ACC exam prep

Card Set Information

ACC exam prep
2015-06-08 07:30:46
accounting things to revise
Show Answers:

  1. If a liability meets the definition but not the criteria what should it be treated as?
    A note
  2. What is DuPonts formula?
    Return on assets= net profit margin x Asset turnover (sales turnover)
  3. How to calculate intrinsic value for shares
    Share dividend divided by (rates return x rate)
  4. Define and provide examples for business and financial risks
    • Business risk: risk associated with the unique circumstances of a particular company
    • Eg. a mining company (BHP) impacted by the change in the market price for ore
    • Financial Risk: risk associated with company's use of debt financing
    • Eg. the higher level of debt in a company means higher interest payments and the possibility of less cash being available for distribution to share holders
  5. Distinguish between the two main types of investors
    • Individual investors: invest on their own behalf
    • Institutional investors: invest on the behalf of others
    • They usually trade in much larger amounts than individual investors and have a wider range of securities available to invest in
    • Generally accepted that on average, institutional investors are more skilled and as a result, they profit at the expense of individual investors
  6. What are the 2 main types of securities?
    • Financial security: a financial instrument that is traded in the secondary financial market (investors to other investors)
    • Debt securities: no ownership rights. Traded both in the money market (Less than 1year maturity eg. bills or notes) and capital market (more than 1 year maturity eg. debentures). Definite maturity date

    • Equity securities: confer ownership rights and are assumed to have an indefinite maturity date. Traded in capital market only
    • eg. ordinary or preference share
  7. What is 'relevant range'?
    A specific activity level bounded by a maximum and a minimum amount. Within these boundaries, certain revenue or cost levels can be expected to occur
  8. What is corporate governance?
    • The system of rules, practices and processes by which a company is directed or controlled. This can be applied to any business.
    • Involves: remunerating fairly, promote ethical and responsible decision making, recognise and manage risk, safeguard integrity in financial reporting and make timely and balanced disclosure