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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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 re-enforces your understanding as you take the test each time.
1. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.
World Trade Organization
Residual income (or economic profit or abnormal earnings)
Simple random sample
Yield beta
2. As an approach to valuing a company - the sum of the value of the company - assuming no use of debt - and the net present value of any effects of debt on company value.
Working capital turnover
Active risk
Qualifying special purpose entities
Adjusted present value (APV)
3. The difference between the actual value per share and the no-growth value per share.
Present value of growth opportunities (or value of growth)
Credit spread option
Chain rule of forecasting
Pooling of interests accounting method
4. The currency in which finan-cial statement amounts are presented.
Standardizing
Interest rate swap
Correlation analysis
Presentation currency
5. A graphical depic-tion of a company's investment opportunities ordered from highest to lowest expected return. A company's optimal capital budget is found where the investment opportunity schedule inter-sects with the company's marginal cost of capit
Defensive interval ratio
Operating breakeven
Credit swap
Investment opportunity schedule
6. Approach that values a private company based on the values of the underlying assets of the entity less the value of any related liabilities.
Return on equity (ROE)
Asset-based approach
Mispricing
Stated rate (nominal rate or coupon rate)
7. A loss in value caused bychanges in price levels. Monetary assets experi-ence purchasing power losses during periods ofinflation.
Purchasing power loss
Independent
Current taxes payable
Model risk
8. A contract calling for the purchase of an individual stock - a stock portfolio - or a stock index at a later date at an agreed-upon price.
Total return swap
Independent and identically distributed (l
Number of days of payables
Equity forward
9. The system of principles - policies - procedures - and clearly defined responsi-bilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.
P Value
Corporate governance
One third rule
Company share-related factors
10. Time thought of as advancing in extremely small increments.
Continuous time
Pairs arbitrage trade
Monetary/nonmonetary method
Divestiture
11. A model of stock valuation that views intrinsic value of stock as the sum of book value per share plus the present value of the stock's expected future residual income per share.
Currency swap
Agency problem - or principal-agent problem
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Leverage
12. An option that allows the holder to buy (if a call) or sell (if a put) an underlying cur-rency at a fixed exercise rate - expressed as an exchange rate.
Mean excess return
Currency option
Storage costs or carrying costs
Other comprehensive income
13. Valuation indi-cators that compare a stock's performance during a period either to its own past performance or to the performance of some group of stocks.
Risk budgeting
Portfolio selection/composition problem
Subsistence real wage rate
Relative strength (RSTR) indicators
14. (No longer allowed under U.S. GAAP or IFRS.)
Shortfall risk
U.S. GAAP and uniting of interests under IFRS
Book value equity per share
Creative response
15. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Correlation
Cash flow statement (statement of cash flows)
Ordinal scale
Foreign currency
16. Segment profit (loss) divided by seg-ment assets.
Segment ROA
Swaption
Fundamentals
Discrete random variable
17. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee ser-vice rendered prior to that
Projected benefit obligation
Independent variable
Expiration date
Breusch-Pagan test
18. Financial statements in which all elements (accounts) are stated as a per-centage of a key figure such as revenue for an income statement or total assets for a balance sheet.
Constant maturity swap or
Fixed charge coverage
Standard cost
Common size statements
19. A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits - share repurchases use corporate cash.
Free cash flow to the
Conditional heteroskedasticity
Credit scoring model
Share repurchase
20. A quantitative restriction on the import of a particular good - which specifies the maximum amount that can be imported in a given time period.
Interval
Commodity option
Strip
Quota
21. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .
Pre-investing
Classified balance sheet
Balance sheet ratios
Operating risk
22. Mutually exclusive proj-ects compete directly with each other. For example - if Projects A and B are mutually exclusive - you can choose A or B - but you cannot choose both. n Factorial For a positive integer n - the product of the first n positive i
Rule of 72
Mutually exclusive projects
Enterprise risk management
Proportionate consolidation
23. Assets lacking physical substance - such as patents and trademarks.
Sampling plan
Pooled estimate
Intangible assets
Minimum-variance frontier
24. A si gle numerical estimate of an unknown quantity - such as a population parameter.
Protective put
Direct format (direct method)
Point estimate
Cash flow from operations (cash flow from operating activities or operating cash flow)
25. A variation of the market approach; establishes a value estimate based on pricing multiples derived from the acquisition of control of entire public or private companies that were acquired.
Cross-sectional analysis
Guideline transactions method
Short
Bear spread
26. Limits imposed by a futures exchange on the price change that can occur from one day to the next.
Box spread
Minimum-variance frontier
Leveraged floating-rate note or leveraged floater
Price limits
27. Tax expenses that have been recognized and recorded on a company's income statement but which have not yet been paid.
Current taxes payable
Activity ratios (asset utilization or operating efficiency ratios)
Strategic transaction
Split-off
28. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.
Derivative
Exp ected holding-period return
Heteroskedasticity
Hedge ratio
29. The difference between inventory reported as FIFO and 'nventory reported as LIFO (FIFO inventory value less LIFO inventory val e).
LIFO reserve
Special purpose entity (special purpose vehicle or variable interest entity)
Measure of central tendency
Shark repellents
30. Temporary differ-ences that result in a red uction of or deduction from taxal:J e income in a future period when the balance sheet item is n~ covered or settled.
NTM P/E
Synthetic call
Deductible temporary differences
Account format
31. A measure of goodness-of-fit of a regres-sion that is adjusted for degrees of freedom and hence does not automatically increase when another independent variable is added to a regression.
Clientele effect
Weighted-average cost of capital (WACC)
Adjusted R2
Gamma
32. To reduce the value of a future payment in allowance for how far away it is in time; to calcu-late the present value of some future amount. Also - the amount by which an instrument is priced below its face value.
Independent and identically distributed (l
Income tax paid
Position trader
Discount
33. A quantitative measure of skew (lack of symmetry); a synonym of skew.
Annual percentage rate
Futures exchange
Tenor
Skewness
34. A spontaneous form of credit in which a purchaser of the goods or service is financing its purchase by delaying the date on which payment is made.
Unlimited funds
Trade credit
Payer swaption
Option price - option premium - or premium
35. With reference to statistical inference - astatement about one or more populations.
Agency costs
Ordinary least squares (OLS)
Hypothesis
Bank discount basis
36. Approach to translating for-eign currency financial statements for consolida-tion in which all assets and liabilities are translated at the current exchange rate. The cur-rent rate method is the prevalent method of translation.
Underlying
Current rate method
Lower bound
Yield
37. Activities related to obtaining or repaying capital to be used in the business (e.g. - equity and long-term debt).
Sector rotation strategy
Ex-dividend date
Stock purchase
Financing activities
38. The elimination or phasing out of reg-ulations on economic activity.
Weighted-average cost of capital (WACC)
Deregulation
Platykurtic
Sample standard deviation
39. Investments in which the investor has no signifi-cant influence or control over the operations of the investee.
Log-log regression model
Gross domestic product
Minority passive investments (passive investments)
Investment opportunity schedule
40. With reference to the error term of a regression - having a variance that differs across observations.
Financing activities
Heteroskedastic
Put-call-forward parity
Prepaid expense
41. A combination of a European call and a risk-free bond that matures on the option expiration day and has a face value equal to the exer-cise price of the call.
Fiduciary call
No-growth company
Market value of invested capital
Antidilutive
42. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .
Leveraged buyout (LBO)
Macroeconomic factor
Income
Sample kurtosis
43. The relationship amongputs - calls - and forward contracts.
Priced risk
Put-call-forward parity
Cumulative relative frequency
Ordinary annuity
44. With reference to estimators - describes an estimator for which the probability of estimates close to the value of the population parameter increases as sample size increases.
Residual loss
Net operating assets
Cnsistent
Decision rule
45. An estimation formula; the formula used to compute the sample mean and other sample statistics are examples of estimators.
Estimator
Free cash flow to the
Statement of cash flows (cash flow statement)
Put-call-forward parity
46. Assets that can be most readily con-verted to cash (e.g. - cash - short-term marketable investments - receivables) .
Days of inventory on hand (DOH)
Quick assets
Partnership
Trading securities (held-for-trading securities)
47. PIE The price-to-earnings ratio that is fair - warranted - or justified on the basis of forecasted fundamentals.
LIFO method
Portfolio implementation problem
Split-rate
Justified (fundamental)
48. Huidity When receipts lag - creating pres-sure fmm the decreased available funds.
Time-period bias
Fundamental factor models
Drag on li
Accounts receivable turnover
49. A set of observations on a variable's out-comes in different time periods.
Rational efficient markets formulation
Time series
Statement of retained earnings
Yield to maturity
50. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.
Income tax paid
Capitalized inventory costs
Perfect collinearity
Storage costs or carrying costs