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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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 graph of the set of portfolios that have minimum variance for their level of expected return.






2. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.






3. The use of inven-tory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e. - a warehouse company) that supervises the inventory.






4. The rate of return required by suppliers of capital for an individual source of a company's funding - such as debt or equity.






5. The posi tive square root of tar-get semivar·ance.






6. The elimination or phasing out of reg-ulations on economic activity.






7. The risk attributed to the operating cost structure - in particular the use of fixed costs in operations; the risk arising from the mix of fixed and variable costs; the risk that a company's operations may be severely affected by environ-mental - soc






8. An activity ratio equal to rev-enue divided by average receivables.






9. An amount equal to net taxes minus government expenditure on goods and services.






10. The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets.






11. Amount that must be set aside each period to have $1 at some future point in time.






12. 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.






13. The process by which options and other derivatives are priced by treating investors as though they were risk neutral.






14. The net amount of cash provided from operating activities.






15. A formula that expresses the equivalence or parity of spot and forward rates - after adjusting for differences in the interest rates.






16. A market index portfolio.






17. The actual cash that would be avail-able to the company's investors after making all investments necessary to maintain the company as an ongoing en terprise (also referred to as free cash flow to the firm); the internally generated funds that can be






18. 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






19. 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.






20. An average in which each observation is weighted by an index of its relative importance.






21. Activities which are associated with the acquisition and disposal of property - plant - and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt (bonds and loans) issued by other c






22. The variance of active returns; active risk raised to the second power.






23. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power - as distinguished from growth or development as a consequence of a superior product - business acumen - or historical accident.






24. A cost that has already been incurred.






25. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.






26. Resources controlled by an enterprise as a result of past events and from which future eco-nomic benefits to the enterprise are expected to flow.






27. A measurement scale that not only ranks data but also gives assurance that the differ-ences between scale values are equal.






28. The hypothesis accepted when the null hypothesis is rejected.






29. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






30. The process of valuing long-lived assets at fair value - rather than at cost less accumulated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity under revaluation surplus.






31. The granting of stock options to employees as a form of compensation.






32. Observations on characteristic(s) of the same observational unit through time.






33. A profitability ratio calcu-lated as net income divided by average total assets; indicates a company's net profit generated per dollar invested in total assets.






34. A subset of a population.






35. Netting the market values of all contracts - not just derivatives - between parties.






36. A money measure of the mini-mum value of losses expected during a specified time period at a given level of probability.






37. Income rate that reflects the relationship between equity income and equity capital.






38. The rate of return that must be met fora project to be accepted.






39. Said of a sale in which proceeds are to be paid in installments over an extended period of time.






40. The present discounted value of future cash flows: For assets - the present dis-counted value of the future net cash inflows that the asset is expected to generate; for liabilities - the present discounted value of the future net cash outflows that a






41. The competitive strategy of offeringunique products or services along some dimen-sions that are widely valued by buyers so that thefirm can command premium prices.






42. The company in a merger or acquisition that is being acquired.






43. 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.






44. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.






45. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.






46. With respect to the format of the income statement - a format that does not subtotal for gross profit (revenue minus cost of goods sold) .






47. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.






48. A finite set of level sequential cash flows.






49. A specialized computer program or a spreadsheet that solves for the portfolio weights that will result in the lowest risk for a specified level of expected return.






50. An investment strategy in which an investor constructs a portfolio to mirror the per-formance of a specified index.