You Will Study With Me.

[Royal]

What is the equation for economic order quantity?

Square Root of annual sales in units x cost per purchase order
Divided by carrying cost per unit.

[Royal]

What are the three motivations for holding cash?

Transaction motive....Enough cash to carry out the ordinary course of business.
Speculative....Take advantage of temporary opportunities
Precautionary....Maintain a safety cushion so that unexpected needs are meet.

[Royal]

Cost of retained earnings (Kre), using the CAPM formula?

kre = krf + [bi x (km - krf)]

Risk Premium = bi x (km - krf)
PMR(The Market Risk Premium) = (km - krf)
bi = beta coefficient of the stock
Krf = risk free rate

[Royal]

Steps in batch processing:

Create transaction file
Update the master file

[Royal]

Phillips Curve


Relationship between unemployment and inflation.


As inflation rises, employment rises.


Curve breaks down with oil shocks (as seen in the 70's)

[Royal]

Some key changes from GAAP to IFRS


More fair value reporting under IFRS. For IFRS, if revenues can be reasonably estimated, it is included in income.

For IFRS, business combinations are easier as there are simpler rules and less exceptions.

Investments that include equity and debt will be reported differently under IFRS.

[Royal]

What are the basic transaction cycles?

Revenue
Expenditure
Production
Human Resources and payroll
Financing

[Royal]

What are some financial valuation methods?

Discounted Cash Flow (DCF)

Price Earnings (P/E)

PEG (Price/Earnings with a growth assumption)

Price Sales (Price/Sales)

[Royal]

ROI = Income / Investment Capital


ROI = Profit Margin (or Return on Sale) x Investment Turnover(Sales/Assets)

[Royal]

Define: Flexible Budget

A flexible budget is a budget that can be adjusted to any activity level; it shows how costs vary with production volume.

Budgeted total costs = (variable cost per unit x activity level) + fixed costs

Fixed costs in total are constant over the relevant range of activity level.