compounded interest =
principal * (1+int rate/pers)^pers
req rate of return =
real rate of return
+ inflation prem
= nom rate of return
+ INTEREST RATE risk prem
+ LIQUIDITY risk prem
+ DEFAULT RISK prem
= req rate of return
put vs call option
put = strike price - prem
call = strike price + prem
AR - put option
AP - call option
AR - you want a contract to SELL foreign currency
AP - you want a contract to BUY foreign currency
when hedging...
always multiple int rate * days/360 <-- usually 90
with no excess cash, borrow at additional cost
= US int rate x days/360 x $ needed
and add to $ needed
discounted cash flow retained earnings calc =
div next yr/price now + growth rate
bond yield risk prem retained earnings calc =
pretax cost of LT Debt + market risk prem
growth rate =
(1 - payout) * NI/Eq <-- ROE
operating leverage =
% change in EBIT/% change in sales
financial leverage =
total assets/total equity
reorder point =
safety stock + (lead time * sales during lead time)
economic order quantity =
sqrroot{(2 x sales units x cost per purchase order)/carry cost per unit}
factoring receivables
AR avg x % fee x days in yr/days in per = a
AR avg - % withheld = subj to interest
subj to interest x annual%/12 x days in yr/days in per = b
a + b - % withheld = net cost
net cost/subj to interest = % APR
price of stock =
dividend/req return
Discounted Dividend Model to find price of stock =
div next yr/(req return - growth rate)
PEG ratio
(price now/eps next yr)/(growth rate*100)
total factor productivity TFP
q output/cost of all inputs $
partial productivity ratio PPR
Q output/q specific input
control chart purpose =
to compare actual results to acceptable range and show a trend
pareto diagram purpose =
frequency of defects from highest to lowest
fishbone diagram =
cause and effect relationship between sector and the defect
machinery, method, manpower, materials
consumer price index =
(current price of market basket/base yr cost of market basket) * 100
inflation rate =
[(CPIcurr-CPIprev)/CPIprev] * 100
elasticity =
%change in q/%change in price
cross elasticity =
% change in units of x/% change in price of y
income elasticity =
% change in number of units/% change in income
market cap =
curr share price * # shares
value of equity using p/e =
NI * P/E multiple
debt to total capital =
total debt/(total long term debt+SE)
*
include current portion of LTD
*
interest burden =
EBT/EBIT <-- Earnings without taxes/earnings without INTEREST and taxes
tax burden =
NI/EBT <-- overall net income/earnings before taxes!
asset turnover =
sales/total assets
ROI =
NI/inv capital
or NI/sales * Sales/inv capital
dupont ROE =
profit margin x asset turnover x financial leverage
NI/sales x sales/assets x asset/equity
extended dupont =
tax burden x int burden x EBIT margin x asset turnover x financial leverage
(NI/pretax income) x (pretax income/EBIT) x (EBIT/Sales) x (sales/assets) x (assets/equity)
residual income =
NI - (NBV equity * hurdle rate)
economic value added =
net op profit after taxes - (inv * WACC)
operating cash flow =
cash flow from ops/
CURRENT LIABILITIES
working capital turnover =
sales/avg WC
ROE =
(NI-preferred divs)/avg se
real gdp =
nominal GDP/GDP deflator * 100
change in real GDP =
multiplier * change in spending
multiplier = 1/(1-MPC)
1-mpc=mps
GDP calc expenditure approach =
Govt purchases
Investment
Consumption
Exports-imports
GDP calc income approach =
Income of proprietors
Profits of corps
Interest (net)
Rental income
taxes
Employee comp
Deprec
Adj for net foreign income/misc
3 objectives of internal control =
operating
reporting
compliance
ORC
COSO framework and principles
1) control environment - EBOCA <-- Financial reporting competencies, HR, org structure
-ethics and integrity commitment
-board independence and oversight
-org structure
-commitment to competence
-accountability
2) risk assessment - SAFR
-specify objective
enterprise risk management =
culture capabilities, practices, and integration with strategy setting performance that orgs rely on to manage risk in creating, preserving, and realizing value
components of ERM and principles
1) governance and culture - doves
-desired culture
-oversight of board
-value commitment
-employee-develp/retain
-structure-operating
2) strategy and objective setting - SOAR
-strategies = evaluate alternative
-objectives of business
-Analyze business con
redesign of product, redesign of processes, search for higher quality suppliers are.... ___ costs
prevention
scrap is a ____ cost
internal failure
downtime is a ____ cost
internal failure
warranty costs are ____ costs
external failure
theory of constraint test =
1. identify constraint
2. exploit it
3. put fixing constraints 1st
4. elevate constraint (add capacity to overcome)
5. re examine process to optimize results
internal constraints include...
-inefficient equipment
-inefficient personnel
-inefficient policies
external constraints include...
the system produces more than the market requires
reasons for having cash on hand...
1) transaction motive
2) precautionary motive
3) speculative motive
working capital mgmt =
financing each asset w/ a financial instrument of same approx maturity
compensating balances =
formal agreement with banks or financial institutions to maintain account balances at specific amounts for reduced fees
deferral of pmt to creditors =
trade credit
Change Control System
a formal, documented process that describes when and how official project documents may be changed
to help authorize and monitor changes related to info technology, including software implementation, development, etc.
scope issues can be minimized
forward contract for ____ amounts
for significant amounts
Balanced Scorecard
a combination of performance measures directed toward the company's long and short term goals and used as the basis for awarding incentive pay
1) learning and growth - how support employees knowledge and growth, retain and sustain employees
2) customer sa
liquidity ratios
-working capital
-current ratio
-quick ratio
-cash conversion cycle
-cash ratio
solvency ratios
-debt ratio
-debt to equity
-debt to capital
-time int earned
-equity multiplier
profitability ratios
-net profit margin
-gross profit margin
-op profit margin
-ROA
-ROE
-EPS
-return on capital employed
-P/e
-p/b
-div payout
-retention
-div yield
activity ratios
-inv turnover
-days sales in inv
-receivables turnover
-days sales outstand
-payables turnover
-days payable outstanding
-fixed asset turnover
-working capital turnover
coverage ratios
supplementary to solvency and liquidity ratios like
-debt coverage
-time int earned
profitability index =
PV of net future cash inflow * 100 / PV of net initial investment
pick the largest first
total quality management factors
1. customer focus
2. continuous improvement
3. workforce involvement
4. top mgmt support
5. objective measures
6. timely recognition
7. ongoing training
kaizen
Japanese term for continuous improvement
occurs at manu stage where ongoing search for cost reductions takes the form of analysis
theory of constraints
A management approach that emphasizes the importance of managing constraints in order to achieve goals
six sigma
a
rigorous
statistical analysis process that reduces defects in manufacturing and service-related processes
for both existing products and new
5 areas of focus of IT governance
1. strategic alignment
2. value delivery
3. resource mgmt
4. risk mgmgt
5. performance measures (balanced scorecard)
SVRRP
categorize resources by impact
high impact = can't operate w/o, high recovery cost
med impact = some cost of recover, could work around
low impact = can operate w/o for a long per of time, inconvenience
categorize risks by likelihood
high likely = highly motivated threat source, sufficiently capable, controls are ineffective
medium likely = source motivated and capable, controls may help but not fully make it go away
low likely = source lacks motivation and capability, controls can pr
4 Vs of big data
1. volume = too lg for traditional database software
2. velocity = flow of data is continuous
3. variety = variety of sources
4. veracity = biases or irrelevant data must be mined from big data in order to minimize the chance of making decisions based on
mgmt information system
enables companies to use data as part of strategic planning processes
provides users with predefined reports that support effective business decisions
mgmt info systems have subsystems called decisions support systems and executive info systems
decisions support system
computer software systems designed to help managers solve problems by showing how results vary when the manager alters assumptions or data
sometimes called an expert system
executive information system
Provides senior executives with immediate and easy
access to internal and external information
to assist in
strategic decision making
accounting information systems
A system that collects, records, stores, and processes data to produce information for decision makers. It includes people, procedures and instructions, data, software, information technology infrastructure, and internal controls and security measures.
enterprise resource planning system
a cross-functional enterprise system that
integrates and automates
the many business processes and systems that must work together in the manufacturing, logistics, distribution, accounting, project mgmt, finance, and hr functions of business
does not offe
Infrastructure as a Service (IaaS)
outsources storage, hardware, services, and networking components to customers, generally on a per-use basis. Ex) amazon, microsoft, google
Platform as a Service (PaaS)
Allows customers to rent virtual servers and related services that can be used to develop and test new software applications
Software as a Service (SaaS)
A method of delivering software in which a vendor hosts the applications and provides them as a service to customers over a network, typically the Internet.
also known as an application service provider
ex) salesforce.com
types of technology risk
1. strategic risk = risk of choosing wrong technology
2. operating risk = risk of doing right things wrong way
3. financial risk = risk of having financial resources lost, wasted, or stolen
4. information risk = risk of loss of data integrity, incomplete
ISACA categories of IT risk
1.
it benefit/value enablement risk
= risk that you missed out on opportunities
2.
it program and project delivery risk
= you engage in IT but it isn't what you hoped
3.
IT operations and service delivery risk
= everything that can go wrong with IT's actu
types of IT Tests
1. unit tests = test the smallest components of the system
2. integration tests = exercise entire subsystem
bottoms up (begins w/ unit and up)
top down (begins w/ top to unit)
3. validation tests = did we build this right ?
4. acceptance tests = conducted
value chain analysis
1. Identify value activities
2. identify cost drivers associated with each activity
3. develop a competitive advantage by reducing cost or adding value
4. exploit linkages among activities in the value chain
types of business combinations
1. horizontal combo = buy out another in your business, ECONOMIES OF SCALE
2. vertical combo = up/down supply chain acquisition
3. circular combo = diff units with relatively remote connections come together
4. diagonal combo = integrate w/ a company who
how companies combine...
1. merger = A+B=C new corp
2. acquisition = A+B=A
3. tender offer = made directly to shareholders to buy outstanding shares of another at specified price, needs
shareholder approval
4. purchase of assets = a portion/all of the selling company's assets are
divestiture types...
1. sell off = outright sale of subsidiary (ex: the subs competencies don't align w/ core company)
2. spin off = creates new independent company by separating sub from parent. typically occur when unit is less profitable or unrelated to core parent busines
leading indicators
-avg new unemploy claims
-building permits for residences
-avg length of workweek
-money supply 2
-S&P 500
-orders for goods
-price changes of materials
-index of consumer expectations
-int rate spread
-index of supply deliveries
lagging indicators
-prime rate charged by banks
-avg duration of unemployment
-comercial and industrial loans outstand
-consumer price index for services
-consumer debt to income ratio
-changes in labor cost per unit of manu output
-inventories to sales ratio
coincident indicators
-industrial production
-manu and trade sales
-industrial production (GDP)
-personal income less transfer pmts
money supply classifications
M1 = coins, currency, checkable deposits, travelers checks
not CDs or savings accounts
M2 = CDs less than 100,000, money market deposit accounts at banks, mutual funds, savings accts
M3 = CDs greater than 100,000
step-down method ABC costing
divide total costs of dept by total division hours for specific dept
multiply the number of appraisals done for other depts by the unit cost/appraisal just calculated
add this new total into the total costs for the other dept and divide by total division
learning curve calculation =
for two products:
time for 1 prod * % = new
new*2 = total for 2
for four products:
new * % = newer
newer * 4 = total for 4
for eight products:
newer * % = newest
newest * 8 = total for 8
Kanban system
a production control approach that uses containers, cards, or visual cues to control the production and movement of goods through the supply chain
like just in time system
general controls vs. application controls
general controls = designed to ensure that an orgs control environment is stable and well managed
application controls = prevent, detect, and correct transaction error and fraud
zero balance test
a processing control that verifies that the balance of a control account equals zero after all entries to it have been made