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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. Provision for a return of invest-ment - net of value appreciation.
Equity
Recapture premium
Floor
Stress testing
2. An offset to accounts receivable for the amount of accounts receivable that are estimated to be uncollectible.
Model specification
Allowance for bad debts
Earnings at risk (EAR)
Percentiles
3. Correlation between adj acent observations in a time ser ies.
First-order serial correlation
Guideline transactions method
Stock purchase
Node
4. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Subsidiary merger
Merger
Out-of-the-money
Harmonic mean
5. The process of selecting - evaluat-ing - and interpreting financial data in order to formulate an assessment of a company's present and future financial condition and performance.
Financial analysis
Sampling distribution
Full price
Prior transaction method
6. A principle stating that the pr:obability that A or B occurs (both occur) equals he probabili ty thab A occ rs - plus the probabir ty tha~ B occurs - minus the probabil-ity that both A and B occur.
Addition rule for probabilities
Tangible book value per share
Salvage value
Nonlinear relation
7. A form of restructuring in which sharehold-ers of a parent company receive a proportional number of shares in a new - separate entity; share-holders end up owning stock in two different companies where there used to be one.
Correlation
Cost recovery method
Multiple
Spin-off
8. A standardized measure of systematic risk based upon an asset's covariance with the market portfolio.
Log-log regression model
Credit
Beta
Creditor nation
9. The use of accounts receivable as collateral for a loan.
Assignment of accounts receivable
Lockbox system
Trend
Horizontal common-size analysis
10. A country that is lending more to the rest of the world than it is borrowing from it.
Tax base (tax basis)
Rational efficient markets formulation
Net lender
Bonding costs
11. The capital structure at which the value of the company is maximized.
Sample excess kurtosis
Rule of 70
Optimal capital structure
Bear spread
12. Future benefits promised to the employee regardless of continuing service. Bene-fits typically vest after a specified period of service or a specified period of service combined with age.
Forward P/E (also leading P/E or prospective P/E)
Balance sheet ratios
Vested benefits
Free cash flow to the
13. The combination of calls - the underly-ing - and risk-free bonds that replicates a put option.
Synthetic put
Goodwill
Account format
Stress testing
14. In the context of inventory management - the need for inventory as part of the routine production-sales cycle.
Salvage value
Definitive merger agreement
Transactions motive
Binomial random variable
15. The goods and sernces that we buy from people in other countries.
Unbiasedness
Current cost
Conditional probability
Imports
16. A present value model of stock value that views the intrinsic value of a stock as present value of the stock's expected future dividends.
Target semideviation
Passive portfolio
Dividend discount model (DDM)
Down transition probability
17. Assets and liabili-ties that are not monetary assets and liabilities. Nonmonetary assets include inventory - fixed assets - and intangibles - and nonmonetary liabili-ties include deferred revenue.
Nonmonetary assets and liabilities
Quantile (or fractile)
Bayes' formula
Proxy fight
18. A common or underlying element with which several variables are correlated.
U.S. interest rate differential
Creditor nation
Number of days of payables
Factor
19. The dollar amount of cash divi-dends paid during a period per share of common stock.
Nonconventional cash flow
Event
Minimum-variance frontier
Dividends per share
20. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.
American option
Strangle
Liruit move
Sales
21. An option strategy that combines two bull or bear spreads and has three exercise prices.
Tie-in sales
Frequency polygon
Before-tax cash flow
Butterfly spread
22. A purchase involving a buyer that would benefit from certain synergies associ-ated with owning the target firm.
Linear interpolation
Deliveryoption
Strategic transaction
Cross-product netting
23. The price at which an asset or liability would change hands between a willing buyer and a willing seller whe n the former is not under any compulsion to buy and the latter is not under any compulsion to sell; the price that would be received to sell
Default risk premium
Fair value
London Interbank Offer Rate (LIBOR)
Return on invested capital (ROIC)
24. Segment profit (loss) divided by seg-ment assets.
Pull on liquidity
Macaulay duration
Segment ROA
Nominal rate
25. In using the method of com parables - the value of a price mul-tiple for the comparison asset; when we have com-parison assets (a group) - the mean or median value of the multiple for the group of assets.
Monetary assets and liabilities
Long-term contract
Benchmark value of the multiple
Overall capitalization rate
26. A corporate transac-tion in which management repurchases all out-standing common stock - usually using the proceeds of debt issuance.
Trust receipt arrangement
Management buyout (MBO)
Brokerage
Sum-of-the-parts valuation
27. A feature of futures markets in which futures prices provide valuable information about the price of the underlying asset.
Dynamic hedging
Price discovery
Conditional variances
Trade receivables (commercial receivables or accounts receivable)
28. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.
Sampling plan
Divestiture
Nondeliverable forwards (NDFs)
Sector rotation strategy
29. The cost to a com pany of issu-ing preferred stock; the dividend yield that a com-pany must commit to pay preferred stockholders.
Direct income capitalization approach
Kurtosis
Cost of preferred stock
Earnings per share
30. In accounting - a liability of uncertain tim-ing or amount.
Income tax paid
Provision
Offsetting
Available-for-sale investments
31. A measurement scale that sorts data into categories that are ordered (ranked) with respect to some characteristic.
Target payout ratio
Ordinal scale
Lessee
Floor traders or locals
32. The amount of book value (also called carrying value) of common equity per share of common stock - calculated by dividing the book value of shareholders' equity by the num-ber of shares of common stock outstanding.
Book value equity per share
Enterprise risk management
Currency swap
Real risk-free interest rate
33. A form of restructuring in which sharehold-ers of the parent company are given shares in a /Jewl y c eated entity in e~change for their shares of the pare ~ company.
Split-off
Terminal value of the stock (or continuing value of the stock)
Segment debt ratio
Manufacturing resource planning (MRP)
34. Describes a distribution that is more peaked than a normal distribution.
Nonmonetary assets and liabilities
Leptokurtic
Payoff
Liruit move
35. A quoting convention that annualizes - on a 360-day year - the discount as a percentage of face value.
Partnership
Bank discount basis
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Operating leverage
36. Huidity When receipts lag - creating pres-sure fmm the decreased available funds.
Drag on li
Historical equity risk premium approach
Decision rule
Initial public offering (IPO)
37. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.
Uniting of interests method
Conventional cash flow
Delta
Surprise
38. A transformation that subtracts the value of the time series in period t - 1 from its value in period t.
Forward dividend yield
Flip-over pill
First-differencing
Unearned revenue (deferred revenue)
39. A portfolio having factor sensitiv-ities that are matched to those of a benchmark or other portfolio.
Perfect collinearity
Sharpe's measure
Income tax payable
Tracking portfolio
40. The last in - first out - method of accounting for inventory - which matches sales against the costs of items of inventory in the reverse order the items were placed in inventory (i.e. - inventory produced or acquired last are assumed to be sold firs
Credit VAR - default VAR - or credit at risk
LIFO method
Tracking risk
Performance measurement
41. A function giving the probability that a random variable is less than or equal to a specified value.
Cumulative distribution function
Account
Holding period return
Service period
42. Company growth in output or sales that is achieved by buying the necessary resources externally (i.e. - achieved through mergers and acquisitions) .
Reconciliation
External growth
Futures contract
Credit derivatives
43. The difference between reported net income on an accrual basis and the cash flows from operating and investing activities.
Cyclical businesses
Sovereign yield spread
Cash ratio
Cash-flow-statement-based aggregate accruals
44. A series of call options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A cap in general can have an underlying other than an interest ra
Interest rate cap or cap
Constant maturity treasury or
Permutation
Cash flow from operations (cash flow from operating activities or operating cash flow)
45. The smaller the stake that managers have in the company - the less is their share in bearing the cost of excessive perquisite consumption or not giving their best efforts in running the company.
LIFO layer liquidation (LIFO liquidation)
Strap
Agency costs of equity
Active specific risk or asset selection risk
46. A loss in value caused bychanges in price levels. Monetary assets experi-ence purchasing power losses during periods ofinflation.
Purchasing power loss
Adjusted present value (APV)
Measure of location
Operating cycle
47. When parties agree to exchange only the net amount owed from one party to the other.
Equity options
Netting
Diffuse prior
Quintiles
48. The most common type of commun-size analysis - ill which the accounts in a given period are compared to a benchmark item in that same year.
Forward integration
Venturers
Histogram
Vertical common-size analysis
49. Revenue after adjustments (e.g. - for estimated returns or for amounts unlikely to be collected).
Reorganization
Accumulated benefit obligation
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Net revenue
50. The P/E to-growth ratio - calculated as the stock's PI E divided by the expected earnings growth rate.
PEG
Type I error
Price to cash flow
Deliveryoption