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36 Cards in this Set
- Front
- Back
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When making decisions, managers should consider |
revenues that differ between alternatives |
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when companies are price setters, their products and services |
tend to be unique |
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in deciding whether to drop its electronics product line, smith co should consider |
- the costs it could save - the revenue it would lose - the affect it would have on other sales |
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in deciding which product lines to emphasize when a production constraint exsits, kitchenware.com should focus on the product line that has the highest |
contribution margin per unit of the constraining factor |
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when deciding whether to sell as is or process a product further, managers should ignore |
the costs of processing the product thus far |
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the following method does not consider the investments profitablity |
payback |
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your rich aunt has promised to give you $2000 a year at the end of each of the next four years to help you pay for college. using a discount rate of %12 the present value of the gift can be stated as |
PV= $2000 (Annuity PV factor, I=12%, n=4) |
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companies should always choose the investment with the...
- the highsest ARR - shortest payback - highest NPV
TRUE OR FALSE regarding capital rationing decisions?
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false |
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the interest rate at which the NPV of the investment is zero |
IRR |
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which analysis involves a percentage increase or decrease in the item? |
horizontal analysis |
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which analysis involves a percentage of an item? |
vertical |
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inventory turnover formula |
cogs / avg merchandise inventory |
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days sales in inventory formula |
365 days/inventory turnover
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gross profit percentage |
gross profit/net sales revenue
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accounts recivebale ratio |
net credit sales/ avg net accts recievable <(beg+end ar)/2> |
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days sales in average recieveables |
365/accts receivable turnover ratio |
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acid-test(quick) ratio |
cash + short term investmnts + net current recvbls/ total current liabs |
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cash ratio |
cash + cash equivalents (money market or us securities)/ total current liabs |
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current ratio |
total current assets/ total current liabilities |
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avg annual operating income |
total net cash inflow - less total depreciation = total op inc during op life/ op years = avg annual op income
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average amount invested |
(amount invested + residual value) /2 |
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ARR |
(average rate of return)
avg annual op income/avg amount invested |
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in making short term special decisions you should |
separate variable from fixed costs |
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what is relevant to kitchenware.com's decision to accept a special order at a lower sale price from a large customer in china |
the cost of shipping the order to the customer |
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costs that are irrelevant to business decisions |
sunk costs |
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when pricing a product or service, managers consider |
- period costs - manufacturing costs - variable costs |
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when making outsourcing decisions |
the variable cost of producing in-house is relevant |
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what is the first step in capital budgeting |
identifying potential projects |
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affects the present value of an investment |
- the type of investment - the number of time periods - the interest rate |
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irrelevant IRR factor |
depreciation |
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the most reliable method for making capital budgeting decisions |
NPV method |
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what part of the annual report is written by the company and could present a biased view of financial conditions and results |
managements discussion and analysis (MD&A) |
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times-interest-earned ratio |
net income + income tax expense + interest expense/ interest expense |
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rate of return on common stockholders equity |
net income - preferred dividends/ avg common stockholders equity |
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earnings per share |
net income - preferred dividends/ weighted avg number of common shares outstanding |
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an item for the extraordinary items section must be |
unusual and infrequent |
