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CFA Level2 Vocab

Subjects : certifications, cfa
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. Independent projects are projects whose cash flows are independent ofeach other.






2. The condition in a financial mar-ket in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.






3. A long-term pattern of movement in a partic-ular direction.






4. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.






5. An entity associated with a futures market that act~ as middleman between the con-tracting parties and guarantees to each party the performance of the other.






6. In reference to mergers - it is the savings achieved through the consolidation of operations and elimination of duplicate resources.






7. 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.






8. Each component put option in a floor.






9. The management of a company's short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers) .






10. An agreement allowing the lessee to use some asset for a period of time; essentially a rental.






11. Debt (fixed-income) securities that a company intends to hold to matu-rity; these are presented at their original cost - updated for any amortization of discounts or pr.emiums.






12. The sample autocorrela-tions of the residuals.






13. A rule that states that the number of years it takes for the level of a variable to double is approximately 70 divided by the annual percent-age growth rate of the variable.






14. The mix of a company's variable costsand fixed costs.






15. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.






16. The estimated gross amount of money that could be realized from the liquidation sale of an asset or assets - given a rea-sonable amount of time to find a purchaser or purchasers.






17. Differences between tax and financial reporting of revenue (expenses) that will not be reversed at some future date. These result in a difference between the company's effective tax rate and statutory tax rate and do not result in a deferred tax item






18. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.






19. Income approach that values an asset based on estimates of future cash flows discounted to present value by using a discount rate reflective of the risks associated wi th the cash flows.






20. A contract signed by both parties to a merger that clarifies the details of the transaction - including the terms - war-ranties - conditions - termination details - and the rights of all parties.






21. PIE (or forward PIE or prospective PIE) A stock's current price divided by the next year's expected earnings.






22. The expansion of production pos-sibilities that results from capital accumulation and technological change.






23. Essentially - the pur-chase of some asset by the buyer (lessee) that is directly financed by the seller (lessor).






24. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.






25. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.






26. A number between 0 and 1 describing the chance that a stated event will occur.






27. The yield to maturity on a basis that ignores compounding.






28. The risk that a company will suffer an extended diminution in market value relative to other companies in the same industry due to a demonstrated lack of concern for environmental - social - and governance risk factors.






29. The expected excess return on the market over the risk-free rate.






30. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.






31. A valuation ratio calculated as price per share divided by cash flow per share.






32. The granting of stock to employees as a form of compensation.






33. Measure of financial reporting quality by subtracting the mean or median ratio for a given sector group from a given company's ratio.






34. A profitabili ty ratio calcu-lated as EBIT divided by the sum of short-and long-te debt and equi ty.






35. 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.






36. The value of an option at expiration.






37. A quoting convention that annualizes - on a 360-day year - the discount as a percentage of face value.






38. An account that offsets another account.






39. The combining of the results of oper-ations of subsidiaries with the parent compaIL y to present financial statements as if they were a sin-gle economic unit. The asset - iabilities - revenues and expenses of the subsidiaries are combined with those






40. FRA A contract in which the initial value is intentionally set at a value other than zero and therefore requires a cash payment at the start from one party to the other.






41. The company in a merger or acquisition that is acquiring the target.






42. A corporate transac-tion in which management repurchases all out-standing common stock - usually using the proceeds of debt issuance.






43. When disbursements are paid tooquickly or trade credit availability is limited -requiring companies to expend funds beforethey receive funds from sales that could cover theliability.






44. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.






45. The potential for asymmetric information to bring about a general decline in product quality in an industry.






46. A finan-cial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its oper-ations; equal to days of inventory on hand + days of sales outstanding - number of days of






47. The risk associated with the pos-sibility that a payment currently due will not be made.






48. A rule explaining the uncon-ditional probability of an event in terms of proba-bilities of the event conditional on mutually exclusive and exhaustive scenarios.






49. A bias caused by using information that was not available on the test date.






50. The particular value calculated from sam-ple observations using an estimator.