Instructions:

• Answer 50 questions in 15 minutes.
• If you are not ready to take this test, you can study here.
• Match each statement with the correct term.
• Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. LLC (Limited Liability Corporation)

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2. Tools used for Technical Analysis
NYSE
Moving Average; Cash positions of funds; Amount of short selling
Cash flow to creditors
Cash flow from assets


3. EBIT
Way to maintain liquidity while waiting for an anticipated inflow of cash
Senior secured; Senior unsecured - Senior Subordinated - Subordinated
Earnings before interest and taxes
Holder can exchange bond for common stock according to the conversion ratio


4. Types of Finance
Senior secured; Senior unsecured - Senior Subordinated - Subordinated
Technical
Government; Personal; Corporate
Movement of Interest Rate; Credit Risk; Features of the bonds. FYI - Long Term Bonds have more price risk


5. The coupon rate of a bond is based off...
NYSE
Security; Seniority; Features (putable bond)
holds that: you cannot get superior returns from Technical Analysis; Fundamental analysis could beat the market
equal payments used by financial intermediaries to make regular payments to recipients (pensioners)


6. GAAP (Generally Accepted Accounting Principles)
Make no periodic interest payments - Yield comes from the difference between purchase price and par value
Over the counter
The process of planning and managing a firm's long-term investments
The common set of standards and procedures by which audited financial statements are prepared


7. What incentives to managers in large corporations have to maximize share value?
Difference between a firm's current assets and its current liabilities``
Unexpected information; Information that effects the risk or return of an asset
Assets pledged as Collateral for non-payment of debt (collateral)
Managers in large corporations have incentive to maximize share value because their compensation is often tied to stock value - and prospects for promotion are tied to performance (or they could be replaced if stock price flounders)


8. Securitization
Expressed on balance sheet but generally not what the assets are worth. market value is the true value of a firm's worth. standard accounting principles focus on historical costs bc they can be precisely measured where market is difficult to estimate
Holder can exchange bond for common stock according to the conversion ratio
Where a corporate entity moves assets to a bankruptcy remote vehicle (SPV) to obtain lower interest rates from lenders.
Technical (charts - supply/demand of stocks); Fundamental (Analyze companies information: balance sheet - ect.); Insider Information


9. Capital Budgeting

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10. Income statement
A financial statement summarizing performance over a period of time.
Make no periodic interest payments - Yield comes from the difference between purchase price and par value
Assets = Liabilities + Shareholders' Equity
Was enacted to protect investors from corporate abuses. among other things - it requires an auditor- and officer-approved assessment of the company's internal control structure and financial reporting in their annual report.


11. Floor Plan Financing
when a retailer gets financing from a bank for his inventory; i.e. financing for cars in a car dealership
The study of the relationship between business decisions and the value of the stock in the business
Movement of Interest Rate; Credit Risk; Features of the bonds. FYI - Long Term Bonds have more price risk
NYSE


12. Corp. Finance involves
Moving Average; Cash positions of funds; Amount of short selling
Most desirable source of Financing; a way for companies to generate cash internally; Net Income + Depreciation and Amortization
how company raise money; uses money; transfers of money from savers to spenders
A security issued by a corporation or a government; represents a promise to pay its bondholder a fixed sum of money (principal) at future maturity date; along with periodic interest payments (coupons)


13. Venture Capital
Short term government debt; Certificates of Deposits (CD's); Commercial Paper (CP)
A security issued by a corporation or a government; represents a promise to pay its bondholder a fixed sum of money (principal) at future maturity date; along with periodic interest payments (coupons)
Equity money provided by investors for start up firms with long term growth potential
Time Value of Money; Risk/Return


14. Bridge Financing
Bond may be redeemed earlier by the issuer
Way to maintain liquidity while waiting for an anticipated inflow of cash
The process of planning and managing a firm's long-term investments
holds that: neither Technical or Fundamental Analysis work - but Insider information can help beat the market


15. Three types of loans
Weak Form Efficiency - Semi Strong Form - Strong Form
The acquisition of long-term investments. the value of the cash flow generated by an asset exceeds the cost of that asset.
how company raise money; uses money; transfers of money from savers to spenders
Pure discount loans; Interest only loans; Amortized loans


16. Type of information that affects Stock Price greatly
Market where Corporate Debt is sold. Short term/Long term
Unexpected information; Information that effects the risk or return of an asset
Name of Issuer; Par Value; Maturity Date; Coupon Rate; Coupon Payments; Current Market Interest Rate; Current Market Price; Bond Indenture (legal note); Credit Rating.
An intermediary who buys and sells the object being sold. He Buys (Bids) and later re-sells (asks). Profits from the spread


17. Franchising
One or more of the partners will be subject to liability - others will be limited but not actively involved in management. division of profits is relative.
Technical (charts - supply/demand of stocks); Fundamental (Analyze companies information: balance sheet - ect.); Insider Information
Bond may be redeemed earlier by the issuer
A way for seller of goods and services to have third parties sell his goods or services under license


18. Present value means _____ money on a time line
Way to maintain liquidity while waiting for an anticipated inflow of cash
earlier
Short term government debt; Certificates of Deposits (CD's); Commercial Paper (CP)
Substitute for buying an asset


19. Convertible bond
By: Claims; Maturity; Seasoning of claims; Time of Delivery; Organizational Structure
Name of Issuer; Par Value; Maturity Date; Coupon Rate; Coupon Payments; Current Market Interest Rate; Current Market Price; Bond Indenture (legal note); Credit Rating.
Holder can exchange bond for common stock according to the conversion ratio
Profit is a vague term - this goal fails to consider whether short-run or long-run profit maximization is being considered


20. Interest rates go from _____ to _____ value
Present to Future
Unexpected information; Information that effects the risk or return of an asset
Banks; Insurance Companies; Mutual Funds; Pension Funds
Long Term Bonds (w/ high - long term - & locked interest rate) ; Short Selling many types of stocks; Holding Cash; Gold


21. Sarbanes-Oxley AKA 'Sarbox'

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22. What is an ETF?
Claims to wealth and legal structure; Saving and Investment Process; Monetary System
Was enacted to protect investors from corporate abuses. among other things - it requires an auditor- and officer-approved assessment of the company's internal control structure and financial reporting in their annual report.
A security issued by a corporation or a government; represents a promise to pay its bondholder a fixed sum of money (principal) at future maturity date; along with periodic interest payments (coupons)
Exchange Traded Fund - Mixture of stocks and mutual funds


23. Commercial Paper
Capital markets and Finance; Cash and Liquidity Mgmt; Corporate Financial Mgmt; Risk Mgmt; Treasury Operations & Control
Assets pledged as Collateral for non-payment of debt (collateral)
Short term; Cancelable; Lessor is responsible; stays off balance sheet; for Financial lease the opposite is true.
unsecured promissory note with a fixed maturity date of 1 to 270 days; Issued by banks and corporations to meet short term debt obligations


24. Operating Lease is...
Cross Border Lease used to arbitrage tax law
A firm's short-term assets (ie cash - inventory) and liabilities (ie accounts payable to suppliers)
Short term; Cancelable; Lessor is responsible; stays off balance sheet; for Financial lease the opposite is true.
Security; Seniority; Features (putable bond)


25. Working Capital Management
Way for companies to reduce working capital by: Decreasing Accounts Receivables; Increasing Accounts Payable; Decreasing levels of inventory
Sole Proprietorship; Partnership (Limited Liability Company); Public Company/Corporation (through IPO)
Security; Seniority; Features (putable bond)
Accounting principles call for revenues and costs to be "booked" when revenue process is complete - not when cash is collected or bills are paid


26. Two types of stocks
Accounting principles call for revenues and costs to be "booked" when revenue process is complete - not when cash is collected or bills are paid
Future to Present
Preferred; Common
Common Stock; Preferred Stock; Long Term Government Bonds


27. Different Types of Investing Analysis
Technical (charts - supply/demand of stocks); Fundamental (Analyze companies information: balance sheet - ect.); Insider Information
Revenues - expenses = income
The speed and ease with which an asset can be converted to cash. liquidity reduces financial distress but holding liquid assets are generally less profitable.
Where a corporate entity moves assets to a bankruptcy remote vehicle (SPV) to obtain lower interest rates from lenders.


28. Bank loans are based on what conditions?
Length; Payment Method (Amortized or Single Bullet); Collateral Protection; Bank Obligation to lend ( Committed or Not Committed); Frequency of borrowing; Pricing (Euribor Rate)
Net working capital
Exchange Traded Fund - Mixture of stocks and mutual funds
Where a company sells an asset and then leases it back.


29. What are Stakeholders?
An intermediary who does not own the object being sold; acts as a middle man; receives a fee for services
persons with interests in the existance of the company. (employees - Company Pensioners - Creditors - Lenders - Consumers)
Technical
Senior secured; Senior unsecured - Senior Subordinated - Subordinated


30. What is a dealer market?
Buys/sells securities for their own benefit - directly with customers -
Technical
Business created as a distinct legal entity composed of one or more individuals or entities; a legal "person" separate and distinct from its owners; complicated to form - subject to taxes
Loan from one company to another used to buy goods from the company providing the loan


31. Debtor in Possession (DIP)
Was enacted to protect investors from corporate abuses. among other things - it requires an auditor- and officer-approved assessment of the company's internal control structure and financial reporting in their annual report.
Senior security provided for companies in financial distress or under bankruptcy
The large OTC market is NASDAQ
GAAP - cash v. noncash items - time and costs


32. Putable Bonds

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33. Credit Quality Risk
Form of financing where large capital expenditures are kept off a companies balance sheet; ex. Joint Ventures - R&D partnerships; Operating Leases
the issuer does something which causes the credit quality to go down
Present to Future
NYSE


34. Time Value of Money
An intermediary who buys and sells the object being sold. He Buys (Bids) and later re-sells (asks). Profits from the spread
states that: one Dollar today will be worth more in the future
Ease of transferring ownership - limited liability to debt - unlimited life of the business
Size of firm; Degree of development of financial markets


35. Internally Generated Fund
An intermediary who buys and sells the object being sold. He Buys (Bids) and later re-sells (asks). Profits from the spread
Cash flow to creditors
Most desirable source of Financing; a way for companies to generate cash internally; Net Income + Depreciation and Amortization
Way to maintain liquidity while waiting for an anticipated inflow of cash


36. Working Capital

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37. Double Dip Lease
Exists whenever someone (the principal) hires another (the agent) to represent his or her interests. In a corporation - the stockholders are the principal - and management is the agent of the stockholders.
equal payments used by financial intermediaries to make regular payments to recipients (pensioners)
Cross Border Lease used to arbitrage tax law
Banks; Insurance Companies; Mutual Funds; Pension Funds


38. Head and Shoulder refers to what type of stock analysis?
Technical
Long Term Bonds (w/ high - long term - & locked interest rate) ; Short Selling many types of stocks; Holding Cash; Gold
holds that: you cannot get superior returns from Technical Analysis; Fundamental analysis could beat the market
Cash flow from assets


39. Debt Market
Where financing is secured by the projects assets - including revenues. Creditors do not have claims against the sponsors assets.
NYSE
Market where Corporate Debt is sold. Short term/Long term
The balance sheet


40. Principle Financial Intermediaries
Security; Seniority; Features (putable bond)
The process of planning and managing a firm's long-term investments
Unique and Highly complex financial service transaction between a Bank and a Company
Banks; Insurance Companies; Mutual Funds; Pension Funds


41. What are the risks of investing in a Bond?
GAAP - cash v. noncash items - time and costs
Commodities (timber - oil - gold); Floating rate notes/bonds; TIP's (Treasury Inflation Protected Securities; Real Estate
A financial statement summarizing performance over a period of time.
Interest Rate Risk; Reinvestment Risk; Call Risk; Default Risk; Credit Risk; Inflation Risk


42. Capital Markets
unsecured promissory note with a fixed maturity date of 1 to 270 days; Issued by banks and corporations to meet short term debt obligations
Movement of Interest Rate; Credit Risk; Features of the bonds. FYI - Long Term Bonds have more price risk
By: Claims; Maturity; Seasoning of claims; Time of Delivery; Organizational Structure
Long term Debt and Equity Instruments only (more than 1 year maturity)


43. What is the order of Seniority?
By: Claims; Maturity; Seasoning of claims; Time of Delivery; Organizational Structure
The large OTC market is NASDAQ
Short term government debt; Certificates of Deposits (CD's); Commercial Paper (CP)
Senior secured; Senior unsecured - Senior Subordinated - Subordinated


44. Levels of Market Efficiency
The acquisition of long-term investments. the value of the cash flow generated by an asset exceeds the cost of that asset.
State owned institutions which act as finance companies for private domestic entities conducting business abroad
Weak Form Efficiency - Semi Strong Form - Strong Form
Technical; Fundamental


45. Vendor Financing
Loan from one company to another used to buy goods from the company providing the loan
State owned institutions which act as finance companies for private domestic entities conducting business abroad
The mixture of long-term debt and equity maintained by a firm to finance its operations
Earnings before interest and taxes


46. Financial Statement showing a firm's accounting value on a particular date - a 'snapshot'
Size of firm; Degree of development of financial markets
Cash flow from assets
Earnings before interest and taxes
The balance sheet


47. Broker
Preferred; Common
Business owned by a single individual. PROs: easy and inexpensive to form - individual retains all profits CONs: individual has unlimited liability to debt - the organization is limited to the life of the owner - capital is often limited to owner'
Difference between a firm's current assets and its current liabilities``
An intermediary who does not own the object being sold; acts as a middle man; receives a fee for services


48. What is the OTC market for stocks called?
More efficient inventory management - increase in AR collections - etc.
The large OTC market is NASDAQ
Future Value of single payment; Present Value of Single Payment; Future Value of unequal series of Payments; Present Value of unequal series of Payments; Future value of annuity; Present value of annuity
Net working capital


49. Strong Form
Present to Future
holds that: there is no information available that can help beat the market (Technical - Fundamental - Insider Information)
A security issued by a corporation or a government; represents a promise to pay its bondholder a fixed sum of money (principal) at future maturity date; along with periodic interest payments (coupons)
Difference between a firm's current assets and its current liabilities``


50. Partnership
Business formed by 2 or more individuals or entities.
earlier
Preferred; Common
Cross Border Lease used to arbitrage tax law