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CFA Level2 Vocab
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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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 use of inventory as collateral for a loan. The inventory is segregated and held in trust - and the proceeds of any sale must be remitted to the lender immediately. t-Test A hypothesis test using a statistic (I-statistic) that follows a t-<listrib
Cash flow additivity principle
Generalized least squares
Trust receipt arrangement
Survivorship bias
2. Observations over individual units at a point in time - as opposed to time-series data.
Cross-sectional data
Breakup value or private market value
Matching principle
Economic profit
3. 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.
Held-to-maturity investments
Net operating cycle
Fiduciary call
External growth
4. To sell the assets of a company - division - or subsidiary piecemeal - typically because of bank-ruptcy; the form of bankruptcy that allows for the orderly satisfaction of creditors' claims after which the company ceases to exist.
Deregulation
Current cost
Cheapest to deliver
Liquidation
5. An electronic payment network available to businesses - individuals - and financial institutions in the United States - U.S. -Territories - and Canada.
Materiality
Automated Clearing House
Component cost of capital
Cash flow at risk (CFAR)
6. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.
Accelerated methods of depreciation
Operating cycle
Enhanced derivatives products companies (EDPC)
Income tax recoverable
7. Above average or abnormally high growth rate in earnings per share.
Discount
Optimizer
Supernormal growth
Rejection point (or critical value)
8. An experiment that can produce one of two outcomes.
Value investors
Taxable temporary differences
Bernoulli trial
Safety-first Rules
9. A procedure for determining the interest on a bond or loan in which the interest is added onto the face value of a contract.
Credit analysis
Valuation
Add-on interest
Level of significance
10. The official price - designated by the clearinghouse - from which daily gains and losses will be determined and marked to market.
Compiled f'mancial statements
Settlement price
In-the-money
Out-of-the-money
11. An aggregate of an entity's income tax payable (or recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabili-ties. It is essentially the income tax payable or recoverable if these had been determined based on accoun
Tax expense
Data mining
Residual claim
Externality
12. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.
Impairment
Industry structure
Ordinal scale
Cost averaging
13. An agreement between two parties to exchange a series of future cash flows.
Sample skewness
Quintiles
Estimated (or fitted) parameters
Swap
14. In the context of inventory management - the need for inventory as part of the routine production-sales cycle.
Binomial random variable
Transactions motive
Cost-of-service regulation
Valuation
15. Costs borne by management to assure owners that they are working in the own-ers' best interest (e.g. - implicit cost of non-compete agreements).
Definitive merger agreement
Investment objectives
Liquidity
Bonding costs
16. A factor related to the econ-omy - such as the inflation rate - industrial produc-tion - or economic sector membership. acroeconomic factor model A multifac tor model in which the factors are surprises in macroeco-nomic variables that significan tly
Continuous time
If-converted method
Matching strategy
Macroeconomic factor
17. The value of the U.S. dollar expressed in units of foreign currency per U.S. dollar.
Sandwich spread
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
No-growth value per share
Nominal exchange rate
18. With reference to assets - the amount of cash or cash equivalents that would have to be paid to buy the same or an equivalent asset today; with reference to liabilities - the un discounted amount of cash or cash equivalents that would be required to
Current cost
Interest rate put
Capture hypothesis
Capital charge
19. A quantity computed from or used to describe a sample.
Nondeliverable forwards (NDFs)
Strangle
Sample statistic or statistic
Debit
20. An electronic payment system used widely in Europe and Japan.
Giro system
Liquidation
Net operating profit less adjusted taxes - or NOPLAT
Bootstrapping earnings
21. The intercept and slope coefficient(s) of a regression.
Synthetic forward contract
Regression coefficients
Margin
Floorlet
22. The government's holding of foreign cun; - e.!}cy.
U.S. official reserves
Available-for-sale investments
Equity charge
Decentralized risk management
23. A synonym for robust standard errors.
Fair market value
Stated rate (nominal rate or coupon rate)
White-corrected standard errors
Owners' equity
24. An option that gives the holder the right to sellan underlying asset to another party at a fixedprice over a specific period of time.
Total probability rule for expected value
Tobin's q
Put
Captive rmance subsidiary
25. The number of shares that target stockholders are to receive in exchange for each of their shares in the target company.
Cash flow additivity principle
Cost-of-service regulation
Exchange ratio
Debt ratings
26. An intangible that cannot be acquired singly and that typically possesses an indefinite benefit period; an example is account-ing goodwill.
Top-down forecasting approach
Investment value
Fixed costs
Unidentifiable intangible
27. The hypothesis that higher debt levels discipline managers by forcing them to make fixed debt service payments and by reducing the company's free cash flow.
Free cash flow hypothesis
Expanded
PEG ratio
Float
28. The net amount of cash provided from operating activities.
Cash flow from operations (cash flow from operating activities or operating cash flow)
Monetary/nonmonetary method
Exercise date
Yield beta
29. An estimation formula; the formula used to compute the sample mean and other sample statistics are examples of estimators.
Estimator
Credit scoring model
Implied repo rate
Solvency
30. A trend in which the dependent vari-able changes at a constant rate with time.
Dividend discount model (DDM)
Linear trend
Entry price
Acquisition method
31. A mean computed after excluding a stated small percentage of the lowest and highest observations.
Period costs
Volatility
Her rmdahl-
Trimmed mean
32. An asset's sensitivity to a particular factor; a mea-sure of the response of return to each unit of increase in a factor - holding all other factors constant.
Functional currency
Sustainable growth rate
Mismatching strategy
Factor sensitivity (also factor betas or factor loadings)
33. Sales on a bill-and-hold basis involve selling products but not delivering those products until a later date.
Probability distribution
Accounts receivable turnover
Sample statistic or statistic
Bill-and-hold basis
34. The period benefited~y the employee's service - usually th e period between the grant date and the vesting date.
Sample
Performance measurement
Service period
Pull on liquidity
35. Small numbers of observations at either extreme (small or large) ofa sample.
Minimum-variance portfolio
Pooled estimate
Outliers
Time-weighted rate of return
36. The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.
Cash-generating unit
Screening
Cost averaging
Cost of debt
37. The quantity of real CDP pro-duced by an hour of labor.
Number of days of payables
Markowitz decision rule
Node
Labor productivity
38. A non-operating entity created to carry out a specified purpose - such as leasing assets or securitizing receivables; can be a corporation - partnership - trust - limited liability - or partnership formed to facilitate a specific type of business act
Cash flow additivity principle
Futures commission merchants (FCMs)
Expensed
Special purpose entity (special purpose vehicle or variable interest entity)
39. The divisor in the expression for the value of a perpetuity.
Capitalization rate
Carried interest
Equity swap
Simulation trial
40. Regression that models the straight-line relationship between the dependent and independen t variable (s) .
Linear regression
Financial distress
Gross income multiplier (GIM)
Box spread
41. Aka Liquidity discount.
Illiquidity discount
Total asset turnover
Adjusted R2
Debit
42. A long-term pattern of movement in a partic-ular direction.
Trend
Transition phase
Adjusted present value (APV)
Capped swap
43. A pre-offer takeover defense mech-anism involving the corporate charter (e.g. - stag-gered boards of directors and supermajority provisions) .
Opportunity set
Collar
Cap
Shark repellents
44. I) An interest rate swap involving two floating rates. 2) A swap in which both parties pay a floating rate.
Horizontal common-size analysis
Cash flow additivity principle
asis swap
Relative valuation models
45. A hypothesis concern-ing pricing behavior that holds that even though there are only a few firms in an industry - they are forced to price their products more or less com-petitively because of the ease of entry by outsiders. The key aspect of a conte
Mean reversion
Longitudinal data
Theory of contestable markets
Active return
46. The risk associated with changes in the relative attractiveness of products and services offered for sale - arising out of the competitive effects of changes in exchange rates.
Economic exposure
Margin
Put-call-forward parity
Share repurchase
47. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Vertical common-size analysis
Price discovery
Basic earnings per share (EPS)
Cheapest to deliver
48. A merger or acquisition in which target shareholders are to receive shares of the acquirer's common stock as compensation.
Expensed
Return on assets (ROA)
Securities offering
Horizontal common-size analysis
49. The operational flexibility to alter production when demand varies from fore-cast. For example - if demand is strong - a company may profit from employees working overtime or from adding additional shifts.
Arithmetic mean
Production-flexibility
Delta-normal method
Organic growth
50. An approach to decomposing return on investment - e.g. - return on equity - as the product of other financial ratios.
Earnings yield
Degree of total leverage
Du Pont analysis
Equity carve-out
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