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7 Cards in this Set

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How do you determine the IRR?
compute the NPV at different %s, and see where its positive (or the highest)
How do you determine the accounting rate of return?
To determine the accounting rate of return, based on the project's average book value for the year, annual depreciation expense and the average book value for the year must be computed.

ARR on avg book value = (Net CF - Dep)/Avg Book Value
What is a flexible budget?
a budget based on many different levels of activity. It allows an easy comparison to be made between actual costs and costs that would have been budgeted at that particular level of activity.
What is the payback period? And what is the formula?
the period of time it takes for the cumulative sum of annual net cash inflows from a project to equal the initial cash outlay.

PBP = Initial Cash Outlay / Annual Net Cash inflows
What is the capital-employed turnover rate?
Capital-employed turnover rate = Sales/Invested capital
How do you compute residual income?
operating income of an investment center less an imputed interest charge on the invested capital used by the center.
How do you compute the ROI?
Profit margin on sales x Capital-employed turnover rate