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Category: Level I
Inventory Methods: FIFO vs. LIFO vs. Average Cost vs. Specific Identification and Periodic vs. Perpetual
I apologize in advance: this article’s long. Every inventory method has two important characteristics: How will costs be assigned to cost of goods sold (COGS) and ending inventory (EI)? When will those costs be assigned to COGS and EI? There are four possible answers to the first question: First-in, first-out (FIFO) Last-in, first-out (LIFO) Average…
Time Value of Money: Using Timelines
Much of finance centers around the idea of the time value of money: a dollar (or euro, or yen, or pound, or yuan, or franc, or won, or ruble, or bhat, or rupee, or whatever) today is worth more than a dollar (or euro, or . . . well, you get the idea) tomorrow, because…
Hypothesis Testing
There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic Step 6: Make…
Hypothesis Testing – Synopsis
Hypothesis testing is essentially just an application of confidence intervals: we construct a confidence interval for a particular value, then compute a test statistic and check whether or not it lies in the confidence interval, then do something with that information. There are several steps to hypotheses testing, but in a nutshell it’s just checking…
Hypothesis Testing – Step 7: Make a (Business) Decision Based on the Results of the Test
There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic Step 6: Make…
Hypothesis Testing – Step 6: Make a Decision Regarding the Null and Alternative Hypotheses
There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic Step 6: Make…
Hypothesis Testing – Step 5: Collect the Sample Data and Calculate the Value of the Test Statistic
There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic (you are here)…
Hypothesis Testing – Step 4: State the Decision Rule for Testing the Null Hypothesis
There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis (you are here) Step 5: Collect the sample data and calculate the value of the test statistic…
Currency Exchange: Forward Discount/Premium
Suppose that the spot exchange rate between USD and GBP is USD/GBP 1.5814; i.e., USD 1.5814 = GBP 1.0. If the 1-year forward exchange rate is USD/GBP 1.5660 (so USD 1.5660 = GBP 1.0), then we say that the GBP is trading at a (one-year) forward discount (versus the USD): the forward price for GBP…
Hypothesis Testing – Step 3: Specify the Level of Significance
There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic Step 3: Specify the level of significance (you are here) Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic…