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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.
If you are not ready to take this test, you can
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 amount of money that a trader deposits in a margin account. The term is derived from the stock market practice in which an investor bor-rows a portion of the money required to purchase a certain amount of stock. In futures markets - there is no b
Accounting estimates
Target payout ratio
Inverse price ratio
Margin
2. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.
Intangible assets
Power of a test
Dividend discount model (DDM)
Interest rate collar
3. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.
Flip-over pill
Accounts payable
Company fundamental factors
Activity ratios (asset utilization or operating efficiency ratios)
4. The company in a merger or acquisition that is acquiring the target.
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Acquiring company - or acquirer
Simulation trial
American option
5. Assets lacking physical substance - such as patents and trademarks.
New growth theory
Imputation
Mixed offering
Intangible assets
6. With respect to double-entry accounting - a debit records increases of asset and expense accounts or decreases in liability and owners' equity accounts.
New growth theory
Money-weighted rate of return
Debit
Assets
7. Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Income statement (statement of operations or profit and loss statement)
Agency problem - or principal-agent problem
Cannibalization
In-sample forecast errors
8. A reserve created against deferred tax assets - based on the likelihood of realizing the deferred tax assets in future account-ing periods.
Diminishing balance method
Valuation allowance
Direct income capitalization approach
Sovereign yield spread
9. The financial state-ment that presents an entity's current financial position by disclosing resources the entity con-trols (its assets) and the claims on those resources (its liabilities and equity claims) - as of a particular point in time (the date
Aging schedule
Unexpected earnings (also earnings surprise)
Balance sheet (statement of fmandal position or state-ment of fmandal condition)
Grouping by nature
10. Each component put option in a floor.
Floorlet
Yield to maturity
Investment opportunity schedule
Expected value
11. An inter-national agreement signed in 1947 to reduce tar-iffs on international trade.
Cyclical businesses
General Agreement on Tariffs and Trade
Liquidation value
Sampling plan
12. The actual value of a variable minus its pre-dicted (or expected) value.
Face value (also principal - par value - stated value - or maturity value)
Surprise
Cost structure
Downstream
13. A country that is lending more to the rest of the world than it is borrowing from it.
Net lender
Net income (loss)
Transactions motive
Lemons problem
14. 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.
Financing activities
Accrual basis
Tracking portfolio
Platykurtic
15. The mix of debt and equity that a company uses to finance its business; a company's specific mixture of long-term financing.
Option
NTM P/E
Market-oriented investors
Capital structure
16. A variation of a floating-rate note that has some type of unusual characteristic such as a leverage factor or in which the rate moves opposite to interest rates.
Principal
Creative response
Structured note
Liruit up
17. Ratios that measure a company's ability to meet its long-term obligations.
Solvency ratios
Forward rate agreement (FRA)
Cointegrated
Complement
18. An acquisition in which the acquirer purchases the target company's assets and pay-ment is made directly to the target company.
Asset purchase
Conditional probability
Termination date
Declaration date
19. The official price - designated by the clearinghouse - from which daily gains and losses will be determined and marked to market.
Settlement price
Multiple linear regression
Financial risk
Qualitative dependent variables
20. Differences between tax and financial reporting of revenue (expenses) that will not be reversed at some future date. These result in a difference between the company's effective tax rate and statutory tax rate and do not result in a deferred tax item
Face value (also principal - par value - stated value - or maturity value)
Quick ratio - or acid test ratio
Permanent differences
Hedge ratio
21. A record of foreign investment in a country minus its investment abroad.
Alpha (or abnormal return)
Capital account
Cumulative distribution function
Real options
22. A guarantee from the clear-inghouse that if one party makes money on a transaction - the clearinghouse ensures it will be paid.
Build-up method
Segment turnover
Performance guarantee
Crawling peg
23. An option in which the underlying is a bond; primarily traded in over-the-counter markets.
Bond option
Value
Cross-sectional analysis
Market value of invested capital
24. The fixed price or rate at which the transaction scheduled to occur at the expiration of a forward contract will take place. This price is agreed on at the initiation date of the contract.
Adjusted present value (APV)
Type I error
Forward price or forward rate
Constant maturity treasury or
25. A time series that is not covariance station-ary is said to have a unit root.
Unit root
Return on common equity (ROCE)
Deep out of the money
Real exchange rate
26. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.
Impairment of capital rule
Mean-variance analysis
Fundamentals
Subsistence real wage rate
27. A transformation that involves sub-tracting the mean and dividing the result by the standard deviation.
Priced risk
Standardizing
Cash
Scatter plot
28. A theory of economic growth based on the idea that real CDP per person grows because of the choices that people make in the pursuit of profit and that growth can persist indefinitely.
Relative valuation models
Stated rate (nominal rate or coupon rate)
New growth theory
Entry price
29. An annuity having a first cash flow that is paid immediately.
Annuity due
Book value equity per share
Discrintinant analysis
Reviewed fmancial statements
30. Income approach that values an asset based on estimates of future cash flows discounted to present value by using a discount rate reflective of the risks associated wi th the cash flows.
Unexpected earnings (also earnings surprise)
Free cash flow method
Stock purchase
Kurtosis
31. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.
Commodity swap
Maturity premium
Managerialism theories
Owners' equity
32. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.
Growth phase
Benchmark value of the multiple
Structured note
Offsetting
33. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; provides information about an entity's cash inflows and cash outflows as they pertain to oper-ating - investing - and financing activities.
Unbiasedness
Statement of cash flows (cash flow statement)
Sarbanes-Oxley Act
Joint probability
34. Corporate earnings are taxed twice when paid out as dividends. First - corporate earn-ings are taxed regardless of whether they will be distributed as dividends or retained at the G-13 corporate level - and second - dividends are taxed again at the i
Double taxation
LIFO reserve
Common size statements
Asset retirement obligations (AROs)
35. Debt (fixed-income) securities that a company intends to hold to matu-rity; these are presented at their original cost - updated for any amortization of discounts or pr.emiums.
Working capital turnover
Held-to-maturity investments
Identifiable intangible
Tenor
36. With respect to double-entry accounting - a credit records increases in liability - owners' equity - and revenue accounts or decreases in asset accounts; with respect to borrowing - the willing-ness and ability of the borrower to make promised paymen
NTM P/E
LIFO layer liquidation (LIFO liquidation)
Credit
Agency costs of equity
37. A si gle numerical estimate of an unknown quantity - such as a population parameter.
Data mining
Du Pont analysis
Point estimate
Incremental cash flow
38. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.
Discount interest
Leptokurtic
Buy-side analysts
Sales returns and allowances
39. 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.
Intergenerational data mining
Bayes' formula
Component cost of capital
Neoclassical growth theory
40. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.
Matching strategy
Winner's curse
Tree diagram
Debt rating approach
41. A comparison of revenues with working capital to produce a measure that shows how efficiently working capital is employed.
Justified price multiple (or warranted price multiple or intrinsic price multiple)
Net income (loss)
Working capital turnover
Economic exposure
42. The day that the company actually mails out (or electronically transfers) a dividend payment.
Rational efficient markets formulation
Payment date
Net operating cycle
Cointegrated
43. The arithmetic mean value of a population; the arithmetic mean of all the obser-vations or values in the population.
Stock grants
Standardized unexpected earnings (SUE)
Mean absolute deviation
Population mean
44. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.
In-sample forecast errors
Confidence interval
Market-extraction method
Down transition probability
45. The process of identifYing the level of risk an entity wants - measuring the level of risk the entity currently has - taking actions that bring the actual level of risk to the desired level of risk - and monitoring the new actual level of risk so tha
Risk management
Pure discount instruments
Winsorized mean
Time value of money
46. The risk associated with the conversion of foreign financial statements into domestic currency.
Translation exposure
Capital allocation line (CAL)
Amortization
Cash ratio
47. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).
Committed lines of credit
Gains
Net asset balance sheet exposure
Deferred tax liabilities
48. The portion of an entity's income that is subject to income taxes under the tax laws of its jurisdiction.
Taxable income
Sector rotation strategy
Statutory merger
Bargain purchase
49. The study of how data can besummarized effectively.
Descriptive statistics
Operating cycle
Interest rate option
Drag on li
50. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Pretax margin
Spreadsheet modeling
Linear trend
Multiple