KASNEB CS13 flashcards
KASNEB CS13 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Accounting equation
- Assets equal liabilities plus capital. Every transaction keeps this equality intact, so the statement of financial position always balances.
- Accrual concept
- Revenue is recognised when earned and expenses when incurred, regardless of when cash is received or paid. It underpins matching of costs with income.
- Depreciation straight-line method
- Annual charge equals cost less residual value, divided by useful life. The same amount is charged each year over the asset's life.
- Suspense account
- A temporary account used to hold the difference when a trial balance does not balance. It is cleared once the underlying error is found and corrected.
- Lower of cost and NRV
- Inventory is carried at the lower of cost and net realisable value under IAS 2, ensuring assets are not overstated where selling value has fallen.
- Net present value
- The sum of future cash flows discounted to present value, minus the initial outlay. A positive NPV means the project adds value.
- Internal rate of return
- The discount rate at which a project's net present value equals zero. A project is acceptable when its IRR exceeds the cost of capital.
- Weighted average cost of capital
- The blended cost of equity and after-tax debt, weighted by their proportions in the capital structure. It is the hurdle rate for new investments.
- Capital asset pricing model
- Cost of equity equals the risk-free rate plus beta multiplied by the market risk premium. Beta captures systematic risk relative to the market.
- Payback period
- The time taken for cumulative cash inflows to recover the initial investment. It ignores cash flows arising after the payback point.
- Profitability index
- Present value of future cash flows divided by the initial investment. A value above one indicates a project with positive net present value.
- Five Cs of credit
- Character, capacity, capital, collateral and conditions. Lenders assess these borrower attributes when evaluating a credit application.
- Quick ratio
- Current assets excluding inventory, divided by current liabilities. It tests short-term liquidity without relying on selling stock.
- Interest cover
- Earnings before interest and tax divided by interest expense. A low multiple shows weak capacity to service debt obligations.
- Cost of foregoing discount
- Discount rate divided by one minus the discount, multiplied by 365 over the extra credit days. It measures the annual cost of not taking a cash discount.
- Loan-to-value ratio
- Loan amount divided by the value of the collateral securing it. A higher ratio means greater lender exposure if values fall.
- Credit concentration risk
- Exposure clustered in a single borrower, sector or region, so one adverse event could cause disproportionate losses to the lender.
- Agency problem
- Managers acting as agents may pursue personal interests rather than those of shareholders. Monitoring, incentives and disclosure reduce this divergence.
- Separation of chair and CEO
- The board chair should not also be chief executive, preventing concentration of power and strengthening independent oversight of management.
- Audit committee role
- A board committee of independent non-executive directors overseeing external audit, internal controls and financial reporting integrity.
- Three lines model
- Operational management owns risk, risk and compliance functions provide oversight, and internal audit gives independent assurance to the board.
- Span of control
- The number of subordinates reporting to one manager. Narrow spans allow closer supervision; wide spans reduce cost but require more delegation.
- COSO control components
- Control environment, risk assessment, control activities, information and communication, and monitoring. Together they frame an entity's internal control system.
- CIA triad
- Confidentiality, integrity and availability. These three objectives guide the design of information security controls in organisations.
- Segregation of duties
- No single person should initiate, authorise and record a transaction. Splitting duties reduces the risk of error and fraud.
- Application controls
- Controls within a software application covering input, processing and output, such as validation checks and control totals over transactions.
- Phishing
- A social-engineering attack using deceptive messages to trick users into revealing credentials or clicking malicious links.
- 3-2-1 backup rule
- Keep three copies of data, on two different media types, with one copy stored off-site to survive local disasters.
- Contract essentials
- Offer, acceptance, consideration, intention to create legal relations and capacity. All are generally required for a binding contract.
- Separate legal personality
- A registered company is a legal person distinct from its members, so shareholders' liability is limited to amounts unpaid on their shares.
- Break-even quantity
- Fixed costs divided by contribution per unit, where contribution is selling price less variable cost per unit. It is the volume at which profit is zero.
- Price elasticity of demand
- Percentage change in quantity demanded divided by percentage change in price. Demand is elastic when the absolute value exceeds one.