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Test your basic knowledge 
CFA Level2 Vocab
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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study here
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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 reenforces your understanding as you take the test each time.
1. A merger or acquisition in which target shareholders are to receive shares of the acquirer's common stock as compensation.
Population
External growth
Securities offering
Spearman rank correlation coefficient
2. The amount of dispersion relative to a reference value or benchmark.
Independent projects
Relative dispersion
Diminishing balance method
Manufacturing resource planning (MRP)
3. Debt with the added feature that the bondholder has the option to exchange the debt for equity at prespecified terms.
Normalized
Operating leverage
Acquisition
Convertible debt
4. Trading exdividend refers to shares that no longer carry the right to the next dividend payment.
Discount interest
Exdividend
Subsistence real wage rate
Total invested capital
5. A mean computed after excluding a stated small percentage of the lowest and highest observations.
Divestiture
Quality of earnings analysis
Trimmed mean
Projected unit credit method
6. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators  who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated industry's
Assetbased valuation
Recapture premium
Nonearning assets
Sharethegains  sharethepains theory
7. A graphical representation of the expected return and risk of all portfolios that can be formed using two assets.
Storage costs or carrying costs
Twosided hypothesis test (or twotailed hypothesis test)
Portfolio possibilities curve
Broker
8. The quantity of goods and services that a country exports to pay for its imports of goods and services.
Unbilled revenue (accrued revenue)
Target semideviation
Terms of trade
Sector neutralizing
9. The investigation of issues relating to the accuracy of reported accounting results as reflections of economic performance; quality of earnings analysis is broadly understood to include not only earnings management  but also balance sheet manageme
Qualifying special purpose entities
Quality of earnings analysis
Monte
Marketoriented investors
10. A factor related to the economy  such as the inflation rate  industrial production  or economic sector membership. acroeconomic factor model A multifac tor model in which the factors are surprises in macroeconomic variables that significan tly
Independent variable
Independent
Macroeconomic factor
Doubleentry accounting
11. The present value of an investment's cash inflows (benefits) minus the present value of its cash outflows (costs).
Cash price or spot price
Cap
Delivery
Net present value (NPV)
12. The set of rules used to select a sample.
Business risk
Interest rate
Accumulated benefit obligation
Sampling plan
13. Present obligations of an enterprise arising from past events  the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors' claims on the resources of a company.
Quick ratio  or acid test ratio
Liabilities
Number of days of receivables
Relative frequency
14. The lowest possible value of an option.
Lower bound
Pet projects
Market efficiency
Sampling plan
15. The present discounted value of future cash flows: For assets  the present discounted value of the future net cash inflows that the asset is expected to generate; for liabilities  the present discounted value of the future net cash outflows that a
Present value (PV)
Linear regression
Risk governance
Accrual basis
16. The share price at a particular point in the future.
Ordinary least squares (OLS)
Terminal share price
Putcall parity
Technical indicators
17. With reference to investment selection processes  an approach that starts with macro selection (i.e.  identifying attractive geographic segments andVor industry segments) and then addresses selection 0 the most attractive investments within those
Posterior probability
Liruit down
Topdown analysis
Traditional efficient markets formulation
18. Publiccompany comparables for the company being valued.
Point of sale
Guideline public companies
Floored swap
Principal
19. A statistical model used to classifY borrowers according to creditworthiness.
Classical growth theory
Credit scoring model
Firstorder serial correlation
Assetbased loan
20. A market index portfolio.
Mixed factor models
Passive portfolio
Contingent consideration
Purchased inprocess research and development costs
21. A qualitativedependentvariable multiple regression model based on the normal distribution.
Agency relationships
Residual autocorrelations
Foreign currency transactions
Probit model
22. Observations through time on a single characteristic of multiple observational units.
Trimmed mean
Generalized least squares
Nonparametric test
Panel data
23. The contribution to active risk squared resulting from the portfolio's differentthanbenchmark exposures relative to factors specified in the risk model.
Active factor risk
Implied volatility
Optimizer
Method of comparables
24. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.
Costofservice regulation
Profitability ratios
Sample standard deviation
Backtesting
25. The value of an asset given a hypothetically complete understanding of the asset's investment characteristics; the value obtained if an option is exercised based on current conditions.
Cherrypicking
Fair value
Intrinsic value or exercise value
Corporate raider
26. In reference to shortterm cash management  an investment strategy characterized by monitoring and attempting to capitalize on market conditions to optimize the risk and return relationship of shortterm investments.
Active strategy
Type I error
Bundling
Subsistence real wage rate
27. Earnings per share divided by price; the reciprocal of the PIE ratio.
Earnings yield
Operating activities
ecurity market line (SML)
Current cost
28. Valuation measures and other factors related to share price or the trading characteristics of the shares  such as earnings yield  dividend yield  and booktomarket value.
Installment
Company sharerelated factors
Univariate distribution
Debtor nation
29. The square root of the average squared forecast error; used to compare the outofsample forecasting performance of forecasting models.
asis swap
Investment value
Root mean square(l er ror (RMSE)
Macaulay duration
30. The process of accumulating interest on interest.
Operations risk or operational risk
Sample mean
Economic order quantityreorder point
Compounding
31. The probability of the joint occurrence of stated even ts.
ecurity market line (SML)
Number of days of payables
Cash flow statement (statement of cash flows)
Joint probability
32. The relationship between the option price and the underlying price  which reflects the sensitivity of the price of the option to changes in the price of the underlying.
Delta
Random variable
Longterm liability
Financing activities
33. A forecasting approach that involves aggregating the individual company forecasts of analysts into industry forecasts  and finally into macroeconomic forecasts.
Bottomup forecasting approach
Nogrowth value per share
Theory of contestable markets
Net book value
34. The estimation of an unknown value on the basis of two known values that bracket it  using a straight line between the two known values.
Free cash flow to the
Linear interpolation
Payoff
Sunk cost
35. The owners' remaining claim on the company's assets after the liabilities are deducted.
Dividends per share
Value at risk (VAR)
Residual claim
Goodwill
36. The financial statement that presents an entity's current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims)  as of a particular point in time (the date
Population
Nonlinear relation
Balance sheet (statement of fmandal position or statement of fmandal condition)
Mean reversion
37. Observations of a variable over time.
Meanvariance analysis
Timeseries data
Protective put
Reconciliation
38. A bias caused by using information that was not available on the test date.
Minority active investments
Active factor risk
Creditworthiness
Lookahead bias
39. A test for conditional heteroskedasticity in the error term of a regression.
Company sharerelated factors
Sampling
Forward contract
BreuschPagan test
40. Linear regression involving two or more independent variables.
Terminal price multiple
Breakup value or private market value
Dutch Book theorem
Multiple linear regression
41. A financial statement that reconciles beginningofperiod ana endofperiod balance sheet values of retained income; shows the linkage between the balance sheet and income statement.
Shortfall risk
Positive serial correlation
Equity carveout
Statement of retained earnings
42. The day that the company actually mails out (or electronically transfers) a dividend payment.
External growth
Impairment of capital rule
Payment date
Builtup method
43. A permissible delivery procedure used by futures market participants  in which the long and short arrange a delivery procedure other than the normal procedures stipulated by the futures exchange.
Marketoriented investors
Real riskfree interest rate
Statement of retained earnings
Exchange for physicals (EFP)
44. A capital rationing environment assumes that the company has a fixed amount of funds to invest.
Earnings per share
Capital rationing
Allowance for bad debts
Anticipation stock
45. With respect to the application of the LIFO inventory method  the liquidation of old  relatively lowpriced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old  low
Mesokurtic
LIFO layer liquidation (LIFO liquidation)
Survey approach
Standardized unexpected earnings (SUE)
46. The risk associated with the possibility that a payment currently due will not be made.
Current credit risk
Lemons problem
Costofservice regulation
Notes payable
47. The difference between reported earnings per share and expected earnings per share.
Balancesheetbased accruals ratio
Unexpected earnings (also earnings surprise)
Interest rate collar
Equity method
48. The most common type of communsize analysis  ill which the accounts in a given period are compared to a benchmark item in that same year.
Vertical commonsize analysis
Financial transaction
Installment
Credit risk or default risk
49. Internal or external limitations on investments.
Capital budgeting
Test statistic
Investment constraints
Arithmetic mean
50. Observations over individual units at a point in time  as opposed to timeseries data.
Neoclassical growth theory
Crosssectional data
Statement of cash flows (cash flow statement)
Estimation