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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 time remaining in the life of a derivative - typically expressed in years.
Conversion factor
Residual loss
Time to expiration
Abandonment option
2. The amount charged for the delivery of goods or services in the ordinary activities of a business over a stated period; the inflows of eco-nomic resources to a company over a stated period.
Drag on li
Cash ratio
Equity options
Revenue
3. A limit move in the futures market in which the price at which a transaction would be made is at or below the lower limit.
Liruit down
Interest rate put
Settlement period
Yield
4. A gain in value caused bychanges in price levels. Monetary liabilities expe-rience purchasing power gains during periods ofinflation.
Cross-sectional analysis
Purchasing power gain
Credit scoring model
Current ratio
5. A company's profits on its usual business activities before deducting taxes.
Pooling of interests accounting method
Holding period return
Cap
Operating profit (operating income)
6. In the context of the weighted average cost of capital (WACC) - a break point is the amount of capital at which the cost of one or more of the sources of capital changes - leading to a change in the WACC.
Matrix pricing
Terms of trade
Deductible temporary differences
Break point
7. Costs of inven tories including costs of purchase - costs of conversion - other costs to bring the inventories to their present location and condition - and the allocated portion of) fixed production overhead costs.
Measure of central tendency
Financial reporting quality
Capitalized inventory costs
Write-down
8. Total company valme (the market value of debt - common equity - and preferred equity) minus the value of cash and investments.
Foreign currency
Quintiles
Enterprise value (EV)
Amortization
9. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .
Delta
Pseudo-random numbers
Asian call option
Income
10. The most frequently occurring value in a set of observations.
Dirty surplus items
Mode
Earnings yield
Discrintinant analysis
11. A test in which the null hypothesis is rejected in favor of the alternative hypothesis if the evidence indicates that the population param-eter is either smaller or larger than a hypothe-sized value.
Free cash flow to the
Ex-dividend date
Two-sided hypothesis test (or two-tailed hypothesis test)
Interest rate parity
12. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.
Discount rate
Net liability balance sheet exposure
Out-of-sample test
Interest rate put
13. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Pet projects
Comparative advantage
Quick assets
Equitizing cash
14. Each value on a binomial tree from which suc-cessive moves or outcomes branch.
Node
PEG ratio
Scaled earnings surprise
Transition phase
15. Debt and equity secu-rities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general - available-for-sale securities are reported at fair value on the bala
Statement of cash flows (cash flow statement)
Economies of scale
Proportionate consolidation
Available-for-sale investments
16. The amount that each unit sold contributes to covering fixed costs- that is - the difference between the price per unit and the variable cost per unit.
Defined-benefit pension plans
Standardized beta
Instability in the minimum-variance frontier
Per unit contribution margin
17. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.
Inverse floater
Cash flow at risk (CFAR)
Initial public offering (IPO)
Parameter
18. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.
Money market yield (or CD equivalent yield
Historical method
Bill-and-hold basis
Economic growth rate
19. A model of intrinsic value that views the value of an asset as the present value of the asset's expected future cash flows.
Interval
Present value model or discounted cash flow model
Implied repo rate
Manufacturing resource planning (MRP)
20. Unearned fees are recognized when a company receives cash payment for fees prior to earning them.
Unearned fees
Commodity option
Cyclical businesses
Target capital structure
21. The compound rate of growth of one unit of currency invested in a port-folio during a stated measurement period; a mea-sure of investment performance that is not sensitive to the timing and amount of withdrawals or additions to the portfolio.
Measure of location
Time-weighted rate of return
Split-off
Balance-sheet-based aggregate accruals
22. Under U.S. GAAP -a special purpose entity structured to avoid consol-idation that must meet qualification criteria.
Diluted earnings per share (diluted
Liquidity
Qualifying special purpose entities
Net operating profit less adjusted taxes - or NOPLAT
23. 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.
Specific identification method
Accounts payable
Matrix pricing
Interest rate cap or cap
24. When disbursements are paid tooquickly or trade credit availability is limited -requiring companies to expend funds beforethey receive funds from sales that could cover theliability.
Settlement risk
Pull on liquidity
Weighted average cost method
Cnsistent
25. The net amount of cash provided from operating activities.
Accounting risk
Optimizer
Cash flow from operations (cash flow from operating activities or operating cash flow)
Effective annual rate
26. With reference to the cash flow statement - a format for the presentation of the statement in which cash flow from operat-ing activities is shown as operating cash receipts less operating cash disburseme ts.
Direct format (direct method)
Efficient portfolio
Dirty surplus accounting
Account
27. Division ofnet operating income by an overall capitalization rate to arrive at market value.
Quantile (or fractile)
Excess kurtosis
Forward rate agreement (FRA)
Direct income capitalization approach
28. The amount at which an asset or liability is valued according to account-ing principles.
Instability in the minimum-variance frontier
Accounts receivable turnover
Termination date
Carrying amount (book value)
29. With reference to equity investors - investors whose investment disciplines cannot be clearly categorized as value or growth.
Seats
U.S. GAAP and uniting of interests under IFRS
Interest rate swap
Market-oriented investors
30. A form ofcommon-size analysis in which the accounts in agiven period are used as the benchmark or baseperiod - and every account is restated in subse-quent periods as a percentage of the base period'ssame account.
Horizontal common-size analysis
Logit model
omparable company
Alpha (or abnormal return)
31. The relationship amongputs - calls - and forward contracts.
Asian call option
Decision rule
Put-call-forward parity
Population
32. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.
Range
Sample variance
Number of days of receivables
omparable company
33. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.
Capitalized cash flow model (method)
Fixed costs
Direct debit program
Absolute dispersion
34. 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.
Warehouse receipt arrangement
Stock options (stock option grants)
Synthetic forward contract
Income approach
35. In the context of corporate finance - leverage refers to the use of fixed costs within a company's cost structure. Fixed costs that are operating costs (such as depreciation or rent) create operating leverage. Fixed costs that are financial costs (su
Leverage
Allowance for bad debts
Cash ratio
Bank discount basis
36. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
Short
Leverage
Breakeven point
IRR rule
37. Quantiles that divide a distribution into five equal parts.
Arbitrage
Quintiles
Conditional variances
LIFO method
38. Ratios that measure a company's ability to meet its long-term obligations.
Solvency ratios
Reviewed fmancial statements
Debt-to-capital ratio
Enterprise value (EV)
39. Agency costs that are incurred despite adequate monitoring and bonding of management.
Friendly transaction
Capital asset pricing model (CAPM)
Tax base (tax basis)
Residual loss
40. Financial ratios measuring the com-pany's ability to meet its short-term obligations.
Collar
Liquidity ratios
Index option
Prepaid expense
41. Futures contracts in which the underlying is a stock - bond - or currency.
Cash flow statement (statement of cash flows)
Market risk
Financial futures
Fiduciary call
42. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Hedge ratio
Value at risk (VAR)
Marking to market
Premise of value
43. An option in which the underlying is a bond; primarily traded in over-the-counter markets.
Antidilutive
Outliers
Bear spread
Bond option
44. The nonmonetary return offered by an asset when the asset is in short supply - often associated with assets with seasonal production processes.
Convenience yield
Number of days of inventory
Financial distress
Independent and identically distributed (l
45. A country that during its entire his-tory has invested more in the rest of the world than other countries have invested in it.
Translation exposure
Net asset balance sheet exposure
Creditor nation
Dividend discount model based approach
46. Tax expenses that have been recognized and recorded on a company's income statement but which have not yet been paid.
Laddering strategy
Financial futures
Current taxes payable
Continuous time
47. A list of accounts used in an entity's accounting system.
Tax expense
Deferred tax liabilities
Official settlements account
Chart of accounts
48. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.
ecurity market line (SML)
Activity ratios (asset utilization or operating efficiency ratios)
Tax risk
Fundamentals
49. 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.
Basic earnings per share (EPS)
Indexing
Taxable temporary differences
Incremental cash flow
50. The company in a merger or acquisition that is acquiring the target.
Straddle
Credit analysis
Acquiring company - or acquirer
Binomial model