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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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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 profitability ratio calcu-lated as net income divided by average sharehold-ers' equity.
Return on equity (ROE)
Covariance
Cash conversion cycle (net operating cycle)
Carrying amount (book value)
2. The amount of variability pres-ent without comparison to any reference point or benchmark.
Absolute dispersion
Pure discount instruments
Accumulated depreciation
Systematic sampling
3. A form of data min-ing that applies information developed by previ-ous researchers using a dataset to guide curren t research using the same or a related dataset.
Multiple linear regression
Covariance matrix
Discount for lack of control
Intergenerational data mining
4. Options that - if exercised - would result in the value received being worth more than the payment required to exercise.
P Value
In-the-money
Geometric mean
Finance lease (capital lease)
5. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.
Before-tax cash flow
Multivariate normal distribution
Cross-sectional data
Cost of debt
6. The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.
Balance of payments accounts
Real exchange rate
Amortization
Modified duration
7. Financial instru-ments that an entity chooses to measure at fairvalue per lAS 39 or SFAS 159. Generally - the elec-tion to use the fair value option is irrevocable.
Addition rule for probabilities
Designated fair value instruments
Salvage value
Diluted shares
8. The number of shares that target stockholders are to receive in exchange for each of their shares in the target company.
Forward P/E (also leading P/E or prospective P/E)
Statement of changes in shareholders' equity (state-ment of owners' equity)
Minority active investments
Exchange ratio
9. An act passed by the U.S. Con-gress in 1933 that specifies the financial and other significant information that investors must receive when securities are sold - prohibits misrepresenta-tions - and requires initial registration of all public issuance
Interest rate put
Securities Act of 1933
Current credit risk
Covariance matrix
10. With reference to a sample - the mean of the absolute values of deviations from the sample mean.
Mean absolute deviation
Independent projects
Pre-investing
Creditworthiness
11. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .
Measure of central tendency
Financial transaction
Double-entry accounting
Off-balance sheet imancing
12. The party obtaining the use of an asset through a lease.
Credit
Net operating cycle
Degree of total leverage
Lessee
13. A company's profits on its usual business activities before deducting taxes.
Share repurchase
Beta
Strap
Operating profit (operating income)
14. The return that an investorearns during a specified holding period; a syn-onym for total return.
Holding period return
Money-weighted rate of return
Nonearning assets
Currency swap
15. An approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marke
Priced risk
Dividend discount model based approach
Index amortizing swap
Income approach
16. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.
Elasticity
Gross profit argin
Cost structure
Lower bound
17. A liquidity ratio that esti-mates the number of days that an entity could meet cash needs from liquid assets; calculated as (cash + short-term marketable investments + receivables) divided by daily cash expenditures.
Defensive interval ratio
Debtor nation
Constant maturity treasury or
Revolving credit agreements
18. The ability to terminate a proj-ect at some future time if the financial results are disappointing.
Abandonment option
Roy's safety first criterion
Classified balance sheet
Binomial tree
19. The percentage of a market that a particular fi rm supplies; used as the primary measure of monopoly power.
Annuity due
Normalized earnings per share (or normal earnings per share)
Monopolization
Market share test
20. With reference to portfolio strategies - the application of a strategy's portfolio selection rules to historical data to assess what would have been the strategy's historical performance.
Current cost
Synthetic call
Stated annual interest rate or quoted interest rate
Backtesting
21. The number of successes in n Bernoulli trials for which the probability of success is constan t for all trials and the trials are independent.
Linear trend
Owners' equity
Quota
Binomial random variable
22. The amount to which a payment or series of payments will grow by a stated future date.
Earnings expectation management
Future value (FV)
Standardized beta
Capital budgeting
23. The difference between the third and fi rst quarti les of a dataset.
Homogenization
Interquartile range
Uniting of interests method
Nominal rate
24. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.
Simple random sample
Net asset balance sheet exposure
Zero-cost collar
Tobin's q
25. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.
Blockage factor
Systematic sampling
Statistically significant
Expiration date
26. Costs (e.g. - executives' salaries) that cannot be directly matched with the timing of rev-enues and which are thus expensed immediately.
Monopolization
Period costs
Entry price
Expiration date
27. Unsecured short-term corporate debt that is characterized by a single payment at maturity.
Straddle
Capital rationing
Commercial paper
Partial regression coefficients or partial slope coeffi-cients
28. A method for accounting for the effect of options (and warrants) on earnings per share (EPS) that specifies what EPS would have been if the options and warrants had been exercised and the company had used the pro-ceeds to repurchase common stock.
Nondeliverable forwards (NDFs)
Weighted-average cost of capital (WACC)
Treasury stock method
Interest rate option
29. The most frequently occurring value in a set of observations.
Mode
Takeover
Survey approach
London Interbank Offer Rate (LIBOR)
30. Describes a scale constructed so that equal intervals on the vertical scale represent equal rates of change - and equal intervals on the horizontal scale represent equal amounts of change.
Semilogarithmic
Credit VAR - default VAR - or credit at risk
Classical growth theory
Current assets - or liquid assets
31. An annuity with a first cash flow that is paid one period from the present.
Independent variable
Pooled estimate
Carried interest
Ordinary annuity
32. The incor-poration of production planning into inventory management. A MRP analysis provides both a materials acquisition schedule and a production schedule.
Manufacturing resource planning (MRP)
Purchasing power loss
Negative serial correlation
Premise of value
33. An activity ratio equal to the number of days in period divided by receivables turnover.
Days of sales outstanding (DSO)
ackwardation
Direct f'mancing lease
Accumulated depreciation
34. A swap in which the floating rate is the cumulative value of a single unit of currency invested at an overnight rate dur-ing the settlement period.
Covariance matrix
Risk-neutral probabilities
Overnight index swap (OIS)
Number of days of payables
35. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free
Price multiple
Arbitrage
Type II error
Reputational risk
36. The single-period interest rate for a completely risk-free security if no infla-tion were expected.
Cash-flow-statement-based aggregate accruals
Real risk-free interest rate
Arbitrage
Nonlinear relation
37. Observations over individual units at a point in time - as opposed to time-series data.
Greenmail
Cross-sectional data
Economies of scale
London Interbank Offer Rate (LIBOR)
38. Financial statements that are not accompanied by an auditor's opinion letter.
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39. An approach to trading that uses pairs of closely re ated stocks - buying the relatively undervalued stock and selling short the relatively overvalued stock.
Analysis of variance (ANOVA)
Straddle
Pairs trading
Intangible assets
40. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.
Credit
Fundamentals
Scaled earnings surprise
Net book value
41. PIE PI Es based on normalized EPS data.
Winner's curse
Hostile transaction
Normalized
Financial flexibility
42. The process of determining the value of an asset or service on the basis of variables per-ceived to be related to future investment returns - or on the basis of comparisons with closely similar assets.
Valuation
Days of sales outstanding (DSO)
Terminal value of the stock (or continuing value of the stock)
Assets
43. Unexpected earnings divided by the standard deviation of analysts' earnings forecasts.
Discount for lack of marketability
P Value
Scaled earnings surprise
Laddering strategy
44. Segment profit (loss) divided by segment revenue.
Total invested capital
Efficiency
Segment margin
Owners' equity
45. The establishment of objectives for individuals - groups - or divisions of an organiza-tion that takes into account the allocation of an acceptable level of risk.
Price to sales
Risk budgeting
Dispersion
Real risk-free interest rate
46. Uncorrelated; at a right angle.
Time-weighted rate of return
Orthogonal
Mutually exclusive events
Cherry-picking
47. Common-size analysis using only one reporting period or one base financial state-ment; fo r example - an income statement in which all items are stated as percentages of sales.
Hmnan capital
Fundamental factor models
Residual income method (or excess earnings method)
Vertical analysis
48. The amount at which an asset or liability is valued for tax purposes.
Pseudo-random numbers
Residual income method (or excess earnings method)
Tax base (tax basis)
No-growth value per share
49. With respect to revenue recognition - a method that s ecifies that the portion of the total profit of the sale that . s recognized in each pe riod is deter-mined by the percentage of the total sales price for which the seller has received cash.
Income tax paid
Installment method (installment-sales method)
Stock options (stock option grants)
Diffuse prior
50. Time thought of as advancing in dis-tinct finite increments.
Nominal scale
Discrete time
Unconditional heteroskedasticity
Ope ating profit margin (operating margin)