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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. Costs borne by management to assure owners that they are working in the own-ers' best interest (e.g. - implicit cost of non-compete agreements).
Bonding costs
No-growth value per share
Coefficient of variation (CV)
Earnings at risk (EAR)
2. A quantity - calculated based on a sam-ple - whose value is the basis for deciding whether or not to reject the null hypothesis.
Test statistic
Principal
Tax expense
Fundamentals
3. The proportional annual benefit that results from making an investment.
Rate of return
Simulation
Stress testing
Arbitrage portfolio
4. The concept that dividends paid now displace earnings in all future periods.
Dividend displacement of earnings
Vega
Fixed-income forward
Estimation
5. A standardized measure of systematic risk based upon an asset's covariance with the market portfolio.
Unearned fees
Beta
Economic growth rate
Spin-off
6. Total assets minus total liabilities.
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7. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.
Dependent
Accounting risk
Holding period yield (HPy)
Sample kurtosis
8. Numbers produced by random number generators.
Modal interval
Pseudo-random numbers
Minority active investments
Credit swap
9. Amounts customers owe the company for products that have been sold as well as amounts that may be due from suppliers (such as for returns of merchandise).
Reverse stock split
Trade receivables (commercial receivables or accounts receivable)
Notes payable
Theta
10. The risk of a change in value between the transaction date and the settlement date of an asset or liability denominated in a for-eign currency.
Assets
Information ratio (IR)
Transaction exposure
Statistics
11. The number of shares that would beoutstanding if all potentially dilutive claims oncommon shares (e.g. - convertible debt - convert-ible preferred stock - and employee stock options)were exercised.
Diluted shares
Closeout netting
Held-for-trading securities (trading securities)
Linear regression
12. The strongest form of short-term bank borrowing facilities; they are in effect for multiple years (e.g. - 3-5 years) and may have optional medium-term loan features.
Her rmdahl-
Revolving credit agreements
Delta-normal method
ecurity market line (SML)
13. The last in - first out - method of accounting for inventory - which matches sales against the costs of items of inventory in the reverse order the items were placed in inventory (i.e. - inventory produced or acquired last are assumed to be sold firs
Transaction exposure
Time to expiration
Contra account
LIFO method
14. The amount of income earned during a period per share of common stock.
Bernoulli random variable
Earnings per share
Cash flow at risk (CFAR)
Floorlet
15. A merger involving companies inthe same line of business - usually as competitors.
Hostile transaction
Horizontal merger
Type I error
Mixed factor models
16. A country that is borrowing more from the rest of the world than it is lending to it.
Type II error
Net borrower
Sample kurtosis
Capital asset pricing model (CAPM)
17. The hypothesis to be tested.
Commodity futures
Present (price) value of a basis point (PVBP)
Null hypothesis
Theta
18. With reference to regression - the set of variables included in the regression and the regression equation's functional form.
Model specification
Cost of debt
Continuous time
Equity carve-out
19. Correlation between adj acent observations in a time ser ies.
First-order serial correlation
Error autocorrelation
Histogram
Sector neutral
20. 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.
Debt-to-assets ratio
Monopolization
Quantile (or fractile)
Pre-investing
21. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.
Discount interest
Diminishing balance method
Delta
Depreciation
22. A sample measure of the degree of a distribution's peakedness in excess of the normal distribution's peakedness.
Frequency distribution
Settlement period
Time value or speculative value
Sample excess kurtosis
23. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.
Unbiasedness
Volatility
Corporate governance
Performance appraisal
24. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.
Termination date
Perpetuity
Enhanced derivatives products companies (EDPC)
Sales returns and allowances
25. Income as reported on the income statement - in accordance with prevailing account-ing standards - before the provisions for income tax expense.
Mature growth rate
Orthogonal
Accounting profit (income before taxes or pretax income)
Unit root
26. An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
Foreign currency transactions
Deciles
Days of inventory on hand (DOH)
Vertical analysis
27. An attempt to acquire a com-pany against the wishes of the target's managers.
Population mean
Intrinsic value or exercise value
Hostile transaction
Capture hypothesis
28. A capital rationing environment assumes that the company has a fixed amount of funds to invest.
Range
Capital rationing
PEG ratio
Binomial model
29. Instruments that payinterest as the difference between the amountborrowed and the amount paid back.
Return on equity (ROE)
Market timing
Pure discount instruments
Capture hypothesis
30. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.
Long-term contract
Synthetic forward contract
Sales returns and allowances
Investment opportunity schedule
31. A liquidity ratio calculated as current assets divided by current liabilities.
Mutually exclusive events
Current ratio
Equity risk premium
Conversion factor
32. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.
Total return swap
Depreciation
Breakup value or private market value
Economic exposure
33. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.
Measure of location
Efficient portfolio
Dispersion
Joint probability
34. A theory of economic growth that proposes that real CDP per person grows because technological change induces a level of saving and investment that makes capital per hour oflabor grow.
Days of sales outstanding (DSO)
Neoclassical growth theory
Defensive interval ratio
Agency costs
35. 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.
Build-up method
Trailirig dividend yield
Platykurtic
Cash-generating unit
36. A method for estimating a company's before-tax cost of debt based upon the yield on comparably rated bonds for maturities that closely match that of the company's existing debt.
Mutually exclusive events
Real options
Linear regression
Debt rating approach
37. The pro-portion of the ownership of a subsidiary not held by the parent (controlling) company.
Error term
Consolidation
Hostile transaction
Minority interest (noncontrolling interest)
38. Independent projects are projects whose cash flows are independent ofeach other.
Synthetic index fund
Growth accounting
Active risk
Independent projects
39. The value of an asset given a hypothetically complete understand-ing of the asset's investment characteristics; the value obtained if an option is exercised based on current conditions.
Intrinsic value or exercise value
Log-log regression model
Marketability discount
Tenor
40. The posi tive square root of tar-get semivar·ance.
Target semideviation
Flotation cost
Intergenerational data mining
Normalized earnings per share (or normal earnings per share)
41. The differ-ence between reported net income on an accrual basis and the cash flows from operating and investing activities compared to the average net operating assets over the period.
Capped swap
Termination date
Partnership
Cash-flow-statement-based accruals ratio
42. 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.
Target semivariance
Static trade-off theory of capital structure
Inverse price ratio
Assets
43. A scheme of measuring differ-ences. The four types of measurement scales are nominal - ordinal - interval - and ratio.
Estimator
Debt covenants
Measurement scales
Management buyout (MBO)
44. A result in probability theory stating that inconsistent probabilities create profit opportunities.
Conglomerate merger
Correlation analysis
Performance measurement
Dutch Book theorem
45. 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.
PEG
Growth phase
Semivariance
Deciles
46. The time between settlement dates.
Settlement period
Tracking risk
Standardized unexpected earnings (SUE)
Hmnan capital
47. Quantiles that divide a distribution into four equal parts.
Warehouse receipt arrangement
Marking to market
Quartiles
Cash flow from operations (cash flow from operating activities or operating cash flow)
48. Quantiles that divide a distribution into 100 equal parts.
Minority active investments
Percentiles
Underlying
Operating profit (operating income)
49. An approach to decomposing return on investment - e.g. - return on equity - as the product of other financial ratios.
Asset purchase
Derivative
Du Pont analysis
Total invested capital
50. A method of accounting for abusiness combination where the acquiring com-pany allocates the purchase price to each assetacquired and liability assumed at fair value. If thepurchase price exceeds the allocation - the excessis recorded as goodwill.
Paired comparisons test
Cyclical businesses
Purchase method
Exercise price (strike price - striking price - or strike)