CFCM A+ Graded End Term Exam: Final FAR-Based
Certification Assessment
capital budgeting - ✔✔the whole process of analyzing projects and deciding whether they should be
included in the planned expenditures on fixed assets
what are some types of real options? - ✔✔(1) investment timing options, (2) growth options, (3)
abandonment options, (4) flexibility options
real options - ✔✔exist when managers can influence the size and risk of a project's cash flows by taking
different actions during the project's life in response to changing market conditions
what 3 types of risk are relevant in capital budgeting? - ✔✔(1) stand alone risk, (2) corporate risk, (3)
market [beta] risk
steps in capital budgeting - ✔✔(1) estimate cash flows, (2) assess risk of cash flows, (3) determine r
[WACC], (4) evaluate cash flows
THE DUPONT EQUATION - ✔✔(1) ROA = [NY/SALES] [SALES/TA] = NY/TA
(2) ROE = [NY/TA] [TA/EQUITY] = NY/EQUITY
components of risk - ✔✔(1) default risk, (2) maturity risk premium, (3) liquidity premium
why would a company have a target capital structure? - ✔✔recognize debt is cheaper, but too much
debt increases cost of debt, which increases default risk and looks bad
efficient frontier - ✔✔the set of optimal portfolios that offers the highest expected return for a defined
level of risk or the lowest risk for a expected level of return
WACC (definition) - ✔✔the weighted average of the after-tax components cost of capital -- debt,
preferred stock, and common equity
,byproduct - ✔✔a product of relatively small total value produced simultaneously with a product of
greater total value
methods of byproduct costing - ✔✔(1) byproducts could be valued at the split-off point at their net
realizable value
(2) none of the common costs is assigned to the byproducts
job costing vs. process costing - ✔✔- job costing is used for unique products, process costing is for
standardized
- job costing is for small production runs, process costing for large production runs
- job costing is more likely to be used for billing to customers
activity based costing (ABC) - ✔✔firm assigns costs to the activities that are the real cause of the
overhead, then assigns the costs of those activities only to the products that are actually demanding the
activities
absorption vs. variable costing - ✔✔absorption includes all costs, including fixed costs, in figuring the
cost of production, while variable costing only includes the variable costs related to production
UNITS FOR TARGET PROFIT = - ✔✔X = (TFC/[UP-UVC]) + TP
cost behavior - ✔✔the change in total costs in response to the change in some activity
- costs that vary proportionately with the changes in the level of activity are variable costs, unaffected
are fixed costs
options for transfer pricing (4) - ✔✔(1) market based, (2) variable-cost, (3) full-cost, (4) negotiated
TOTAL COST - ✔✔TC = UVC(UNITS) + TFC
BREAK EVEN POINT = - ✔✔BEP = TFC/(UP - UVC) or... TFC/UCM
, variance analysis - ✔✔the quantitative investigation of the difference between actual and planned
behavior
cash budget - ✔✔financial budget prepared to calculate the budgeted cash inflows and outflows during
a period and the budgeted cash balance at the end of the period
3 ways to analyze sell-or-process further - ✔✔(1) incremental (or differential), (2) opportunity cost, (3)
total project approach
sell-or-process further - ✔✔whether to sell a joint product at split-off point or to process it further and
sell it in a more refined form
special orders - ✔✔a one-time customer order, often involving a large quality and a low price
theory of constraints (TOC) - ✔✔a management paradigm that views any manageable system as being
limited in achieving more of its goals by a very small number of constraints
leadership - ✔✔the process by which an individual exerts influence over other people and inspires,
motivates, and directs them their activities
key elements of leadership - ✔✔(1) Influence (2) Organizational Objectives (3) People (4) (4) Change (5)
Leaders-Followers
are all leaders managers? - ✔✔(1) Manager= formal title and authority (2) Leader= person (manager or
non-manager with influence (3) Follower= person influenced by a leader
the four leadership theory: - ✔✔(1) Trait (2) Behavioral (3) Integrative (4) Contingency
teams - ✔✔a. Leads to desirable performance improvements, most of the time
b. Have a sense of shared mission
Certification Assessment
capital budgeting - ✔✔the whole process of analyzing projects and deciding whether they should be
included in the planned expenditures on fixed assets
what are some types of real options? - ✔✔(1) investment timing options, (2) growth options, (3)
abandonment options, (4) flexibility options
real options - ✔✔exist when managers can influence the size and risk of a project's cash flows by taking
different actions during the project's life in response to changing market conditions
what 3 types of risk are relevant in capital budgeting? - ✔✔(1) stand alone risk, (2) corporate risk, (3)
market [beta] risk
steps in capital budgeting - ✔✔(1) estimate cash flows, (2) assess risk of cash flows, (3) determine r
[WACC], (4) evaluate cash flows
THE DUPONT EQUATION - ✔✔(1) ROA = [NY/SALES] [SALES/TA] = NY/TA
(2) ROE = [NY/TA] [TA/EQUITY] = NY/EQUITY
components of risk - ✔✔(1) default risk, (2) maturity risk premium, (3) liquidity premium
why would a company have a target capital structure? - ✔✔recognize debt is cheaper, but too much
debt increases cost of debt, which increases default risk and looks bad
efficient frontier - ✔✔the set of optimal portfolios that offers the highest expected return for a defined
level of risk or the lowest risk for a expected level of return
WACC (definition) - ✔✔the weighted average of the after-tax components cost of capital -- debt,
preferred stock, and common equity
,byproduct - ✔✔a product of relatively small total value produced simultaneously with a product of
greater total value
methods of byproduct costing - ✔✔(1) byproducts could be valued at the split-off point at their net
realizable value
(2) none of the common costs is assigned to the byproducts
job costing vs. process costing - ✔✔- job costing is used for unique products, process costing is for
standardized
- job costing is for small production runs, process costing for large production runs
- job costing is more likely to be used for billing to customers
activity based costing (ABC) - ✔✔firm assigns costs to the activities that are the real cause of the
overhead, then assigns the costs of those activities only to the products that are actually demanding the
activities
absorption vs. variable costing - ✔✔absorption includes all costs, including fixed costs, in figuring the
cost of production, while variable costing only includes the variable costs related to production
UNITS FOR TARGET PROFIT = - ✔✔X = (TFC/[UP-UVC]) + TP
cost behavior - ✔✔the change in total costs in response to the change in some activity
- costs that vary proportionately with the changes in the level of activity are variable costs, unaffected
are fixed costs
options for transfer pricing (4) - ✔✔(1) market based, (2) variable-cost, (3) full-cost, (4) negotiated
TOTAL COST - ✔✔TC = UVC(UNITS) + TFC
BREAK EVEN POINT = - ✔✔BEP = TFC/(UP - UVC) or... TFC/UCM
, variance analysis - ✔✔the quantitative investigation of the difference between actual and planned
behavior
cash budget - ✔✔financial budget prepared to calculate the budgeted cash inflows and outflows during
a period and the budgeted cash balance at the end of the period
3 ways to analyze sell-or-process further - ✔✔(1) incremental (or differential), (2) opportunity cost, (3)
total project approach
sell-or-process further - ✔✔whether to sell a joint product at split-off point or to process it further and
sell it in a more refined form
special orders - ✔✔a one-time customer order, often involving a large quality and a low price
theory of constraints (TOC) - ✔✔a management paradigm that views any manageable system as being
limited in achieving more of its goals by a very small number of constraints
leadership - ✔✔the process by which an individual exerts influence over other people and inspires,
motivates, and directs them their activities
key elements of leadership - ✔✔(1) Influence (2) Organizational Objectives (3) People (4) (4) Change (5)
Leaders-Followers
are all leaders managers? - ✔✔(1) Manager= formal title and authority (2) Leader= person (manager or
non-manager with influence (3) Follower= person influenced by a leader
the four leadership theory: - ✔✔(1) Trait (2) Behavioral (3) Integrative (4) Contingency
teams - ✔✔a. Leads to desirable performance improvements, most of the time
b. Have a sense of shared mission
