Wiley_CPAexcel Exam Review 2015 Focus Notes_Business Environment and Concepts

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Asset Utilization RatiosReceivable Turnover = Net credit sales / Average accounts receivable Average accounts receivable (A/R) = (Beginning A/R + Ending A/R) / 2 Remember to use net credit sales, not net salesReceivables Collection Period = Average accounts receivable / Average credit sales per day Use 365-day year unless told otherwiseInventory Turnover = Cost of goods sold / Average inventory Remember to use cost of goods sold, not salesInventory Conversion Period = Average inventory / Average cost of goods sold per dayFixed Asset Turnover = Sales / Average net fixed assets Remember that net fixed assets is after subtraction of accumulated depreciationTotal Asset Turnover = Sales / Average total assetsFocus onPerformance Measures and Management Techniques—Module 45 128
Liquidity RatiosCurrent Ratio = Current assets / Current liabilitiesQuick (or Acid Test) Ratio = Quick assets / Current liabilities Quick assets = Cash + Marketable securities + Accounts receivableDebt Utilization RatiosDebt to Total Assets = Total liabilities / Total assetsDebt to Equity Ratio = Total debt / Total equityTimes Interest Earned Ratio = Earnings before interest and taxes / Interest expenseFocus onPerformance Measures and Management Techniques—Module 45 129
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2015WileyCPAexcel®EXAM REVIEWFOCUS
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Cover Design by WileyCover image:
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PREFACEThis publication is a compre
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ABOUT THE AUTHORRay Whittington, Ph
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Incentives to Defeat Agency Problem
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Incentives to Defeat Agency Problem
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Internal ControlsCOSO: Internal Con
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Internal Controls (continued)
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Internal Controls (continued)
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Enterprise Risk Management: Eight C
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Enterprise Risk Management: Limitat
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Benefits of ITConsistency—Compute
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Systems Design and Process Improvem
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HardwareHardware is the actual elec
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Storage DevicesMagnetic tape—Inex
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SoftwareSoftware is either system s
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Types of Computer SystemsTransactio
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Electronic CommerceElectronic comme
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NetworksIn a computer network, comp
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The Internet (continued)To make use
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Networks and Control RiskTo minimiz
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Control Objectives for Information
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Organization in a Segregated Depart
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Other Technical ServicesOther techn
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General ControlsGeneral controls en
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Application ControlsApplication con
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Edit TestsEdit tests scrutinize dat
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Output ControlsOutput controls ensu
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Controls Over MicrocomputersMicroco
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ECONOMIC CONCEPTSDemand CurveAs the
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Positive Demand Curve ShiftCertain
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Elasticity of DemandPrice Elasticit
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Supply CurveAs the price of a produ
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Factors Causing a Supply Curve Shif
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Short-Run Costs of ProductionOver s
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Measures of Economic ActivityGross
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Measuring Price InflationThere are
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Cost-Push InflationWhen production
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Business CycleExpansion—Periods o
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UnemploymentThe unemployment rate i
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Government Involvement in the Econo
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Obstacles to Free TradeFree trade i
Page 90 and 91: Foreign Exchange RatesThe value of
Page 92 and 93: Expected ReturnsFINANCIAL RISK MANA
Page 94 and 95: Standard DeviationThe most common m
Page 96 and 97: Portfolio RiskThe SD of a portfolio
Page 98 and 99: Yield CurveThe interest rate charge
Page 100 and 101: Risks Associated with DerivativesDe
Page 102 and 103: Valuing DerivativesFor derivatives
Page 104 and 105: CAPITAL BUDGETINGUsed to evaluate c
Page 106 and 107: Accounting Rate of ReturnIncrease i
Page 108 and 109: Net Present ValueAfter-tax net cash
Page 110 and 111: Relevant CostingIncrease or decreas
Page 112 and 113: Working Capital ManagementInventory
Page 114 and 115: Marketable SecuritiesTo maximize ea
Page 116 and 117: Inventory ManagementEconomic Order
Page 118 and 119: Just-in-Time (JIT) PurchasingCosts
Page 120 and 121: Receivables ManagementA company set
Page 122 and 123: Debt CovenantsBorrowers often must
Page 124 and 125: Provisions Affecting Repayment of B
Page 126 and 127: Variations on Bond InterestZero-cou
Page 128 and 129: Preferred StockPreferred stock shar
Page 130 and 131: Cost of CapitalDebt—The cost of d
Page 132 and 133: MergersHorizontal merger—When a f
Page 134 and 135: PERFORMANCE MEASURES ANDMANAGEMENT
Page 136 and 137: Value-Based ManagementReturn on Inv
Page 138 and 139: Business Process Management: Focus
Page 142 and 143: Market RatiosPrice/Earnings (PE) Ra
Page 144 and 145: Quality ControlISO Quality Standard
Page 146 and 147: Cost of Quality (continued)3. Inter
Page 148 and 149: Project Management (continued)Effec
Page 150 and 151: Project Management (continued)3. Pr
Page 152 and 153: Cost Classifications (continued)Var
Page 154 and 155: Manufacturing Overhead1. Calculate
Page 156 and 157: Job Order CostingUsed when units ar
Page 158 and 159: Process Costing (continued)Process
Page 160 and 161: Process Costing (continued)4. Costs
Page 162 and 163: Activity Based Costing (ABC)Method
Page 164 and 165: Cost EstimationCalculating Total Co
Page 166 and 167: Regression AnalysisCoefficient of c
Page 168 and 169: PLANNING, CONTROL, AND ANALYSISFlex
Page 170 and 171: Preparing a Master Budget1. Estimat
Page 172 and 173: Standard CostingMaterial VariancesS
Page 174 and 175: Standard Costing (continued)Overhea
Page 176 and 177: Transfer PricingTransfer price—pr
Page 178 and 179: Graphical Approach to Breakeven$FCO
Page 180 and 181: Joint Product Costing (continued)Al
Page 182 and 183: Product and Service PricingFactors
Page 184 and 185: Costing Methods, 141Cost-push infla
Page 186 and 187: Performance Measures, 122Planning,
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Wiley_CPAexcel Exam Review 2015 Focus Notes_Business Environment and Concepts

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