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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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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. FIrm model A model of stock valuation that views the value of a firm as the pres-ent value of expected future free cash flows to the firm.
Free cash flow to the
A priori probability
Transactions motive
Floorlet
2. 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
Return on assets (ROA)
Flip-over pill
Financial analysis
Deregulation
3. Describes a distribution that is more peaked than a normal distribution.
Going-concern value
Leptokurtic
Legislative and regulatory risk
Abandonment option
4. Valuation indicators that relate either price or a fundamental (such as earnings) to the time series of their own past val-ues (or in some cases to their expected value).
Momentum indicators
LIFO reserve
White knight
Vested benefit obligation
5. An activity ratio equal to rev-enue divided by average receivables.
Exp ected holding-period return
Receivables turnover
Historical simulation (or back simulation)
If-converted method
6. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.
Captive rmance subsidiary
Going-concern assumption
Joint probability
Deliveryoption
7. The ratio of a set of observations' standard deviation to the observa-tions' mean value.
Coefficient of variation (CV)
Vertical merger
Offsetting
Sector neutralizing
8. An option to enter into a swap.
Event
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
FIFO method
Swaption
9. A business's value under a going-concern assumption.
Return on common equity (ROCE)
Operating lease
Going-concern value
Upstream
10. The probabili ty that a confi-dence interval ind udes the unknown population parameter.
Degree of confidence
Account
No-growth value per share
Current assets - or liquid assets
11. A business owned and operated by a single person.
Leading dividend yield
Agency problem - or principal-agent problem
Sole proprietorship
Multiple
12. 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.
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Enterprise risk management
Money market yield (or CD equivalent yield
Reconciliation
13. A normal operating expense that has been paid in advance of when it is due.
Statistically significant
Single-payment loan
Prepaid expense
Percentage-of-completion
14. A variation of the market approach; considers actual transactions in the stock of the subject private company.
Dividend discount model based approach
Prior transaction method
Multiplication rule for probabilities
North
15. An amount or percentage deducted from the value of an owner-ship interest to reflect the relative absence ofmarketability.
Sales
Discount for lack of marketability
Real options
Income statement (statement of operations or profit and loss statement)
16. The arithmetic mean value of a population; the arithmetic mean of all the obser-vations or values in the population.
Pooling of interests accounting method
Simulation trial
Modal interval
Population mean
17. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Transaction exposure
Illiquidity discount
Treasury shares
Incremental cash flow
18. The ratio of the market value of debt and equity to the replacement cost of total assets.
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19. The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.
Sustainable growth rate
Screening
Financial leverage
Population standard deviation
20. When a company has a single risk management group that monitors and controls all of the risk-taking activities of the organization.
Business risk
Other post-employment benefits
Centralized risk management or companywide risk management
Financial flexibility
21. The management of a company's short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers) .
Working capital management
Interest rate
Days of sales outstanding (DSO)
Exports
22. Covering or containing all possible outcomes.
Exhaustive
Positive serial correlation
Liquidation value
Effective annual yield (EAY)
23. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.
Asset-based loan
Controlling interest
Hedging
Long-lived assets (or long-term assets)
24. The risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Shortfall risk
Interest coverage
Shark repellents
General Agreement on Tariffs and Trade
25. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.
Tender offer
Organic growth
Opportunity set
Reorganization
26. Amounts owed by a business to credi-tors as a result of borrowings that are evidenced by (short-term) loan agreements. n-Period moving average The average of the current and immediately prior n - 1 values of a time series.
Weighted mean
Due diligence
Survey approach
Notes payable
27. A method of revenue recognition in which - in each accounting period - the company estimates what percentage of the contract is complete and then reports that per-centage of the total contract revenue in its income statement.
Payment netting
Simple random sampling
If-converted method
Percentage-of-completion
28. With reference to an interval of grouped data - the number of observations in the interval divided by the total number of observa-tions in the sample.
Active risk squared
Probability distribution
Histogram
Relative frequency
29. Equity shares that are subordinate to all other types of. equity (e.g. - p refe rred equi ty) .
Ordinary shares (common stock or common shares)
Trailirig dividend yield
Target balance
Total probability rule
30. The competitive strategy of being the lowest cost producer while offering products comparable to those of other firms - so that prod-ucts can be priced at or near the industry average.
Sensitivity analysis
Cost leadership
Linear trend
Current liabilities
31. The value of exports of goods and ser-vices minus the value of imports of goods and services.
Nonstationarity
Net exports
Synthetic forward contract
Ratio spread
32. The margin requirementon the first day of a transaction as well as on anyday in which additional margin funds must be deposited.
Agency relationships
Initial margin requirement
Pairs arbitrage trade
Discount for lack of control
33. A non-operating entity created to carry out a specified purpose - such as leasing assets or securitizing receivables; can be a corporation - partnership - trust - limited liability - or partnership formed to facilitate a specific type of business act
Debtor nation
Special purpose entity (special purpose vehicle or variable interest entity)
Sandwich spread
Efficient portfolio
34. An offset to property - plant - and equipment (PPE) reflecting the amount of the cost of PPE that has been allocated to current and previous accounting periods.
Guideline public company method
Cash ratio
Accumulated depreciation
Delta hedge
35. The original time to maturity on a swap.
Downstream
Tenor
Valuation allowance
PEG ratio
36. Method of valu-ing property based on recen t sales prices of simi-lar properties.
Out-of-sample forecast errors
Direct sales-comparison approach
Operating profit (operating income)
Operating breakeven
37. Mutually exclusive proj-ects compete directly with each other. For example - if Projects A and B are mutually exclusive - you can choose A or B - but you cannot choose both. n Factorial For a positive integer n - the product of the first n positive i
Interval
Mutually exclusive projects
Cash-generating unit
Historical equity risk premium approach
38. A matrix or square array whoseentries are covariances; also known as a variance-covariance matrix.
Operating cycle
LIFO layer liquidation (LIFO liquidation)
Covariance matrix
Cash basis
39. The purchase of the accumulated shares of a hostile investor by a company that is targeted for takeover by that investor - usually at a substan-tial premium over market price.
Agency relationships
Greenmail
Cap
Fixed-income forward
40. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.
Node
Interest rate put
Decentralized risk management
Risk management
41. A policy regime is one that selects a target path for the exchange rate with interven-tion in the foreign exchange market to achieve that path.
Nonstationarity
Total invested capital
Crawling peg
Frequency polygon
42. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe
Effective annual yield (EAY)
Exports
Corporate governance
Zero-cost collar
43. A model that specifies an asset's intrinsic value.
Statistical inference
Absolute valuation model
Compiled f'mancial statements
Stress testing
44. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is
Her rmdahl-
Monetary assets and liabilities
Straddle
Intangible assets
45. The portion of the minimum-variance frontier beginning with the global mmlmum-variance portfolio and continuing above it; the graph of the set of portfolios offering the maximum expected return for their level of variance of return.
Modified duration
Breakup value or private market value
Efficient frontier
Index option
46. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Split-rate
Harmonic mean
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Complement
47. An account that offsets another account.
P Value
Contra account
Robust
Efficiency
48. The owners' remaining claim on the company's assets after the liabilities are deducted.
Capital allocation line (CAL)
Residual claim
Debt rating approach
Equity method
49. Heightened uncertainty regarding a company's ability to meet its various obligations because of lower or negative earnings.
Intrinsic value or exercise value
Financial distress
Performance appraisal
Conglomerate discount
50. Interest earned but not yet paid.
Nominal rate
Minimum-variance frontier
Accrued interest
Common-size analysis