma specified country, not necessarily withinits borders.

Q1860.- What's a conglomerate?

A1860.- A merger of 2 entities in diff mkts!- ex. steel manufacturer & computer manufacturer

Q1861.- What is price leadership?

A1861.- In an oligopoly, a major firm announces a price change &other mkt members match it!

Q1862.- In monopolistic competition, what's profit maximization?

A1862.- Each producing entity equates marginal rev with marginalcost unless price is less than avg variable cost. If cost isless than avg variable cost, an entity ceases production.

Q1863.- Give the basics of the demand curve.

A1863.- deman on x-axis, as price increase demand decreases.An increase in demand is a shift to the right.

Q1864.- Explain the elasticity coefficient.

A1864.- If the absolute value of Ed is greater than 1, demand isclassified as elastic, less than 1 it's inelastic, and = 1 isclassified as having unitary elasticity.

Q1865.- How does expectations influence demand?

A1865.- Positively! ex. if cons expect prices to go up, or inflation,they buy more now!

Q1866.- Explain surplus (economic rent).

A1866.- Surplus or ER is deemed earned when an input is paid orpurchased for higher amt than the next highest bidder-consumer of that input would pay.- ex. a muscian earns 500k as a rock star. His alternativework would be a cashier for 20k. ER is 480K.

Q1867.- What's the def of CE of demand?

A1867.- Closely related goods influence deman.- 1. Subs- 2. Complements

Q1868.- What's always on the y-axis?

A1868.- $

Q1869.- What's the def of demand?

A1869.- Demand is the amt of a good that consumers as a groupwill (are willing and able to) purchase at a given priceduring a given time period. Demand analysis concentrateson cons behavior!

Q1870.- What's the law of supply?

A1870.- The price & quantity of a good are related directly, that is,the greater the price, the greater the supply!

Q1871.- What are some things that can increase demand?

A1871.- 1. Increase in sub's price or decrease in complementsprice for normal goods.- 2. Increase in cons inc for normal goods.- 3. Decrease in cons inc for inferior goods.- 4. Expected future price increases

Q1872.- What's the def of price elasticity of demand?

A1872.- It measures responsiveness of demand to changes inprice. If demand is elastic, demand will fluctuate as theprice changes!

Q1873.- How does income influence demand?

A1873.- 1. Normal goods - positive relationship- 2. Inferior goods - negative- ex. as income increases so does the demand for normalgoods!

Q1874.- What's the def of elasticity?

A1874.- The measure of how responsive the mkt is to change in adeterminant.

Q1875.- What's the relationship btw price & quantitiy demanded?

A1875.- Inverse

Q1876.- How does the future expected price of a good affectsupply currently?

A1876.- An increase in the expected future price for goodincourages firms to supply less now!

Q1877.- What's communism?

A1877.- Resources are owned by the state & most decisions aremade by the state.

Q1878.- What's the def of supply?

A1878.- Amt of a good that producers as a group will (are willingand able to) supply at a given period of time.

Q1879.- How is the gen'l price level related to the purchasingpower of $?

A1879.- Inversly!

Q1880.- What's a balanced budget?

A1880.- Taxes = Gov't Expenditures

Q1881.- What's a margin req't?

A1881.- When the fed req's a min down payment that applies tosecurities.

Q1882.- What's the monetarist theory?

A1882.- A steady, restrained growth of $ supply is moresignificant than fiscal policy on economic activity, inflation& employment.- Inflation - in the long run, excessive increases in the $supply cause inflation. Inflation can be controlled only byrestricting $ supply growth.

Q1883.- Explain the open-mkt Op's of monetary control.

A1883.- Purch and sell gov't debt- 1. Selling - decreases $ supply by taking it fromcirculation- 2. Purchase - opposite!

Q1884.- What's a multiplier coefficient?

A1884.- Any increase in autonomous investment, consumption, orgov't spending results in a multiplied increase in nationalincome. The same income is spent several times. Theimpact of this effect is determined by the marginalpropensity to save (MPS).

Q1885.- What's a disc rate?

A1885.- When banks borrow from fed. Lowering the discount rateencourages borrowing & increases the money supply.

Q1886.- What's the model of closed economy?

A1886.- In a simple economy without a gov't,a money mkt or int'ltrade, equilibrium income occurs when aggregate savingsequals aggregate investment. In other words, equilibriumincome occurs when aggregate demand (consumption &investment) equals aggregate supply. With gov't - taxes &gov't expenditures play a factor!

Q1887.- What are 3 examples of near money?

A1887.- 1. Gov't sec's- 2. Nonchecking saving deposits- 3. Time deposits

Q1888.- What are the 3 components of investment?

A1888.- 1. Residential Const- 2. Inventories- 3. P & E

Q1889.- Brief explanation of monetary policy is?

A1889.- Monetary policy is policy intended to control the moneysupply. Control of money supply growth is deemedessential to control inflation, spending & credit availability.Stable int rates & monetary control are mutually exclusivegoals. The Fed focuses sometimes on int rates &sometimes on $ supply.

Q1890.- What are some things that can increase/decreaseinvestment?

A1890.- High tech growth - Increase- Real Int Decline - Increase- High Cap Good Stock - decrease- Higher acq & maint - decrease

Q1891.- What's the supply side theory?

A1891.- Cutting taxes stimulates work, savings & investments &restores incentive to the economy.

Q1892.- What's the PPF?

A1892.- All the possible combo's of output, with all the otherfactors held constant.

Q1893.- What's the neo-keynesian theory?

A1893.- Fiscal policy influences econ activities, but excessivemonetary growth leads to inflation.

Q1894.- Explain how a shift or inflation is in the PPF.

A1894.- 1. Shift - outward shift is called economic growth, anation can have more output. Change in the PPF arecaused by changes in resources (land, labor, cap, etc.) ortechnology.- 2. Inflation - If production is at the PPF boundary &demand increases, consumers will bid up prices of goods.

Q1895.- What's the fwd exchange rate?

A1895.- The fwd exchange rate is the rate agreed to be paid in thefuture. The diff btw the spot rate & the fwd exchange rate iscalled a discount or premium. If fwd is more than spot, it'sa premium!

Q1896.- What's the basics of keynesian economics?

A1896.- Keynesian economics holds the theory that an economycan be in equilibrium at less than full employment.Keynesian economics focuses on spending & fiscal policy(gov't stuff) as determinates of economic activity.

Q1897.- What's hedging?

A1897.- It's a risk avoidance technique! Hedging involvesoffsetting a G or L on rec/pay denominated in foreigncurrencies by purchasing or selling fwd exhangecontracts. Buying these contracts covers liability in theforeign currency, selling covers rec!

Q1898.- What's in the capital or current accts?

A1898.- Current - bal of goods & svcs, net int & dividends, & netunilateral transfers!- Capital - tracks cash flows resulting from the exchange offixed or financial assets.

Q1899.- What are 3 things that measure inflation?

A1899.- 1. CPI - comparison of the items price in a "typical"shopping cart to a base value.- 2. WPI - same as above except wholesale quantities.- 3. GDP Deflator

Q1900.- Explain factor endowment.

A1900.- The Heckscher-Ohlin theory states that regionaldifferences in efficiency occur because of diff in supply ofprod factors: land, labor, & cap! For ex, farming is favoredby a slowly moving river as a reliable irrigation source, butmanufacturing is favored by a swiftly moving river as apower source.

Q1901.- What's the basics of classical economies?

A1901.- Classical economics theory holds that an economy is inequilibrium at full employment, the economy generates &maintains full employment over the long run withoutartificial (gov't) intervention due to price & wage flexibility.

Q1902.- What's the demand-pull theory?

A1902.- Inflation is caused by xs aggregate demand for goods &svcs. Usually xs aggregate demand is deemed to be due toexpansionary fiscal policy (additional gov't expenditures).

Q1903.- Give examples of capital, labor & land intensive goods.

A1903.- Cap intensive - req's high level of investment, like aconstruction plant to build an aircraft.- Labor intensive - req's high level of labor, for ex. the laborinvolved in making computer programs.- Land intensive - ex. land involved in beef production.

Q1904.- What's the spot rate?

A1904.- It's the rate paid for currency now!

Q1905.- What's an export incentive?

A1905.- Subsidies are gov't payments to producers, typically in aprotected industry. Indirect subsidies, or incentives,include favorable tax treatment on export-related income.This practice might have similar effects on the foreigncountry as import quotas or tariffs.

Q1906.- What's the purpose of trade barriers?

A1906.- Trade restrictions exist due to many factors. An exportingcountry may allow conditions that are not permitted in acountry that would otherwise import goods from thatexporting country.

Q1907.- What's sovereignty risk?

A1907.- Sov risk is risk of significant restrictions on removal ofthe investment, either as dividends or sale of theoperations, including nationalization.

Q1908.- When does currency appreciate or depreciate?

A1908.- Currency appreciates when it can buy more units ofanother currency & depr's when it can buy fewer units ofanother currency.

Q1909.- Give 3 reasons against free trade.

A1909.- 1. Incubate infant industry - one argument is that acountry has a comparative adv in the long run, but atemporary disadvantage!- 2. Protect local jobs from cheap foreign labor!- 3. Fair competition tariff - an import tariff that brings thecost of imported goods up to the domestic price level.

Q1910.- Explain current & capital in int'l payments.

A1910.- Int'l payments - imports, exports, debt or equityinvestments - rarely net to 0! The balance of payments (thedef or surplus) typically is tracked in 2 prin accts - currentor capital!

Q1911.- What's comparative adv?

A1911.- Comp adv for a good exists when the opportunity cost ofproducing that good is less than the cost of producingother goods in the same country compared to anothercountry.

Q1912.- What's a trade barrier?

A1912.- Usually, the effect of trade barriers is to keep resources(land, labor, cap, etc) in less efficient protected industriesrather than move the resources to relatively efficientindustries.

Q1913.- Which goods do countries tend to export?

A1913.- Goods in which they have a comparative adv! For ex in amodel with only labor, land & cap as production factors,countries with a relative abundance of labor will importcap-intensive goods & land intensive goods & export laborintensive goods!

Q1914.- Barrier vs free trade?

A1914.- Barrier support - competition costs are obvious!- Free Trade Support - competition benefits are lessobvious!

Q1915.- What are 4 impacts of inflation?

A1915.- 1. Discourages saving- 2. Restricts Lending- 3. Strained relationships (uncertainty with LT contracts)- 4. Wealth redistribution (debtors repay with less valuabledollars, pensions pay out less valuable $, etc)

Q1916.- What's the cost-push theory of inflation?

A1916.- Inflation is caused when increased product costs arepassed on the the consumers in the form of higher prices.Labor unions are considered the primary source of thesecosts.

Q1917.- What's the 4 objectives of the EU?

A1917.- 1. Establish euro citizenship- 2. Ensure freedom, security & justice- 3. Promote economic & social progress- 4. Assert Europes role in the world

Q1918.- Explain what happens when an exchange rate is setabove the mkt equilibrium price.

A1918.- There's a surplus! More people are willing to supply thanthere is demand & a deficit of payments results!

Q1919.- Call vs Put.

A1919.- Call - Buy- Put - Sell

Q1920.- What's exercise value?

A1920.- The exercise value is the diff in the mrkt price and theexercise price times the # of shares each warrant allowsthe warrant holder to purchase at the exercise price. Anoptions actual value is the market price.

Q1921.- What's the ex dividend date?

A1921.- To avoid conflict because of a delay btw an exchange &corporate receipt of notification of an exchange, the exdividend date is the date after which the right to thedividend is NOT transferred with the sale of stock.

Q1922.- What's the formula for DFL?

A1922.- DFL = EBIT / (EBIT - Int)

Q1923.- Briefly explain how stock price rises & falls.

A1923.- Expected stock prices first rise as a corp begins toborrow, peaks, & then declines as debt becomesexcessive. Since interest is tax deductible, a corp has agreater proportion of operating income flowing through toinvestors as debt increases, increasing stock prices.

Q1924.- What's a warrant?

A1924.- A warrant is an option to buy a specific amount of CS at astated price (the exercise price) usually within a specificperiod of time. A detachable warrant may be tradedseparately from the bond or preferred stock.

Q1925.- What's the residual theory of dividends?

A1925.- 1. Determine an optimal or target capital budget.- 2. Calculate the equity necessary to finance that capitalbudget.- 3. Suppy that equity from RE insofar as possible.- 4. Pay dividends to the extent RE exceed equity needed(in other words, leftover or residual earnings).

Q1926.- What's an optimal cap structure?

A1926.- An OCS maximizes the price of the stock by balancingrisks and returns. Also where the marginal tax shelterbenefits of the interest are equal to the marginalbankruptcy costs.

Q1927.- Briefly explain what financial leverage is.

A1927.- When a relatively small change in EBIT results in a largechange in CS return, a high degree of financial leverageexists. This results when a high % of the entity's financingis through fixed income securities: debt & preferred stock.Gen'ly the greater the financial leverage that exists, thegreater the bus risk will be!

Q1928.- Briefly explain what operating leverage is.

A1928.- When a relatively samll change in sales results in a largechange in operating income (or EBIT), a high degree ofoperating leverage exists. This results when a high % ofcosts are fixed! Gen'ly the greater the operating leveragethat exists, the greater bus risk will be!

Q1929.- What's the formula for the degree of operating leverage?

A1929.- DOL = Cont Marg / EBIT

Q1930.- Why is bond interest risky to an issuer?

A1930.- Unpaid bond interest could force an issuer intobankruptcy; undeclared dividends will NOT! Bond interestcontinues to accrue regardless of wheter the entitygenerates profits or $ to pay interest, potentiallymagnifying losses or cash shortfalls!

Q1931.- 5 things used to determine an entity's risk are?

A1931.- 1. Demand Variability - the more demand for an entitiesproducts is stable, the lower the entity's risk.- 2. Sales Price Volatility - degree at which sales priceschange, higher risk for entity.- 3. Input Price Volatility - higher's entity's risk!- 4. Sales Price Influence - the more a producer can chargehigher prices when inputs change the lower the risk for theentity.- 5. Operating Leverage - higher fixed costs are more riskyfor entity.

Q1932.- What's coverage ratio and example?

A1932.- Coverage is a measure of an issuer's ability to meetinterest & principal. The time-int-earned ratio (EBIT / intpayments) is an example.

Q1933.- In liquidation who's claims have priority bondholder's orPS?

A1933.- BONDHOLDERS!

Q1934.- Are debenture bonds unsecured?

A1934.- Yes. Also called junk! Bondholder's are like gen'lcreditors.

Q1935.- What's a zero or low-coupon bond?

A1935.- Offered below par & pays no annual interest. Usuallycompany's that make actuarial contracts such as pensionfunds & life insurance companies buy zero coupon bonds.They don't need to worry about investing the interest &principal payments.

Q1936.- Explain indenture and trustee in bonds.

A1936.- An indenture defines the rights & obligations ofbondholders & the issuer. A trustee represents thebondholders in ensuring the indenture terms are fulfilled.The SEC approves indentures & ensures indentureprovisions are met initially.

Q1937.- Best Effort vs Underwritten Issues.

A1937.- Best Effort - an investment bank doesn't guarantee thatsecurities will be sold.- Underwritten - an investment bank buys the issue at adiscount from the price at which they are offered to thepublic & resells them effectively guaranteeing that theissue will sell.

Q1938.- Explain residual income.

A1938.- The objective of maximizing residual income assumesthat as long as the accting unit earns a rate of return in xsof the imputed int charge on its avg invested capital.

Q1939.- What's cost of capital?

A1939.- An entity's cost of capital is equal to the weighted avg ofthe cost of debt, preferred & CS, & RE, with their marktvalues as weights.

Q1940.- What's a restrictive covenant ratio?

A1940.- A provision in an indenture or term loan contract thatrequires the debtor to meet certain financial standards.

Q1941.- What are the 3 main types of LT fixed income securities?

A1941.- 1. Term loans- 2. Bonds- 3. Preferred Stock

Q1942.- What's Economic Value Added?

A1942.- It's the Net Operating Profit after tax less the opportunitycost of capital.

Q1943.- What's return on investment?

A1943.- The return on investment measures the relationship ofprofit to invested capital for a unit of accountability. Thereturn on investment is increased when operating incomeincreases or when avg invested cap decreases.- DIRECT RELATIONSHIP WITH OPERATING INCOME!

Q1944.- What are the adv & disadvantages of the NPV?

A1944.- Adv - all of the CF's over the life of the project is used,including the estimated residual sales value of the project,the TM of $ is explicitly recognized & CF's are assumed tobe reinvested at the enterprises cost of capital.- Disadvantages - it don't estimate the projects rate ofreturn but merely tests the rate against a minimum rate.

Q1945.- What are the adv & disadvantages of the IRR?

A1945.- Adv - all of the CF's over the life of the project is used,including the estimated residual sales value of the project,the TM of $ is explicitly recognized & the projects rate ofreturn is estimated.- Disadvantages - CF's are assumed to be reinvested at therate earned by the project & it's more difficult to use thenother techniques.

Q1946.- What are the advantages and disadvantages of thepayback period?

A1946.- Advantages - based upon CF's, serves as a roughscreening device to determine the time to recoup initialinvestment, it's simple to understand & easy to compute.- Disadvantage - the TM of $ is ignored, not all the CF overthe life of the project is used - all CF beyond the paybackperiod for the investment is ignored & it don't measureprofitability.

Q1947.- What are the advantages and disadvantages of theAccting Rate of Return on Avg Investment?

A1947.- Adv - Understood easily- Disadvantage - It is based upon financial accountingincome that uses the accrual basis (cap budgetingdecisions gen'ly should rely on CF's) & it ignores the TM of$.

Q1948.- What's the formula for the profitability index?

A1948.- PI = PV of CF / Initial Investment

Q1949.- What's the NPV?

A1949.- It's PV of future cash inflows from the project MINUS thecost of the initial investment. A project that will earnexactly the desired rate of return will have a NPV of ZERO!A positive NPV identifies projects that will earn in xs of theminimum rate of return.

Q1950.- What's the IRR?

A1950.- This is the rate of interest that would make the PV of thefuture CF's from the project equal to the cost of the initialinvestment. Projects with a rate less than a minimum rate(or hurdle rate) set by the company are eliminated fromconsideration.

Q1951.- What's payback period?

A1951.- This is the length of time req'd to recover the initial cashoutflow from incremental cash benefits AFTER tax. Thus, ifwe have an investment of 10K that yields 4.5K each yr aftertax, it would take us 2.22 yrs (10/4.5) to recover the orginvestment from the cum net CF's!

Q1952.- What's the Accounting Rate of Return on AvgInvestment?

A1952.- This is the avg annual net income from the projectdivided by the avg investment in the project. Thenumerator is the avg annual increase in NI, NOT CF, sodepr and incremental inc taxes are SUBTRACTED!

Q1953.- Independent vs Mutually Exclusvie.

A1953.- A project is independent if it's projected CF's areunaffected by another projects existence. For independentprojects, NPV & IRR criteria lead to the same accept orreject decisions. In mutually exclusive NPV & IRR can givediff rankings. NPV ranking is usually more reliable.

Q1954.- What's the current extensive use for derivatives?

A1954.- 1. Volatile Markets- 2. Deregulation- 3. Emerging Technologies

Q1955.- Explain the free component.

A1955.- The credit received during the disc periods commonly iscalled free. A supplier has the cost of carrying receivablesduring that disc period & must pass that cost to the cust.Thus, the costs of the disc period credit is included in theform of higher base prices. However, unless a supplier willlower the base price for cash purchases, the discountperiod is free.

Q1956.- When is depr EXCLUDED from certian calcs?

A1956.- When income tax considerations are IGNORED!

Q1957.- What's the purpose of Post-Project audit's?

A1957.- 1. Supports refinement of future predictions.- 2. Improves the project implementation as animplementation team has incentive to make the projecthappen, for their reputations if nothing else, just becausethe team is aware of the post project audit.

Q1958.- What are the categories of derivatives.

A1958.- 1. Fwd Contracts- 2. Swap Contracts- 3. Option contracts based on int rates or currencies

Q1959.- Explain the costly component.

A1959.- "Costly" trade credits cost is an implicit cost = to forgonediscounts. Entities should use the costly component onlyafter determining that the cost of this credit is less than thecost of funds from other sources.

Q1960.- A/P or trade credit is typically divided into 2 categorieswhich are?

A1960.- Free and Costly Components!

Q1961.- What's the Economic Order Quantity?

A1961.- The EOQ is the purchase size that minimizes the totalinventory order cost & inventory carry costs!- >(2 x order cost x annual demand) / inventory carryingcost per unit

Q1962.- What is good inventory management characterized by?

A1962.- 1. High Inventory Turnover- 2. Low obsolescence or deterioration write-offs- 3. Infrequent work stoppages or lost sales due to stock-outs

Q1963.- How is outstanding A/R calculated?

A1963.- By multiplying credit sales volume by the avg length oftime btw sales and collections.

Q1964.- How is the level of safety stock determined?

A1964.- It's level is determined by balancing the cost of a stock-out (i.e., lost business & customer GW) against the cost ofcarrying extra inventory.

Q1965.- Explain lead time & reorder point.

A1965.- Lead time is the time lag btw placing an order & thereceipt of the goods. If safety stock is ignored, the reorderpoint is computed as the anticipated demand during thelead time. If safety stock is considered, the reorder point iscomputed as the anticipated demand during the lead timeplus the level of safety stock.

Q1966.- What's the downside to discounts?

A1966.- The reduced margin on sales.

Q1967.- What's float?

A1967.- Float is the diff btw the amount on the depositor's books& the balance according to the bank.

Q1968.- Precautionary balances?

A1968.- Cash budgets are merely forecasts with varying degreesof reliability. Unpredicted fluctuations in inflows couldreduce an account just normal outflows need to be made,causing havoc in everyday operations.

Q1969.- Transaction Balances vs Compensating Balances

A1969.- Trans Balances - balances associated with routinepayments & collections.- Comp Balances - banks usually specify a min balance ordeposit to offset the cost of svcs such as checkprocessing or lockbox collection.

Q1970.- Rate of return estimates?

A1970.- The rate of return req'd for stock "n" is the default-freerate of return plus the beta for stock "n" times the marketrisk premium.

Q1971.- Lockbox arrangement?

A1971.- A lockbox arrangement involves payment checksaddressed to an entity to be physically mailed to a nearbybank, which clears the check & then wires funds to theentity's bank.

Q1972.- Working capital?

A1972.- Entity's current assets: $, MS, AR & Inventory. Net WC iscurrent assets less current liab.

Q1973.- Speculative balances?

A1973.- Cash balances that are held to allow an entity to takeadvantage of an unplanned bargain purchase.

Q1974.- Rational Investor Behavior (buying & selling).

A1974.- A rational investor will buy a stock if it's expected rate orreturn exceeds it's req'd rate of return. Sell opposite! Fewwill buy until the stock price drops to the point where theexpected returns = the req'd returns! Equilibrium price!

Q1975.- Assumed rates of return?

A1975.- A default-free rate of return typically is estimated as therate of return on LT US Treasury bonds. The req'd rate ofreturn on an avg stock by definition, is one with a beta of1.0.

Q1976.- Correlation?

A1976.- Correlation is the tendency of 2 variables to move jointly.The correlation coefficient (r) ranges from +1.0 to -1.0. +1 =positive perfect correlation & -1 = perfectly negativecorrelation.

Q1977.- What are several factors that change stock prices?

A1977.- 1. A riskless rate change due to changes in anticipatedinflation.- 2. A stocks beta coefficient changing.- 3. Expected growth rate flucuations.

Q1978.- What are beta coefficients?

A1978.- They measure the tendency of stock prices to changewith the market changes. High Beta = MORE VOLATILE!- As a corps assets or operating environment changes, sowill it's stock beta coeff!

Q1979.- What's the CAPM?

A1979.- The Capital Assets Pricing Model, also called the securitymarket line, attempts to specify relationships btw risk &rates of return. Beta coefficients are determined based onpast volatility, yet investors often attempt to use them topredict future results without full regard for changingconditions.

Q1980.- Explain market risk.

A1980.- Market risk can't be eliminated by diversification, it canbe eliminated only by remaining out of the market. Marketrisk is caused by change in the stock market at large. Forinstance, market risk includes the risk that int will rise,lowering all stock prices. Undiversifiable or systematicrisk.

Q1981.- What is expected rate of return?

A1981.- The ERR is the weighted avg or outcomes in other words,the sum of each possible outcome multiplied by itsprobability.

Q1982.- Market risk premium?

A1982.- The MRP is the addtional return over the default-free ratereq'd for the avg stock. If stock "h" is twic as risky as themarket avg it's risk premium is estimated at twice that ofan avg stock.

Q1983.- What's the expected total return?

A1983.- The ETR is the expected dividend yield plus the expectedcap gain (or loss) yield.

Q1984.- YTM?

A1984.- The YTM or rate of return on a bond is the effective or realrate of interest NOT stated!

Q1985.- What's the model of bond value?

A1985.- BV = PV of prn payment + PV of int payments (annuity)

Q1986.- For compounding periods other than a yr, how are theyhandled?

A1986.- For Qtrly compounding, the PV factor for 4 times the # ofperiods & one-qtr of the int is used!

Q1987.- YTC?

A1987.- If current mkt rates are below an outstanding callablebonds stated rate, the bond is likely to be called.

Q1988.- Explain for bonds the stated face value or par value & thecoupon int rate or stated int rate?

A1988.- Stated or par = what's repaid!- Stated or coupon = rate the issuer use to calculate intpayments (par val x coupon int rate)

Q1989.- What's a premium on a bond?

A1989.- If a 12% bond is available when the mkt rate is 10% apremium will be awarded to the 12% bond, such that theeffective int rate is 10%!

Q1990.- Zero growth stock vs Uneven growth stock

A1990.- Zero growth = constant dividends- Uneven = more realistic

Q1991.- Formula for FV of annuity due?

A1991.- (n + 1) - A- Think future, going fwd so + !

Q1992.- Do rising int rates depress stock prices?

A1992.- Yes

Q1993.- What's the risk premium?

A1993.- Default risk premium + Maturity risk premium

Q1994.- What's the effect of a maturity risk premium?

A1994.- The effect of a maturity risk premium is to have higher intrates on LT bonds as opposed to comparable ST bonds.

Q1995.- What's perpetuity?

A1995.- A special instance of annuity, continues infinitely! The PVis the payment divided by the disc rate. Why? The effect ofeach additional payment far in the future decrease to thepoint where the impact of individual future paymentsapproaches 0.

Q1996.- T or F, demand for $ falls during recession.

A1996.- True

Q1997.- Example of PV of a future amount?

A1997.- A person wants to deposit enough $ to have 5K in 2 yrs.What will they need to deposit now?

Q1998.- Explain normal yield.

A1998.- In a stable economy (where inflation flucuates in a lowrange, expected future inflation rates are roughly equal tocurrent rates & no intervention by the fed occurs), the yieldcurve is relatively low & generally has a slight upwardslope reflecting maturity effects.

Q1999.- Corps raise cap in what 2 forms?

A1999.- Debt & Equity!

Q2000.- T or F. Temporary EPS increses that cripple futureearning potential might not be taken into acct whencomparing current performance.

A2000.- True

Q2001.- Explain what happens when dividends & EPS are diff &the same.

A2001.- Diff - part of the stock value is due to untrasferredearnings, rather than performance.- Same - all of the stock value change is due toperformance.

Q2002.- Briefly explain autonomy.

A2002.- Autonomy could translate into actions that, rather thanmaximizing s/h wealth, merely keeping stakeholderssatisfied while other goals are pursued.

Q2003.- What are the 4 cycles of a life cycle?

A2003.- 1. Infancy- 2. Growth- 3. Maturity- 4. Decline

Q2004.- What are some external constraints?

A2004.- Societies make antitrust, employment, environmental,product safety, workplace safety, & other laws, reg's &practices.

Q2005.- To maximize s/h wealth, management should concentrateon what?

A2005.- Total ret per share!

Q2006.- What are 2 arguments against a corp taking cost-increasing socially responsible actions?

A2006.- 1. Mandates increase effectiveness- 2. Owners benefit equals social benefit

Q2007.- What is default risk?

A2007.- The default risk premium for a given security is the diffbtw the security rate & the US Treasury bond rate.

Q2008.- Debt vs Equity markets.

A2008.- Debt mkts exchange bonds, notes & loans. Equity mktsexchange stock & other ownership interests.

Q2009.- What are mutual funds?

A2009.- Mutual funds are corporations that pool dollars fromstockholders (savers) to invest typically in debt & equitysecurities.

Q2010.- Physical assets mkt vs financial assets mkt

A2010.- Physical - real estate, grains, computers, etc.- FA mkt - claims on assets, ex. include stocks, bonds,warrants, options, notes & mortgages.

Q2011.- 1 yr vs 3 yr bond when inflation is expected to decrease.

A2011.- The int rate on the 1 yr bond is expected to be greater thatthe int rate on the 3 yr!

Q2012.- What are bid & asked prices?

A2012.- Bid - what price the specialist will buy- Ask - " " sell- Thnk BB & SS

Q2013.- What do investment banks typically do?

A2013.- 1. Help corps design securities with features that willattract investors.- 2. Buy the securities- 3. Re-sell them to investors.

Q2014.- What's in money mkt?

A2014.- Exchanges for ST debt securities (less than 1 yr).

Q2015.- Explain what direct (variable) costing is.

A2015.- It's an inventory costing method whereby dm, dl & vohare considered to be product costs (inventoriable costs),while fixed manufacturing OH is considered to be a periodcost (cost expensed in the period incurred).- In absorption costing, the costs to be inventoried includeALL manufacturing costs, both variable & fixed.

Q2016.- Example of percentage markup on cost.

A2016.- Want to sell a product at a gross margin of 20%. The costof the product is $4.00.- % markup = 20% / 100% - 20% so = 25%- Selling price = Cost of product + GM so 4.00 + 25%(4.00) =5.00

Q2017.- What's the formula for % markup on cost in cost-pluspricing?

A2017.- % markup on cost = % markup on selling price / 100% - %markup on selling price

Q2018.- Explain the cost-plus pricing approach in product pricing.

A2018.- Takes the products costs & adds a predetermined markupto compute the targeted selling price.

Q2019.- Explain cont marg approach in product pricing.

A2019.- Under CM approach, product pricing is based upon allrelevant costs plus any additional fixed costs necessaryfor the increased production level.

Q2020.- What's up with irrelevent costs?

A2020.- Historical costs are always irrelevent per se, althoughthey may be helpful in predicting relevent costs. In order tobe relevent for decision making, an item must meet both ofthe following: it's an expected future cost or revenue, it'samount will differ among alternatives.

Q2021.- What's the def of relevent costs?

A2021.- Relevent costs are expected future costs that will differamong alternatives. The concept of cost relevence isimportant in the decision making process, especially indecisions that are nonroutine.

Q2022.- What's predatory pricing?

A2022.- Deliberately setting prices below cost in an effort to drivecompetition out of the mkt. Once competitors leave, pricesare raised.

Q2023.- What are the 2 common approaches to product pricing?

A2023.- Cont Margin Approach & Cost Plus Pricing

Q2024.- Eliminate product line or division.

A2024.- The cont margin of a line must be compared to itsrelevant fixed costs (the FC's that would be eliminated ifthe line were discontinued). If the CM of the line exceedsthe FC's that would be eliminated, the line should NOT bediscontinued! The fixed cost's that will not be eliminatedare irrelevant to the decision because they will continueregardless of the decision.

Q2025.- Examples of relevent costs are?

A2025.- Avoidable Costs - cost that will not be incurred if anactivity is altered or suspended.- Differential (incremental) costs - the diff in cost btw 2alternatives- Marginal costs - the addition to total cost of producing orselling one more unit of output.- Out of pocket costs - immediate or near future $ outlays.- Opportunity costs - the foregone benefits (revs minuscosts) from alternatives not selected.

Q2026.- Composite sales BE?

A2026.- FC / *Composite CMR- *Remember, this is the 1/19 (50%) + 6/19 (25%) + 12/19(33%) thing!

Q2027.- In mixed sales, how would you get the BE point for eachproduct?

A2027.- Composite Units x sales mix ratio = BE Units- BE Units x selling price = BE $

Q2028.- In composite BE pt, do you multiply the cont marg foreach product by their sales mix ratio to get weighted CM?

A2028.- Yes

Q2029.- Contribution marg method of BE pt in $ & units.

A2029.- FC + NI / Cont Marg Ratio- FC + NI / UCM- Cont Marg is always in den!

Q2030.- What's the def of MOS?

A2030.- MOS can be defined as the xs of budgeted (or actual)sales over the BE volume of sales. It states the amount bywhich sales can drop before losses begin to be incurred inan org.- Total Sales - BE Sales = MOS- MOS / Total Sales = MOS%

Q2031.- Formula for composite cont margin?

A2031.- CCM = Sum(sales mix ratio for a product x cmr for theproduct)- ex. 1/19 (50%) + 6/19 (25%) + 12/19 (33%)

Q2032.- Formula for composite units? (also called the BE point formixed sales)

A2032.- FC / Composite CM- CCM is the weighted CM's added together.- Note: A composite unit is based on the ex in the bk as the"package" made up of 1 unit of A, 3 units of B, & 4 units ofC.

Q2033.- What is composite BE?

A2033.- When a company sells more than 1 product, a BE pointcan be determined for each product based on expectedsales mix & the composite or combined cont marg!

Q2034.- What are committed costs?

A2034.- These represent fixed costs that arise from having PPE, &a functioning org! These costs remain even when theproduction volume is zero! Included is depr & LT leasepayments.

Q2035.- Prime costs vs conv costs

A2035.- Prime = DM & DL- CC = DL & OH- Period = Selling & Admin (expensed as incurred)

Q2036.- Give examples of DM, DL & MOH.

A2036.- DL ex = easily traceable to product. The labor costs ofworkers who assemble desk tops or operate melting equip.- DM ex = desk tops & legs- MOH = indirect labor, indirect mat'l, repairs &maintenance, factory utilities, equip depr.

Q2037.- What are product costs?

A2037.- They are inventoriable. They are DM, DL, VOH & FOH.Pretty much everything!

Q2038.- What's the def of CC?

A2038.- Sum of DL & MOH (V & F)! It represents the costs toconvert raw mat'ls into finished products.

Q2039.- What are prime costs?

A2039.- DM & DL

Q2040.- What are discretionary costs?

A2040.- These costs are often unrelated to volume & include forex. adv costs & research & development costs.

Q2041.- Does COGM replace purchases of a merchandising firm?

A2041.- Yes! Finished Goods = EI

Q2042.- Learning Curve?

A2042.- Used to refer to the phenomenon that when people firstperform a task, they will be slower than when they performit for the 100th time. Hence, labor hrs will be more (&associated costs higher) when people are doing for the 1sttime.

Q2043.- Does total variable cost have a direct relationship withvolume?

A2043.- Yes! FC don't change remember!

Q2044.- Explain mixed costs.

A2044.- Mixed costs are comprised of both variable and fixedelements. Due to their variable cost element, mc change intotal with a change in volume, but not in direct proportioncuz of their fixed cost element. Due to their fixed cost part,avg mc per unit decreases with an increase in volume. MCinclude electricity, maintenance, etc. MC are usually splitinto fixed & variable elements for purposes of cvp &budgets.

Q2045.- What's in raw mat'ls inventory acct?

A2045.- Beg Bal + Purchases = Available for use - RM used(transferred to WIP) = Ending Balance

Q2046.- Experience curve?

A2046.- The experience curve is the graphic representation oftime (& costs) for a broad category of tasks decreasing asa group gains experience with a set of tasks.

Q2047.- Does avg fixed cost per unit have an inverse relationshipwith volume?

A2047.- Yes

Q2048.- What are step variable costs?

A2048.- ex. supervision may be fixed over a given productionvolume, but additional shifts or work crews may be neededto increase production therefore additional supervisors areneeded & thus the added cost will go up in a lump sum or"stair step" manner!

Q2049.- Explain how the cvp chart works.

A2049.- The cvp chart shows the profit or loss potential for therange of volume within the relevant range. At any givenlevel of output, the predicted profit or loss is the verticaldiff btw the sales line & the total cost line. The BE point isat the intersection of sales & total costs.

Q2050.- What's the schedule called that represents the cost of theproducts completed during the period & transferred to FGinventory?

A2050.- COGM schedule!

Q2051.- What's in the WIP inventory acct?

A2051.- Beg Bal + RM, Labor, OH used = Avail to finish - GoodFinished ( to FG's) = ending balance

Q2052.- Explain the relevent range.

A2052.- All the relationships graphed on the cvp chart are validonly within a band of activity called the relevent range, thesame relationships are unlikely to hold true. For ex, somefixed costs may increase at high levels of output!

Q2053.- T or F, breakeven & cvp analyses are concerned with theeffect upon operating income (or NI) of various decisionsregarding sales & costs?

A2053.- True

Q2054.- Explain how the diff (variance) btw actual OH & appliedOH is reported?

A2054.- Usually reported as an adj to COGS in the I/S!

Q2055.- What's in the FG inventory acct?

A2055.- Beg Bal + Goods Finished (from WIP) = Avail for Sale -COGS = Ending Bal

Q2056.- What's the dollar sales to achieve a desired profitformula?

A2056.- (FC + desired NI) / Cont Marg Ratio

Q2057.- What's the cont margin ratio?

A2057.- Total cont margin / total sales

Q2058.- In the cvp chart, explain BE pt, cont marg, NI & NL.

A2058.- BE = Total cost & sales intersect- Cont Marg = Sales line over variable costs line- NI = Past BE pt- NL = Below BE pt

Q2059.- Simply put, how is BE pt defined?

A2059.- The pt where sales less fixed & variable costs result inzero profit. Thus, the BE point is defined as the pointwhere NI = 0!

Q2060.- At zero volume, what would the net loss equal?

A2060.- Equals total fixed costs!

Q2061.- Hardware?

A2061.- Physical computer equip. Downtime is when computeraint functioning.

Q2062.- What's CPU / mainframe?

A2062.- Primary hardware component. Actual processing dataoccurs in the CPU! It contains primary storage, a controlunit & an arithmetic / logic unit!

Q2063.- What's RAM & ROM?

A2063.- The primary storage contains the data & program stepsthat are being processed by the CPU & is divided into RAM(random-access memory) & ROM (read-only memory)!

Q2064.- What's the control unit?

A2064.- Portion of the CPU that controls & directs the operationsof the computer. It interprets the instructions from theprogram & directs the computer system to perform them.

Q2065.- What are peripheral equip?

A2065.- Equip that is NOT part of the CPU but that may be placedunder the control of the CPU, i.e., which may be accesseddirectly by the CPU. Input/Output devices & secondarystorage devices are peripheral equip!

Q2066.- What are examples of Input/Output devices?

A2066.- 1. Barcode readers- 2. Keyboard- 3. Magnetic Ink Character Recognition- 4. Magnetic Tape Reader- 5. Modem- 6. Monitor / Screen- 7. Mouse / Trackball- 8. Optical character recognition scanner- 9. Printer

Q2067.- Briefly explain what software is?

A2067.- Software includes programs, routines, documentation,manuals, etc., that make it possible for the computersystem to operate & process data.

Q2068.- What are examples of secondary storage?

A2068.- 1. Disk, Diskette- 2. Magnetic Tape- 3. Offline Storage- 4. Online Storage- 5. Redundant Array of Independent disks- 6. Randomly accessible (direct access)- 7. Sequentially Accessible

Q2069.- What's a program?

A2069.- A program is a set of instructions that the computerfollows to accomplish a task (e.g., A/R update program,inventory management program, & payroll program).Program maintenance refers to making changes in theprogram in order to keep it current & functioning properly.ex. payroll update for soc sec changes.

Q2070.- What are the 5 program languages?

A2070.- MAPFO- 1. Machine Language- 2. Assembly Language- 3. Procedural Language- 4. Fourth-generation Lang- 5. Object-oriented programming

Q2071.- What's a graphical user interface?

A2071.- A GUI allows user access to software functions depictedthrough use of icons, scroll bars, frames, & other pictorialmeans, rather than line-by-line commands or requests.

Q2072.- What's a patch?

A2072.- Addition of a new part to a program.

Q2073.- Explain briefly JCL, Multiprocessing & programming &VS.

A2073.- Job Control Lang - A commend language that launchesapps, specifying priorities, program sizes, runningsequences, databases used, & files used.- Multiprocessing - 2 or more programs at same time &needs more than one CPU!- Multiprogramming - A program is processed until sometype of input or output is needed. APPEARS if more thanone program is being processed concurrently using oneCPU!- Virtual Storage - O/S divides a program into segments(called pages) & brings only sections of the program intomemory as needed.

Q2074.- What's an operating system?

A2074.- Manages the coordinating & scheduling of variousapplication programs & computer functions. The O/S is likea traffic controller for data btw peripheral equip &application programs.

Q2075.- What's pass (run)?

A2075.- A complete cycle of input, processing, & output in theexecution of a program, typically an application program.

Q2076.- What's heuristic?

A2076.- In computing, the adjective heuristic signifies able tochange, it is used to descrie a computer program that canmodify itself in response to the user. ex. spell check orvoice recognition software.- Think Heuristic - spell check, wierd spelling!

Q2077.- Collaborative Computing Applications (Groupware,Shareware)?

A2077.- A program that allows several people to have access tothe same info & attempts to track the authors of changes.

Q2078.- Management information system?

A2078.- An information system within an org that providesmanmgt with the info needed for planning & control.

Q2079.- Utility program?

A2079.- Routine functions such as sorting & merging!

Q2080.- What's Enterprise Resource Planning Software?

A2080.- Complex, highly integrated, multimodule applications thatmanage a business' diff aspects, from traditionalaccounting to inventory management & advanced planning& forecasting.

Q2081.- Library Program (library routine)?

A2081.- Programs that frequently are used by several otherprograms. They are kept within the system & "called up"whenever necessary.- ex. generating random #'s

Q2082.- Web Crawler?

A2082.- A specialized program used to search the WWW for filesmeeting user criteria.- *Browser displays!- *Crawler searches!

Q2083.- Topology?

A2083.- Physical layout of a network! BTRS!

Q2084.- Explain the 4 topologies.

A2084.- BTRS!- Bus - Each device is connected to a line with disconnectedends. Communication on either side of a failed device isimpossible.- Tree - Devices connected to other devices in a hierarchicalmanner. Some have many connections & some don't.- Ring - Each device connected to 2 others suce that itresembles a circle. If one device fails communication is stillpossible, however if a device btw 2 failed one's won't be able tocommunicate.- Star - All connected to cent'l device, all messages passthrough cent'l one!

Q2085.- Brief explanation of what networks are.

A2085.- A network is an arrangement of computers to allow usersaccess to common data, hardware, &/or software. Aninternet is a network of networks. Intranet gen'ly isrestricted to employee access. Extranet is passwordprotected internet usually made for vendors & customers.

Q2086.- What's a concentrator?

A2086.- A device that combines multiple communication channelsinto one. A concentrator differs from a multiplexor in thatthe total bandwidth of inputs don't have to = totalbandwidth of outputs!

Q2087.- Multiplexor?

A2087.- Total bw of inputs must equal outputs. It converts lowspeed into high speed transmissions & back again forcommunication stuff!

Q2088.- Proxy server?

A2088.- An app or device that manages requests from webbrowsers. A proxy server caches (saves) a copy of pagesretrieved from a web server. Future requests for the samepage are supplied from the cache for shorter responsetime.

Q2089.- Router?

A2089.- Switch that transfers incoming messages to outgoinglinks via the most efficient route possible. ex. over theinternet!

Q2090.- Firewall?

A2090.- Software designed to prevent unauthorized access todata by separating one segment from another!

Q2091.- Gateway?

A2091.- Software or hardware that links 2 or more computernetworks.

Q2092.- Web Browser?

A2092.- Program used to find & display www files meeting usercriteria.

Q2093.- Parallel vs Serial Transmissions.

A2093.- P - all of the bits of a byte are transmitted at once alongparallel lines, with one bit on each line. Practical only forshort distances, public infrastructure is limited in capacityto do this.- S - each bit is transmitted at one time!

Q2094.- What are transmission protocols?

A2094.- Sets of rules used by the transmitting and receivingdevices so that they both interpret data identically. Filetransfer protocols is an example.

Q2095.- Explain what packet switching is.

A2095.- PS divides a message into packets which may betransmitted separately through diff paths. Routing & ctrlsoftware assemble the packets to recreate the orgmessage. More efficient than circuit switching, but ofteninvolves some delay.

Q2096.- Explain what circuit switching is.

A2096.- CS involves a dedicated channel for the duration of thetransmission. Sender signals it will send message,receiver acknowledges, then whole message is sent.

Q2097.- What's client-svr architecture?

A2097.- A network of workstations (clients) & another computer(server) that is shared among the clients.- 1. File Server - a server in two-tier architecture wheremost processing occurs at clients & server mainly servesto store stuff.- 2. Database server - similar to a file server, except theserver stores the database management software & doessome processing.- 3. Three Tier (n-tier) Architecture - additional servers areadded to a two-tier so clients share the functions providedby the svrs. Typical servers include print servers, faxservers, application servers & web servers.

Q2098.- What are the 4 network languages?

A2098.- HHXX- 1. HTML - Hyper text markup lang - the code used toformat files for internet display.- 2. HTTP - Hyper text transfer protocol - a set of rulesestablishing how data in files is coded, transferred &viewed.- 3. XML - extensive markup lang - similar to HTML asformats info for use on the web but goes further identifyingthe nature of the info.- XBRL - Extensive business reporting lang - protocolunder development that will provide interactive capabilitiesto SEC filings.

Q2099.- IP# or address?

A2099.- An internet protocol # is a unique # assigned to acomputer in a network. A registered IP # is registered witha central database to eliminate duplication on the web.Since IP #'s aren't easy to remember, unique domainnames may be assigned to these #'s. A Uniform ResourceLocator (URL) is another name for a web address.

Q2100.- What's prima facie credibility?

A2100.- Something transmitted electronically froma customerderives its credibility primarily from the controls within theelectronic environment.

Q2101.- A sniffer is?

A2101.- A tool that will report all the user names & passwords thatit finds, allowing the operator access to an unaware usersemail or other accounts.

Q2102.- What are the diff's btw a TH, virus, & virus hoax?

A2102.- Trojan Horse - a seemingly legit program that operates inan unauthorized manner, usually causing damage.- Virus - replicates & attaches itself to other programs, canbe just an annoying message or malicious activity.- Virus Hoax - an email message with a false warning,originator trys to get it circulated as widely as possible.

Q2103.- Digital Sig?

A2103.- A dig sig is a guarantee that info has not been modified,like a tamper proof seal on a bottle of aspirin. Digital sigsare used for establishing secure website connections &verifying the validity, but NOT the privacy, of transmittedfiles. Also, a digital sig don't verify the receiving person oraddress.

Q2104.- What's encryption?

A2104.- Encryption is a mathematical process of coding data sothat in cant be read by unauthorized people. Decryption istransforming an encrypted file into the file that existed b4the encryption. A key is used to lock & unlock the data.The key is the set of mathematical operations & anyrandom initial values that are used to encrypt & decrypt thedata. Algorithms describe the mathematical process vs.key which give the exact process.

Q2105.- Explain symmetric encryption.

A2105.- With symmetric (private key) encryption, the samealgorithm is used for encryption & decryption. Anyone whoknows the method used to encrypt the message candecrypt it. Should be kept secret btw sender & recipient.

Q2106.- Explain asymmetric encryption.

A2106.- Think A-Pub!!- Public key (asymmetric) encryption is a system that usesa public key that may be widely known & a private key thatis intended to be dept secret & known only by the recipientof the encrypted messages. The sender encryptsmessages to each particular recipient public key. Therecipient decrypts messages with their private key.

Q2107.- What are "hot" & "cold" sites?

A2107.- Back up places!- Hot - location where a functioning system is planned foruse with minimal prep in the event of a disaster at theprimary location.- Cold - equip & power is avail at a location, but req's a lotof set up!

Q2108.- What's a connectionless enivironment?

A2108.- The internet (web) since a website can interact with manyusers simultaneously.

Q2109.- What's back-end processing?

A2109.- Sales reporting, order inquiry, inventory updating,shipping order generation, etc.

Q2110.- Hacker vs Cracker?

A2110.- Hackers - computer enthusiast who's interested inlearning the nitty-gritty.- Crackers - (criminal hacker)- intentionally involved in unethical activity.- Script Kiddies - use tools in an automated fashion &cause damage without understanding what they doing.

Q2111.- What are 7 kinds of hacker tools?

A2111.- DPS TVSV- 1. Demon Dialers- 2. Port Scanners- 3. Scripts- 4. Trojan Horse- 5. Virus- 6. Sniffer- 7. Virus Hoax

Q2112.- What's an ad hoc report?

A2112.- Non-standardize report composed when the need arises.

Q2113.- What are demon dialers?

A2113.- Software tools that will dial through a series of phone #'sfinding modems then it will issue standard or defaultpasswords, username combos, or brute attack trying tobreak into the system.

Q2114.- What are scripts?

A2114.- Scripts will interrogate or investigate machines, findingout what accounts exist on the maching & whether a limiton password attempts is enabled.

Q2115.- What are port scanners?

A2115.- Port Scanners are tools that will scan a network &network devices, & produce, automatically, reports thatsay these particular svcs are available & open. Thus, it'simportant to turn off svcs NOT being used & restrict svcsthat are being used.

Q2116.- 6 things a gen'l IT system includes?

A2116.- 1. Hardware- 2. Software- 3. Documentation- 4. Personnel- 5. Data- 6. Controls

Q2117.- What's another word for automated controls?

A2117.- Controls embedded in computer programs!

Q2118.- What are the benefits of an IT environment?

A2118.- 1. Consistently apply predefined bus rules & performcomplex calcs in processing large volumes of trans!- 2. Enhance timeliness, availability, & accuracy of info.- 3. Facilitate additional analysis of info.- 4. Enhance the ability to monitor the performance of theentity's activities & compliance with its policies & proc's.- 5. Reduce the risk that controls will be circumvented,especially if controls over changes to the IT system areeffective.

Q2119.- What are the risks of an IT environment?

A2119.- 1. Overeliance on info provided b the IT system.- 2. Unauthorized access to data.- 3. Unauthorized changes to computer programs.- 4. Failure to make necessary changes to computerprograms.- 5. Inappropriate manual intervention.- 6. Potential loss of data.

Q2120.- What are the 6 trans processing systems?

A2120.- 1. Inventory control- 2. Sales- 3. Purchasing- 4. Payroll- 5. Production- 6. Gen'l ledger

Q2121.- What are 4 things to consider about an IT system?

A2121.- 1. Documentation - many proc's in IT system don't leaveevidence of performance automatically.- 2. Electronic info - files & records are in machine-readable form & can't be read without a computer.- 3. Knowledge - a user may need specialized knowledge touse the system.- 4. Difficulty of change - once implemented it's hard tochange an IT system.

Q2122.- What are the 3 management reporting systems?

A2122.- 1. F/S- 2. Data Mining- 3. Key Performance Indicators

Q2123.- Explain the 3 types of data mining.

A2123.- 1. Sieve - sift thru large amts of data quickly. Can be doneon entire pop's!- 2. Customer Profiling - ex. credit card co may flag & delaytrans that don't fit the customer profile. A store may noticeseveral unrelated items commonly are purchases at thesame time, a change in merchandise arrangement canresult in increased sales.- 3. Auditing - looking for fraud.

Q2124.- Explain the structure of data.

A2124.- Bit - binary digit (0 or 1, on or off) represents smallest unitof data.- Byte - group of bits that represents a single character- Field - group of related characters. ex. a name- Record - group of related fields. ex. customer file- Editing refers to the addition, deletion, &/orrearrangement of data. Input editing refers to editing b4processing & output editing refers to editing afterprocessing.

Q2125.- Master vs Transaction file?

A2125.- Master - contains relatively perm data like customername, address, credit limit, amount owed, etc.- Transaction - contain current temporary data. Atransaction file is used to update a master file.- For example, the day's charge sales would beaccumulated on a trans file that would be used to updatethe A/R master file during an update run.

Q2126.- Explain database.

A2126.- A structured set of interrelated files combined toeliminate redundancy of data items within the files & toestablish logical connections btw data items. For ex, withinpersonnel & payroll files, some of the data in the two setsof records will be the same, in a database system, thesefiles would be combined to eliminate the redundant data.

Q2127.- What's encode and decode?

A2127.- Encoding (or encryption) is scrambling data to preventunauthorized use.- Decoding is converting data from an encoded state to itsoriginal form.

Q2128.- What are the 5 phases of development & implementation?

A2128.- Analysis - feasibility study- Design- Programming - coding and testing- Implementation - system is released to user- Monitoring

Q2129.- In systems operation, what are the 4 processingmethodologies?

A2129.- 1. Batch Processing- 2. Online Processing- 3. Real-time Processing- 4. Integrated System

Q2130.- Diff btw batch & online processing?

A2130.- B - transactions to be processed are accumulated ingroup (batches) b4 processing & are then processed as abatch.- OP - Trans are processed & the files are updated as thetrans occurs. ex. cash terminal may automatically updateinventory file when sale is made.

Q2131.- What's real-time processing and what's an example?

A2131.- An online system is operating in real time if the data isprocessed fast enough to get the response back in time toinfluence the process. For ex, an airline reservation systemis an OLRT system since the customer receivesreservations after waiting only a few moments.

Q2132.- Which functions within the IT dept should be segregated?

A2132.- Control Group- Operators- Programmer- System Analyst- Librarian- COPSL

Q2133.- What's an integrated system?

A2133.- All files affected by a transaction are updated in one transprocessing run! ex. a sales trans may update the salessummary file, the A/R master file, & the inventory fileduring one processing run!

Q2134.- What are the 3 outside processing arrangements?

A2134.- 1. Block time - rent certain block of time from outsideparty.- 2. Time-sharing - a # of users share a computer system.Each may a access a CPU outside a client whenever.- 3. Service bureau - outside org that provides a wide rangeof data processing svcs for a fee.

Q2135.- What do the C, O & S do in an IT dept?

A2135.- Control Group - repsonsible for I/C within the IT dept!- Operators - Convert data into machine readable form!- Systems Analyst - Designs the overall system & preparesthe system flowchart.

Q2136.- Who are the 6 people usually in a website team?

A2136.- 1. Accountant / Auditor - Specialists who understand howbus processes work.- 2. Graphics designer - an artists who uses colors &images to design a site to complement the sites mission.- 3. Marketing Specialist- 4. Usability Specialist- 5. Webmaster - A programmer responsible for thefunctionality of a site.- 6. Writer- AMUGWW

Q2137.- What are the 3 diff administrators & what do they eachdo?

A2137.- Database administrator - responsible for maintaining 1 ormore databases & restricting access to authorizedpersonnel.- Network Administrator - responsible for maintaining theefficiency & effectiveness of an internal network.- Web Administrator - responsible for maintaining externalnetwork interfaces (websites).

Q2138.- What's program documentation?

A2138.- Primarily used by systems analysts & programmers toprovide a control over program corrections & revisions.

Q2139.- What are operations documentation?

A2139.- Info provided to the computer operator. IT can be used bythe auditor to obtain an understanding of the functionsperformed by the operator & to determine how data isprocessed.

Q2140.- What are hardware controls?

A2140.- They are controls that are built into the computer.

Q2141.- Echo check vs Hardware Check?

A2141.- Echo - CPU sends signal to activate input/output device,the device sends back signal to verify activation.- Hardware - computer checks to make sure the equip isfunctioning properly.

Q2142.- What is boundary protection?

A2142.- Keeps several files or programs seperate when theyshare a common storage.

Q2143.- File labels?

A2143.- External - Human readable- Internal - Machine readable- Header - appears at beg of file & contains such info as thefile name, ID# & the tape reel #.- Trailer - at end of file, contains info like count of therecords in the file & an end of file code.

Q2144.- What's a file protection ring?

A2144.- Guards against the inadvertant erasure of the info on thetape.

Q2145.- What's computer editing?

A2145.- Computers can be programmed to perform a wide rangeof edit tests (edit checks) on records as they are beingentered in the system.- If a particular record does NOT meet the test, it aintprocessed.

Q2146.- The 6 control types are?

A2146.- PACCDS- Preventive - b4 an error occurs- Application - limited to a specific app, such as a controlthat verifies that a soc sec # has only numerical input.- Corrective - after an error is found- Compliance - promote adherence to established policies- Detective - uncover errors after they happen- System or gen'l - apply to the entire system, such as acontrol that verifies parity is maintained.

Q2147.- Hot vs cold sites?

A2147.- Hot - location where a functioning system is planned foruse with minimal prep in the event of a disaster at theprimary location.- Cold - location where equip & power is located &available but req's considerable effort to get an o/sfunctioning.

Q2148.- What should continuity planning include?

A2148.- 1. Notification proc's- 2. Recovery management- 3. Temp Operating Proc's- 4. Backup & recovery proc's

Q2149.- Best way to scenario test disaster stuff?

A2149.- Scenario Testing - The expense & lost productivity tosimulate a company wide disaster could be significant &unnecessary. A dry run (or table-top testing) woulddiscover many weaknesses & allow contingency plans tobe refined. Several limited-scope disaster sims couldpinpoint additional weaknesses with minimal disruption toregular operations.

Q2150.- Documentation Mnemonic?

A2150.- OPSOUP- Operation documentation- Problem definition doc- Systems documentation- Operator documentation- User documentation- Program documentation

Q2151.- Explain user documentation.

A2151.- Description of the input req'd for processing an outputlisting. Auditor's may use it to gain an understanding of thefunctions performed by the user & the gen'l flow of info.

Q2152.- What are decision tables?

A2152.- Decision tables are one means of documentation. Theyemphasize the relationships among conditions & actions,& present decision choices. Decision tables oftensupplement systems flowcharts.

Q2153.- Explain operator documenation.

A2153.- Documentation should be prepared that will indicate thejobs run & any operator interaction.- 1. Daily computer log - tells jobs run, the time & by who.- 2. Console log - a listing of all interactions btw theconsole & the cpu.

Q2154.- What's systems documentation?

A2154.- Provides sufficient info to trace accting data from it'soriginal entry to system output. Includes:- 1. Desc of system- 2. System flowchart- 3. Input descriptions- 4. Output descriptions- 5. File descriptions- 6. Descriptions of controls- 7. Copies of authorizations & their effective dates forsystem changes.

Q2155.- What's problem definition documentation?

A2155.- Permits auditor to gain a gen'l understanding of a systemwithout having to become involved in the details of theprograms.

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