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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.
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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 difference between inventory reported as FIFO and 'nventory reported as LIFO (FIFO inventory value less LIFO inventory val e).
Swaption
LIFO reserve
Debt rating approach
Degree of total leverage
2. An updated probability that reflects or comes after new information.
Posterior probability
Business risk
Operating breakeven
Pseudo-random numbers
3. Changes to equity that bypass (are not reported in) the income statement; the diffe rence between comprehensive income and net income.
Pure discount instruments
Free cash flow
Other comprehensive income
Clean surplus accounting
4. Weights that are used to compute a binomial option price. They are the probabilities that would apply if a risk-neutral investor valued an option.
Risk-neutral probabilities
Direct f'mancing lease
Active strategy
Variable costs
5. A variation of the market approach; establishes a value estimate based on the observed multiples from trading activity in the shares of public companies viewed as reasonably comparable to the subject private company.
External growth
A priori probability
Two-sided hypothesis test (or two-tailed hypothesis test)
Guideline public company method
6. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.
Cost-of-service regulation
Market approach
Sustainable growth rate
Acquisition method
7. The rate of dividend (and earnings) growth that can be sustained over time for a given level of re turn on equity - keeping the capi tal structure constant and wi thout issuing addi tional common stock.
Market price of risk
Error term
Sustainable growth rate
Passive strategy
8. The process of obtaining a sample.
Sampling
Method based on forecasted fundamentals
Segment turnover
Root mean square(l er ror (RMSE)
9. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.
Nominal scale
Nondeliverable forwards (NDFs)
Sample excess kurtosis
Random number generator
10. Events such that only one can occur at a time.
Accounts receivable turnover
Mutually exclusive events
Bottom-up analysis
Momentum indicators
11. A rule explaining the uncon-ditional probability of an event in terms of proba-bilities of the event conditional on mutually exclusive and exhaustive scenarios.
Stock purchase
Total probability rule
Brokerage
Bernoulli trial
12. 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
Current rate method
Theta
Enterprise value multiple
13. An option strategy in which a long position in a certain number of options is offset by a short position in a certain number of other options on the same underlying - resulting in a risk-free position.
Asset beta
Capital budgeting
Common size statements
Ratio spread
14. A striNgent measure of liquidity th t ind'cates a company's ab'li ty to satisfY current liabilities with its most liquid assets - calcu-lated as (cash + short-tenn marketable invest-ments + receivables) divided by current liabilities.
Potential credit risk
Leading dividend yield
Quick ratio - or acid test ratio
Pairs arbitrage trade
15. Total assets minus total liabilities.
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16. 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
Investing activities
Differentiation
White knight
Per unit contribution margin
17. A measurement scale that not only ranks data but also gives assurance that the differ-ences between scale values are equal.
Index option
Liquidation value
Interval scale
Intergenerational data mining
18. A theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.
Classical growth theory
Time value of money
Creditworthiness
Type I error
19. Financial statements that are not accompanied by an auditor's opinion letter.
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20. A model for pncmg futurescontracts in which the futures price is determinedby adding the cost of carry to the spot price.
Measure of location
Matrix pricing
Cost of carry model
Sample standard deviation
21. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.
Cost approach to value
Unconditional probability (or marginal probability)
Accounting risk
Leading
22. The arithmetic mean value of a population; the arithmetic mean of all the obser-vations or values in the population.
American
Winner's curse
Estimation
Population mean
23. A swap in which each party makes ayments to the other in different currenmes.
Dead-hand provision
Interquartile range
Currency swap
Margin
24. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.
Active specific risk or asset selection risk
First-differencing
Projected benefit obligation
synunetric information
25. P/E calculated on the basis of a forecast of EPS; a stock's current price divided by next year's expected earnings.
Independent and identically distributed (l
Cost of carry
Split-rate
Forward P/E (also leading P/E or prospective P/E)
26. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.
Information ratio (IR)
Mispricing
Test statistic
Intergenerational data mining
27. A valuation ratio calculated as price per share divided by cash flow per share.
Accumulated benefit obligation
Balance-sheet-based accruals ratio
Price to cash flow
Cash flow statement (statement of cash flows)
28. The price multiple for a stock assumed to hold at a stated future time.
North
Terminal price multiple
Synthetic index fund
Declaration date
29. The owners' remaining claim on the company's assets after the liabilities are deducted.
Residual claim
Survivorship bias
Shark repellents
Active risk squared
30. With reference to a sample - the mean of the absolute values of deviations from the sample mean.
Mean absolute deviation
Stated rate (nominal rate or coupon rate)
Temporal method
Installment
31. The amount for which one can sell some-thing - or the amount one must pay to acquire something.
Purchasing power parity
Value
Deliveryoption
Normal backwardation
32. The sale by a foreign firm of exports at a lower price than the cost of production.
Median
Annuity due
Dumping
Discount for lack of control
33. The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets.
Cash conversion cycle (net operating cycle)
Infant-industry argument
Government sector surplus or deficit
Income tax recoverable
34. The use of fixed costs in operations.
Joint probability
Capture hypothesis
Weighted average cost method
Operating leverage
35. The unsold units of product on hand.
Proportionate consolidation
omparable company
Bank discount basis
Inventory
36. The standard deviation of the differ-ence in returns between an active investment portfolio and its benchmark portfolio; also called tracking error volatility - tracking risk - and active risk.
Exit price
After-tax cash flow (ATCF)
Cost of goods sold
Tracking error
37. Next twelve months P/E: current market price divided by an estimated next twelve months EPS.
Inventory blanket lien
Credit analysis
NTM P/E
Safety stock
38. Above average or abnormally high growth rate in earnings per share.
Sole proprietorship
Supernormal growth
Ordinary annuity
Earnings at risk (EAR)
39. Depositary Receipt A negotiable certifi -cate issued by a depositary bank that represen ts ownersh ip in a non-U .S. company's deposi ted equity (i.e. - equity held in custody by the deposi-tary bank in the company's home market).
Earnings game
Commodity forward
American
Classical growth theory
40. A market index portfolio.
Passive portfolio
Index amortizing swap
Swap
Cointegrated
41. 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.
Greenmail
Settlement date or payment date
Floored swap
Multi-step format
42. The fixed price at which an option holder can buy or sell the underlying.
Exercise price (strike price - striking price - or strike)
Broker
Multivariate distribution
Cap
43. A measure of the time needed to convert raw materials into cash from a sale; it con-sists of the number of days of inventory and the number of days of receivables.
Minority interest (noncontrolling interest)
Sensitivity analysis
Dependent
Operating cycle
44. 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
Backtesting
Variance
Free cash flow
Guideline public company method
45. An option strategy that involves buying a call with a lower exercise price and selling a call with a higher exercise price. It can also be exe-cuted with puts.
Bull spread
Statistically significant
Offsetting
Financial reporting quality
46. The risk that failures by company man-agers to effectively manage a company's environ-mental - social - and governance risk exposures will lead to lawsuits and other judicial remedies - resulting in potentially catastrophic losses for the company; th
Stress testing
Legal risk
Forward price or forward rate
Discrintinant analysis
47. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.
Performance appraisal
Time-period bias
Yield spread
Ordinary shares (common stock or common shares)
48. A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option - or $0 - whichever is greater.
Floored swap
Accounting estimates
Asian call option
Capitalization rate
49. A qualitative-dependent-variable multi-ple regression model based on the logistic proba-bility distribution.
Project sequencing
Logit model
Exercise or exercising the option
Collar
50. A method of account-ing for joint ventures where the venturer's share of the assets - liabilities - income and expenses of the joint venture are combined on a line-by-line basis with similar items on the venturer's financial statements.
Proportionate consolidation
Defined-benefit pension plans
Opportunity set
Matrix pricing