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Test your basic knowledge |
CFA Level2 Vocab
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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. A number between 0 and 1 describing the chance that a stated event will occur.
Passive portfolio
Probability
Discount for lack of control
Comparables (comps - guideline assets - guideline com-panies)
2. A measure of the sensitivity of a bond's yield to a general measure of bond yields in the market that is used to refine the hedge ratio.
Yield beta
Inventory blanket lien
Current exchange rate
Current taxes payable
3. An option strategy that combines two bull or bear spreads and has three exercise prices.
Implied repo rate
Confidence interval
Butterfly spread
Complement
4. 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.
Company share-related factors
Statistical inference
Binomial random variable
Tenor
5. A legal contract specifYing the terms of a bond issue.
Net book value
Basic earnings per share (EPS)
Long-term contract
Bond indentnre
6. 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
Trade credit
Sovereign yield spread
Production-flexibility
Degree of total leverage
7. The goods and sernces that we buy from people in other countries.
Terms of trade
Venturers
Conglomerate discount
Imports
8. Stan-dard errors of the estimated parameters of a regression that correct for the presence of het-eroskedasticity in the regression's error term.
Heteroskedasticity-consistent standard errors
One third rule
Price relative
Parameter
9. An option in which the underlying is a bond; primarily traded in over-the-counter markets.
Replacement value
Consolidation
Net borrower
Bond option
10. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.
Provision
Hypothesis testing
Liquidation
Trade-weighted index
11. The setting of overall policies and standards in risk management
Sampling error
Discrintinant analysis
Investing activities
Risk governance
12. Each component call option in a cap.
Caplet
Capitalization rate
A priori probability
Financial leverage ratio
13. The mix of debt and equity that a company uses to finance its business; a company's specific mixture of long-term financing.
Takeover
Capital structure
Swap spread
Operating cycle
14. The income tax expected to be recovered - from the taxing authority - on the basis of taxable income. It is a recovery of previ-ously remitted taxes or future taxes owed by the company.
Effective annual rate
Income tax recoverable
Tax expense
Bond-equivalent basis
15. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.
Operating return on assets (operating
omparable company
Hypothesis
Controlling interest
16. A complete pass through the steps of a simula tion .
Time-weighted rate of return
Holder-of-record date
Simulation trial
Residual dividend approach
17. Private equity investors in development-stage companies.
Venture capital investors
Floorlet
Dealing securities
Corporate raider
18. A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits - share repurchases use corporate cash.
Inventory turnover
Share repurchase
Synthetic forward contract
Test statistic
19. The standard deviation of the differ-ences between a portfolio's returns and its bench-mark's returns; a synonym of active risk.
Supernormal growth
Differential expectations
Tracking risk
Trade receivables (commercial receivables or accounts receivable)
20. The principle that dol-lar amounts indexed at the same point in time are additive.
Cash price or spot price
Empirical probability
Total return swap
Cash flow additivity principle
21. An acquisition in which the acquirer gives the target company's shareholders some combination of cash and securities in exchange for shares of the target company's stock.
Cash-flow-statement-based aggregate accruals
Empirical probability
Sales risk
Stock purchase
22. With respect to financial statement analy-sis - the ability of a company to fulfill its long-term obligations.
Log-log regression model
Vertical analysis
Marketability discount
Solvency
23. An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company's stock relative to its bonds. The addi-tional yield is often estimated using historic
Bond yield plus risk premium approach
Continuous random variable
Capture hypothesis
Exhaustive
24. Diminishment in value as a result of car-rying (book) value exceeding fair value and/or recoverable value.
Treasury shares
Contribution margin
Number of days of inventory
Impairment
25. The after-tax net operating profits as a percent of total assets or capital.
Financial transaction
Return on invested capital (ROIC)
Pre-investing
Mutually exclusive events
26. The required rate of return on com-mon stock.
Proxy fight
Debt with warrants
Cost of equity
Qualitative dependent variables
27. A finance perspective on capital markets that deals with the relationship of price to intrinsic value. The traditional efficient mar-kets formulation asserts that an asset's price is the best available estimate of its intrinsic value. The rational ef
Market efficiency
Scatter plot
Value at risk (VAR)
Strap
28. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.
Retail method
Target payout ratio
Materiality
Skewness
29. A pre-offer takeover defense mechanism that makes it prohibitively costly for an acquirer to take control of a target without the prior approval of the target's board of directors.
Share repurchase
Poison pill
Effective annual yield (EAY)
Discrete random variable
30. The currency in which finan-cial statement amounts are presented.
Goodwill
Presentation currency
Dependent
Bond equivalent yield
31. Options originally created with expirations of sev-eral years.
Free cash flow to equity
Long-term equity anticipatory securities (LEAPS)
Winsorized mean
Semilogarithmic
32. 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.
Probability function
Financial risk
Due diligence
Held-for-trading securities (trading securities)
33. A yield on a basis comparable to the quoted yield on an interest-bearing money market instrument that pays interest on a 360-<iay basis; the annualized holding period yield - assuming a 360-<iay year.
Money market yield (or CD equivalent yield
Compiled f'mancial statements
Cyclical businesses
Pooling of interests accounting method
34. A general strategy usually thought of as reducing - if not eliminating - risk.
Pre-investing
Unit root
Hedging
Balance-sheet-based aggregate accruals
35. An intangible asset that represents the excess of the purchase price of an acquired com-pany over the value of the net assets acquired.
Goodwill
Leptokurtic
Interest coverage
Permutation
36. A balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit. The taxable income is less than the accounting profit and income tax payable is less than tax expense. The company expects to eliminat
Accumulated benefit obligation
Duration
Value investors
Deferred tax liabilities
37. A financial covenant made in conjunction with existing debt that restricts a company's ability to incur additional debt at the same seniority based on one or more financial tests or conditions.
Ordinal scale
Day trader
Tracking error
Debt incurrence test
38. A linear regression model with two or more independent variables.
Mixed factor models
One third rule
Multiple linear regression model
Central limit theorem
39. All changes in equity other than contributions by - and distributions to - own-ers; income under clean surplus accounting; includes all changes in equity during a period except those resulting from investments by own-ers and distributions to owners;
Comprehensive income
Sales returns and allowances
Opportunity set
Arbitrage portfolio
40. An approach to managing inve tory based on expected demand and the predictability of demand; the ordering point for new inventory is determined based on the costs of ordering and carrying inventory - such that the total cost associated with inventory
Inventory
Economic order quantity-reorder point
Spin-off
Conditional variances
41. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.
Financial reporting quality
Electronic funds transfer
Enterprise risk management
Operating lease
42. A loan in which the interest rate is reset at least once after the starting date.
Quota
Lessee
Floating-rate loan
Pooling of interests accounting method
43. 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.
Takeover premium
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Cross-product netting
Electronic funds transfer
44. Individual accounts to which an employee and typically the employer makes contributions - generally on a tax-advantaged basis. The amounts of contributions are defined at the outset - but the future value of the benefit is unknown. The employee bears
Notes payable
Alternative hypothesis
Taxable temporary differences
Defined-contribution pension plans
45. A type of qualitative variable that takes on a value of 1 if a particular condition is true and 0 if that condition is false.
Dummy variable
Log-linear model
Present value model or discounted cash flow model
Risk budgeting
46. The ratio of the percentage change in net income to the percent-age change in operating income; the sensitivity ofthe cash flows available to owners when operating income changes.
Sales-type lease
Degree of financial leverage (DFL)
Outliers
Mesokurtic
47. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.
Mature phase
Minority active investments
Partial regression coefficients or partial slope coeffi-cients
Taxable income
48. The annual percentage change in real CDP.
Probability distribution
Economic growth rate
Chain rule of forecasting
Business risk
49. A type of non-audited financial statements; typically provide an opinion letter with representations and assurances by the reviewing accountant that are less than those in audited financial statements.
Growth option or expansion option
Nonlinear relation
Accounting estimates
Reviewed fmancial statements
50. A poison pill takeover defense that gives target company shareholders the right to purchase shares of the acquirer at a significant discount to the market price - which has the effect of causing dilution to all existing acquiring com-pany shareholder
Accelerated methods of depreciation
Sinking fund factor
Safety-first Rules
Flip-over pill