Test your basic knowledge |

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. Accounting in which some income items are reported as part of stockholders' equity rather than as gains and losses on the income statement; certain items of comprehensive income bypass the income statement and appear as direct adjustments to sharehol






2. The owners' remaining claim on the company's assets after the liabilities are deducted.






3. The elimination or phasing out of reg-ulations on economic activity.






4. The Eurodollar rate at which London banks lend dollars to other London banks; considered to be the best representative rate on a dollar borrowed by a private - high-quality borrower.






5. A weighted average of the after-tax required rates of return on a company's common stock - preferred stock - and long-term debt - where the weights are the fraction of each source of financing in the company's target capital structure.






6. PIE The price-to-earnings ratio that is fair - warranted - or justified on the basis of forecasted fundamentals.






7. An option contract that can be exercised at any time until its expiration date.






8. Managers who hold portfolios that differ from their benchmark port-folio in an attempt to produce positive risk-adjusted returns.






9. The theory that managers take into account how their actions might be inter-preted by outsiders and thus order their prefer-ences for various forms of corporate financing. Forms of financing that are least visible to out-siders (e.g. - internally gen






10. A function with non-negative values such that probability can be described by areas under the curve graphing the function.






11. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.






12. A model of stock val-uation that views a stock's intrinsic value as the present value of expected future free cash flows to equity.






13. The value of the middle item of a set of items that has been sorted into ascending or descending order; the 50th percentile.






14. 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.






15. Uncorrelated; at a right angle.






16. A portfolio with sensitivity of 1to the factor in question and a sensitivity of 0 to allother factors.






17. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






18. The owners of a joint venture. Each is active in the management and shares control of the joint venture.






19. The number of indepen-dent observations used.






20. An extra return that compen-sates investors for the possibility that the borrower will fail to make a promised payment at the con-tracted time and in the contracted amount.






21. The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.






22. When a company is acquired and the purchase price is less than the fai r value of the net assets. The current treatment of the excess of fair value over the purchase price is diffe re t under IFRS and U.S. CAAP. The excess is never accounted for as n






23. An annualized return that accounts for the effect of interest on interest; EAY is computed by compounding 1 plus the holding period yield forward to one year - then subtracting 1.






24. PIE PI Es based on normalized EPS data.






25. A measure of disper-sion relating to a population in the same unit of measurement as the observations - calculated as the positive square root of the population variance.






26. A ratio in property valua-tion; net operating income divided by sale price. Also known as the going-in rate.






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






28. An activity ratio equal to the number of days in a period divided by the inventory ratio for the period; an indication of the number of days a company ties up funds in inventory.






29. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.






30. An indicator of profitability - calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses.






31. A merger involving companies at different positions of the same production chain; for example - a supplier or a distributor.






32. The difference between net operating assets at the end and the beginning of the period compared to the average net operating assets over the period.






33. In accounting - a liability of uncertain tim-ing or amount.






34. In reference to corporate taxes - a system that imputes - or attributes - taxes at only one level of taxation. For countries using an imputation tax system - taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at th






35. A combination of a long cap and a short floor - or a short cap and a long floor. A col-lar in general can have an underlying other than an interest rate.






36. A test of a strategy or model using a sample outside the time period on which the strategy or model was developed.






37. When settling a contract - the risk that one party could be in the process of paying the counterparty while the counterparty is declar-ing bankruptcy.






38. A solvency ratio calculated as total debt divided by total debt plus total share-holders ' equi ty.






39. Another term for the historical method of estimating VAR. This term is somewhat misleading in that the method involves not a simulation of the past butrather what actually happened in the past - some-times adjusted to reflect the fact that a differen






40. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.






41. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.






42. A third party that is sought out by the target company's board to purchase the target in lieu of a hostile bidde .






43. The difference between the actual value per share and the no-growth value per share.






44. A measure of central tendency computed by taking the nth root of the product of n non-negative values.






45. The number of shares that target stockholders are to receive in exchange for each of their shares in the target company.






46. The company in a merger or acquisition that is being acquired.






47. Correlation between adj acent observations in a time ser ies.






48. The residuals from a fitted time-series model within the sample period used to fit the model.






49. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe






50. A valuation indicator based on past pdce movement.