Intermediate Financial Management (China) - independent subject foundations cheat sheet

Contribution = sales − variable costs; profit = contribution − fixed costs

Break-even units = fixed costs ÷ contribution per unit

Relevant costs are future, incremental and differ between alternatives

Predetermined overhead rates use budgeted overheads and budgeted activity

Cash budgets exclude depreciation but include capital expenditure

Define incremental cash flows and the valuation date.

Discount rate, cash-flow timing and risk assumptions must be consistent.

NPV, IRR, payback and accounting return measure different things.

Expected value does not eliminate downside or estimation uncertainty.

Supplied model rates are not current market or tax facts.

Cost of sales includes carriage inwards and excludes carriage outwards

Closing inventory affects both the trading account and the balance sheet

Drawings reduce capital and are never an expense

An increase in the doubtful debts provision is charged to profit and loss

Capital = opening capital + net profit − drawings

Issued capital and actual cash received are different concepts.

Share premium in the supplied par-value model is not sales revenue.

Distinguish equity distributions from interest on liabilities.

Prime cost includes direct materials consumed, direct labour and direct expenses

Cost of production adds production overheads and adjusts for work in progress

Selling and administration costs are not production costs

Inventory is valued at the lower of cost and net realisable value