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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. An offset to accounts receivable for the amount of accounts receivable that are estimated to be uncollectible.






2. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.






3. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.






4. A type of swap transaction used as a credit derivative in which one party makes peri-odic payments to the other and receives the prom-ise of a payoff if a third party defaults.






5. Sales minus the cost of sales ~.e . - the cost of goods sold for a manufactur-ing cOlp pany) .






6. The nonmonetary return offered by an asset when the asset is in short supply - often associated with assets with seasonal production processes.






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






8. An act passed by the U.S. Congress in 1934 that created the Securi-ties and Exchange Commission (SEC) - gave the SEC authority over all aspects of the securities industry - and empowered the SEC to require peri-odic reporting by companies with public






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






10. The graph of the set of portfolios that have minimum variance for their level of expected return.






11. A system that allows individual units within an organization to manage risk. Decentralization results in duplication ofeffort but has the advantage of having people closer to the risk be more d irectly involved in its management.






12. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.






13. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.






14. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.






15. With reference to the error term of a regression - having a variance that differs across observations.






16. ID) With respect to random variables - the property of ran-dom variables that are independent of each otherbut follow the identical probability distribution.






17. Aka Liquidity discount.






18. Systems that capture transaction data at the physical location in which the sale is made.






19. The expected return on equi-ties minus the risk-free rate; the premium that investors demand for investing in equities.






20. The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard deviation of return.






21. Earnings exclud-ing nonrecurring components.






22. The rate of return that must be met fora project to be accepted.






23. A numerical measure of how sensitive an option's delta is to a change in the underlying.






24. The amount the company estimates that it can sell the asset for at the end of its useful life.






25. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.






26. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; provides information about an entity's cash inflows and cash outflows as they pertain to oper-ating - investing - and financing activities.






27. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .






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






29. A business's value under a going-concern assumption.






30. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.






31. A business owned and operated by more than one individual.






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






33. The day that employees actually exer-cise the options and convert them to stock.






34. ROA) A prof-itability ratio calculated as operating income divided by average total assets.






35. The return on a portfolio minus the return on the portfolio's benchmark.






36. (No longer allowed under U.S. GAAP or IFRS.)






37. A financial state-ment that reconciles beginning-of-period ana end-of-period balance sheet values of retained income; shows the linkage between the balance sheet and income statement.






38. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.






39. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.






40. An agreement between two parties in which one party - the buyer - agrees to buy from the other party - the seller - an underlying asset at a later date for a price established at the start of the contract.






41. An approach to investing that typically begins with macroeconomic forecasts.






42. In reference to assets - the amount paid to purchase an asset - including any costs of acquisition and! or preparation; with reference to liabilities - the amount of proceeds received in exchange in issuing the liability.






43. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.






44. A financial instrument that gives one party the right - but not the obligation - to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claims.






45. A con-flict of interest that arises when the agent in an agency relationship has goals and incentives that differ from the principal to whom the agent owes a fiduciary duty.






46. The U.S. interest rate minus the foreign interest rate.






47. The value of exports of goods and ser-vices minus the value of imports of goods and services.






48. The line with an inter-cept point equal to the risk-free rate that is tangent to the efficient frontier of risky assets; represents the efficient frontier when a risk-free asset is available for investment.






49. Deliberate activity aimed at influencing reporting earnings numbers - often with the goal of placing management in a favorable light; the opportunistic use of accruals to manage earnings.






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