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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.
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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 re-enforces your understanding as you take the test each time.
1. The risk associated with the pos-sibility that a payment due at a later date will not be made.
Unidentifiable intangible
Potential credit risk
Capped swap
World Trade Organization
2. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Current assets - or liquid assets
Ordinal scale
Operating cycle
3. The most recent quarterly dividend multiplied by four.
Dividend rate
Floor traders or locals
Merger
Spreadsheet modeling
4. A stock's current mar-ket price divided by the most recent four quarters of earnings per share.
Trailing P/E (or current PIE)
Sole proprietorship
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Trade-weighted index
5. Quantiles that divide a distribution into five equal parts.
Moneyness
Dependent
Captive rmance subsidiary
Quintiles
6. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.
Abandonment option
Real risk-free interest rate
Constant maturity swap or
Bernoulli trial
7. The rate of dividend (and earnings) growth that can be sustained over time for a given level of re turn on equity - keeping the capi tal structure constant and wi thout issuing addi tional common stock.
Flotation cost
Bundling
Sustainable growth rate
Moneyness
8. The share price at a particular point in the future.
Sum-of-the-parts valuation
Terminal share price
Financial flexibility
Pure discount instruments
9. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.
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10. Revenue that has been earned but not yet billed to customers as of the end of an accounting period.
Pure-play method
Unbilled revenue (accrued revenue)
Population mean
Stated rate (nominal rate or coupon rate)
11. Debt or equity financial assets bought with the inten-tion to sell them in the near term - usually less than three months; securities that a company intends to trade.
Held-for-trading securities (trading securities)
Exchange ratio
Block
Method based on forecasted fundamentals
12. Making forecasts - estimates - or judgments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.
Cash flow statement (statement of cash flows)
Double taxation
Production-flexibility
Statistical inference
13. A mean computed after assigning a stated percent of the lowest values equal to one specified low value - and a stated percent of the highest values equal to one specified high value.
Income tax recoverable
Winsorized mean
Estimated (or fitted) parameters
Multivariate distribution
14. The value of the U.S. dollar in terms of other currencies in the foreign exchange market.
Sample mean
Plain vanilla swap
Pairs trading
Exchange rate
15. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.
Cash flow at risk (CFAR)
Performance appraisal
Tracking portfolio
Out-of-the-money
16. A diagram with branches emanating from nodes representing either mutually exclu-sive chance events or mutually exclusive decisions.
Probability density function
Liquidation value
First-differencing
Tree diagram
17. The actual amount paid for income taxes in the period; not a provision - but the actual cash outflow.
Cost of debt
Income tax paid
Derivatives dealers
Going-concern value
18. A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.
Straight-line method
Mean reversion
Ordinary shares (common stock or common shares)
Absolute frequency
19. With reference to grouped data - the most frequently occurring interval.
Debtor nation
Modal interval
Imputation
Capture hypothesis
20. The contri-bution to active risk squared resulting from the portfolio's active weights on individual assets as those weights interact with assets' residual risk.
Expiration date
Conditional probability
Spin-off
Active specific risk or asset selection risk
21. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.
Ratio scales
Flip-in pill
Expenses
Commodity swap
22. A striNgent measure of liquidity th t ind'cates a company's ab'li ty to satisfY current liabilities with its most liquid assets - calcu-lated as (cash + short-tenn marketable invest-ments + receivables) divided by current liabilities.
Shark repellents
Portfolio selection/composition problem
Quick ratio - or acid test ratio
Production-flexibility
23. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).
Residual claim
Unidentifiable intangible
Single-step format
Noncurrent assets
24. A quantitative measure that describes the location or distribution of data; includes not only measures of central tendency but also other measures such as percentiles.
Call
Covariance stationary
Off-balance sheet imancing
Measure of location
25. The relationship amongputs - calls - and forward contracts.
Semideviation
Put-call-forward parity
Deregulation
Debt-to-assets ratio
26. With reference to equity investors - investors who are focused on paying a relatively low share price in relation to earnings or assets per share.
Backward integration
Sector neutral
Leveraged buyout (LBO)
Value investors
27. The extent to which a company can effect - through the use of debt - a propor-tional change in the re turn on common equity that is greater than a given proportional change in operating income; also - short for the financial leverage ratio.
Financial leverage
Decision rule
Current account
Dilution
28. With reference to regression analysis - the estimated values of the population intercept and population slope coeffi-cien t(s) in a regression.
Estimated (or fitted) parameters
Stated annual interest rate or quoted interest rate
Normal backwardation
Specific identification method
29. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Free cash flow to equity
Breakeven point
Molodovsky effect
Income tax paid
30. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Operating risk
Sovereign yield spread
Overall capitalization rate
Tax base (tax basis)
31. The amount of cash payable by a company to the bondholders when the bonds mature; the promised payment at maturity sepa-rate from any coupon payment.
Spearman rank correlation coefficient
Face value (also principal - par value - stated value - or maturity value)
Discount rate
Cumulative distribution function
32. The risk associated with the pos-sibility that a payment currently due will not be made.
Sales
Normalized earnings per share (or normal earnings per share)
Vertical common-size analysis
Current credit risk
33. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.
Broker
Exercise price (strike price - striking price - or strike)
Aging schedule
Before-tax cash flow
34. Common-size analysis using only one reporting period or one base financial state-ment; fo r example - an income statement in which all items are stated as percentages of sales.
Pure factor portfolio
Vertical analysis
synunetric information
Event
35. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.
Deliveryoption
Covariance matrix
Guideline public company method
Generalized least squares
36. The quantity of real CDP pro-duced by an hour of labor.
Labor productivity
Credit VAR - default VAR - or credit at risk
Residual income (or economic profit or abnormal earnings)
Breakeven point
37. A poison pill provision that allows for the redemption or cancellation of a poi-son pill provision only by a vote of coNtinuing directors (generally directors who were on the tar-get company's board p rior to the takeover attempt) .
Log-log regression model
Adjusted R2
Mean excess return
Dead-hand provision
38. The amount by which the takeover price for each share of stock must exceed the current stock price in order to entice shareholders to relinquish control of the com-pany to an acquirer.
Sampling plan
Inventory turnover
Arrears swap
Takeover premium
39. The after-tax net operating profits as a percent of total assets or capital.
Net asset balance sheet exposure
Surprise
Return on invested capital (ROIC)
Outcome
40. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).
Diminishing balance method
Benchmark value of the multiple
Capital asset pricing model (CAPM)
Committed lines of credit
41. A reserve created against deferred tax assets - based on the likelihood of realizing the deferred tax assets in future account-ing periods.
Valuation allowance
Asset retirement obligations (AROs)
Taxable income
Dirty surplus items
42. A valuation ratio calculated as price per share divided by book value per share.
Price to book value
Mode
IRR rule
Leverage
43. Earnings per share divided by price; the reciprocal of the PIE ratio.
Earnings yield
Covariance matrix
Minimum-variance frontier
Sales returns and allowances
44. A transaction executed inthe foreign exchange market in which a currencyis purchased (sold) and a forward contract is sold(purchased) to lock in the exchange rate forfuture delivery of the currency. This transactionshould earn the risk-free rate of t
Covered interest arbitrage
Estimate
Potential credit risk
Vested benefits
45. The principle that dol-lar amounts indexed at the same point in time are additive.
Theta
Bernoulli random variable
Position trader
Cash flow additivity principle
46. Amounts customers owe the company for products that have been sold as well as amounts that may be due from suppliers (such as for returns of merchandise).
Acquisition
Trade receivables (commercial receivables or accounts receivable)
Conditional expected value
Statistics
47. The value of skills and knowledgepossessed by the workforce.
Hmnan capital
Currency swap
Regulatory risk
Current liabilities
48. ID) With respect to random variables - the property of ran-dom variables that are independent of each otherbut follow the identical probability distribution.
Mixed offering
Potential credit risk
Independent and identically distributed (l
Poison pill
49. The probability that an asset's value moves up.
Residual autocorrelations
Dispersion
Up transition probability
Floor traders or locals
50. The positive square root of the sample variance.
Unlimited funds
Lower bound
Collar
Sample standard deviation