If you’re running out of time and need to cram for your BEC test, don’t panic. To use your time effectively, you need a plan to reinforce as many important test concepts as you can. Think of your test as a checklist, and your study plan as a way to check off as many items on the checklist as possible. Use these tips to cram for the BEC test.
The business environment and concepts (BEC) test includes a broad range of general business topics, including corporate governance, economic topics, and business management questions. If you’re short on time, make sure that you’re clear about these frequently tested concepts.
This test includes many questions about corporate governance, and there are two key themes that run through many of the questions. First, does the question present a conflict of interest? If it does, there is probably an issue with independence, which means that a CPA cannot perform most types of accounting work for the client. Another theme regarding corporate governance is segregation of duties. Does the question expose the company to possible fraud of theft? If so, there’s an internal control that needs to be improved.
Capitalization, liquidity, solvency
Many business management questions focus on capitalization, liquidity, and solvency. If you understand these three concepts, you’ll have more success on the test. Keep in mind that there are only two ways a company can raise capital: selling ownership by issuing stock (equity), or taking on debt. Yes, there are certainly different versions of both methods, but it all boils down to stock or debt.
Your test will also include financial ratio analysis, and the ratios can be grouped into two categories. Liquidity ratios refer to a company’s ability to generate enough cash inflows in the short term to cover required cash outflows. When you think about liquidity, visualize the company checkbook, because the focus is on the short-term. Solvency ratios, on the other hand, analyze the long-term viability of a company. Can a manufacturing firm, for example, afford to purchase a $2 million machine in three years? That’s a solvency question. As you go over financial ratios, group the liquidity and solvency ratios together.
Many CPA candidates throw up their hands when it comes to essay questions since most accountants do not consider themselves to be writers. However, CPAs need to be competent writers because they need to communicate accounting information in emails, memos, and presentations. The challenge for many candidates is to organize their thoughts, and that requires you to write an outline. As I write this blog post, I’m looking at an outline that I wrote on a yellow legal pad. Don’t skip this step, thinking that you can save time. Creating an online saves time, and you’ll write an essay that is easier for a reviewer to read. Try outlining a few essays and show your work to a friend who is a writer. They can help you learn this skill.
You can pass this test with some proper planning. Use these tips to cram for the BEC test and give yourself some peace of mind.