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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. The use of inventory as collat-eral for a loan. Though the lender has claim to some or all of the company's inventory - the com-pany may still sell or use the inventory in the ordi-nary course of business.
Mature phase
Independent variable
Rho
Inventory blanket lien
2. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.
Enterprise risk management
Externality
Equity swap
Debt-to-equity ratio
3. The risk associated with the pos-sibility that a payment currently due will not be made.
Account format
Operating risk
Current credit risk
Cash price or spot price
4. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Duration
Statistically significant
Cash settlement
Sales risk
5. Attempts by management to encourage analysts to forecast a slightly lower number for expected earnings than the analysts would otherwise forecast.
Treasury stock method
Earnings expectation management
One third rule
Bottom-up investing
6. A measure of financial lever-age calculated as average total assets divided by average total equity.
Financial leverage ratio
Terminal share price
Statement of cash flows (cash flow statement)
Comprehensive income
7. An activity ratio equal to rev-enue divided by average receivables.
Position trader
Tangible assets
Receivables turnover
Option
8. 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.
Positive serial correlation
Debt incurrence test
Interest rate
Credit derivatives
9. A solvency ratio calculated as total debt divided by total shareholders' equity.
Debt-to-equity ratio
Real risk-free interest rate
Absolute frequency
Complement
10. The amount of funds originally invested in a project or instrument; the face value to be paid at maturity.
Cash flow additivity principle
Principal
Relative dispersion
Creative response
11. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.
Taxable income
Inverse price ratio
Mean-variance analysis
Currency option
12. The extent to which a company's operations are predictable with substantial confidence.
Binomial model
VISibility
Paired observations
Financial leverage ratio
13. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.
Capital allocation line (CAL)
Nondeliverable forwards (NDFs)
Company fundamental factors
Perfect collinearity
14. A forecasting approach that involves aggregating the individual company forecasts of analysts into industry fore-casts - and finally into macroeconomic forecasts.
Probability distribution
Tariff
Bottom-up forecasting approach
Free cash flow hypothesis
15. The revaluation of a financial asset or liability to its current market value or fair value.
Pecking order theory
Mark-ta-market
Capital allocation line (CAL)
Frequency distribution
16. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Horizontal analysis
Long-term liability
Free cash flow to equity
Sample kurtosis
17. Observations over individual units at a point in time - as opposed to time-series data.
Amortizing and accreting swaps
Bonding costs
Performance appraisal
Cross-sectional data
18. The condition in which supply equals demand.
Ratio scales
Heteroskedastic
Equilibrium
Liquidity risk
19. The rule that the joint probability of events A and B equals the probability of A given B times the probability of B.
Multiplication rule for probabilities
Capital budgeting
Bonding costs
Operating risk
20. 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)
Exchange ratio
Perfect collinearity
Earnings at risk (EAR)
21. A transaction between two affiliates - an investor company and an associate company such that the investor company records a profit on its income statement. An example is a sale of inven-tory by the investor company to the associate.
Incremental cash flow
Illiquidity discount
Noncurrent assets
Downstream
22. Division ofnet operating income by an overall capitalization rate to arrive at market value.
Cash basis
Direct income capitalization approach
Liquidation
Swap
23. Essentially - the pur-chase of some asset by the buyer (lessee) that is directly financed by the seller (lessor).
Market risk premium
Box spread
Finance lease (capital lease)
Return on invested capital (ROIC)
24. The relative price of foreign-made goods and services to U.S. -made goods and services.
Parametric test
Real exchange rate
London Interbank Offer Rate (LIBOR)
Spurious correlation
25. An electronic payment network available to businesses - individuals - and financial institutions in the United States - U.S. -Territories - and Canada.
Tie-in sales
Overnight index swap (OIS)
Automated Clearing House
Buy-side analysts
26. Amounts owed to the company from parties other than customers.
Other receivables
Exhaustive
Liruit down
Clean surplus relation
27. The earnings growth rate in a company's mature phase; an earnings growth rate that can be sustained long term.
Mature growth rate
Stated annual interest rate or quoted interest rate
Transition phase
Modal interval
28. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.
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29. Method of accounting in which the effect of transactions on financial condition and income are recorded when they occur - not when they are settled in cash.
Number of days of inventory
Point estimate
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Accrual basis
30. A transaction whereby the target company management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company's outstanding shares.
Imports
Balance-sheet-based accruals ratio
PEG
Leveraged buyout (LBO)
31. The owners' remaining claim on the company's assets after the liabilities are deducted.
Valuation ratios
Efficient portfolio
Residual dividend approach
Residual claim
32. The rate of return that must be met fora project to be accepted.
Hurdle rate
Sales risk
European-style option or
Vega
33. Limits imposed by a futures exchange on the price change that can occur from one day to the next.
Rational efficient markets formulation
Sample selection bias
Price limits
Anticipation stock
34. A method of account-ing in which combined companies were portrayed as if they had always operated as a single eco-nomic entity. Called pooling of interests under
Tax risk
Operating profit (operating income)
Pure-play method
Uniting of interests method
35. With respect to the application of the LIFO inventory method - the liquidation of old - relatively low-priced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old - low
Income approach
LIFO layer liquidation (LIFO liquidation)
Realizable value (settlement value)
Receiver swaption
36. The ratio of the market value of debt and equity to the replacement cost of total assets.
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37. Approach to trans-lating foreign currency financial statements for consolidation in which monetary assets and liabil-ities are translated at the current exchange rate. Nonmonetary assets and liabilities are translated at historical exchange rates (th
Buy-side analysts
Implied yield
Monetary/nonmonetary method
First-differencing
38. A model that specifies an asset's intrinsic value.
Arithmetic mean
Absolute valuation model
Block
Dependent
39. Options that - if exercised - would require the payment of more money than the value received and therefore would not be cur-rently exercised.
Out-of-the-money
Terminal value of the stock (or continuing value of the stock)
Covariance matrix
Quartiles
40. Aka Harmonic mean.
Weighted harmonic mean
Quartiles
Basic earnings per share (EPS)
Scenario analysis
41. A dividend yield based on the anticipated dividend during the next 12 months.
Managerialism theories
Forward dividend yield
Grant date
Trade credit
42. The elimination or phasing out of reg-ulations on economic activity.
Interquartile range
Venturers
Deregulation
Fair value
43. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.
Incremental cash flow
Net asset balance sheet exposure
Interest coverage
Structured note
44. The unsold units of product on hand.
Standard normal distribution (or unit normal distribu-tion)
Efficient portfolio
Inventory
Annuity due
45. The variable whose variationabout its mean is to be explained by the regres-sion; the left-hand-side variable in a regressionequation.
Spin-off
Forward contract
Sunk cost
Dependent variable
46. An accelerated depre-ciation method - i.e. - one that allocates a relativelylarge proportion of the cost of an asset to the early years of the asset's useful life.
Yield spread
Comparables (comps - guideline assets - guideline com-panies)
J oint probability function
Diminishing balance method
47. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Market timing
Linear regression
Capital allocation line (CAL)
Pet projects
48. A reduction or discount to value for shares that are not publicly traded.
Realizable value (settlement value)
Installment method (installment-sales method)
Kurtosis
Marketability discount
49. The government's holding of foreign cun; - e.!}cy.
Period costs
U.S. official reserves
Perpetuity
Illiquidity discount
50. An account that offsets another account.
Equity charge
Venturers
Contra account
Intergenerational data mining