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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. As an approach to valuing a company - the sum of the value of the company - assuming no use of debt - and the net present value of any effects of debt on company value.






2. Small numbers of observations at either extreme (small or large) ofa sample.






3. A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.






4. The fixed rate at which the holder of an interest rate option can buy or sell the underlying.






5. Total assets minus total liabilities.

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6. The risk associated with operating earnings. Operating earnings are uncertain because total revenues and many of the expendi-tures contributed to produce those revenues are uncertain.






7. A commercial imple-mentation of the residual income concept; the computation of EVA® is the net operating profit after taxes minus the cost of capital - where these inputs are adjusted for a number of items.






8. The sensitivity of the option price to the risk-free rate.






9. A variation of a forward contract that has essentially the same basic definition but with some additional features - such as a clearing-house guarantee against credit losses - a daily settlement of gains and losses - and an organized electronic or fl






10. With respect to the format of the income statement - a format that presents a subtotal for gross profit (revenue minus cost of goods sold).






11. 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.






12. Behavior on the part of a firm that allows it to comply with the letter of the law but violate the spirit - significantly lessening the law's effects.






13. With reference to assets - the amount of cash or cash equivalents that would have to be paid to buy the same or an equivalent asset today; with reference to liabilities - the un discounted amount of cash or cash equivalents that would be required to






14. A probability based on logical analysis rather than on observation or personal judgment.






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






16. 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






17. Valuation indi-cators that compare a stock's performance during a period either to its own past performance or to the performance of some group of stocks.






18. The property of having a constantvariance; refers to an error term that is constantacross observations.






19. The value of a company if the com-pany were dissolved and its assets sold individually.






20. An option strategy in which a position in an asset is converted to a risk-free position with a position in a specific number of options. The number of options per unit of the underlying changes through time - and the position must be revised to maint






21. A variation of the monetary/ nonmonetary translation method that requires not only monetary assets and liabilities - but also nonmonetary assets and liabilities that are mea-sured at their current value on the balance sheet date to be translated at t






22. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.






23. A method for determining the required rate of return on equity as the sum ofrisk premiums - in which one or more of the risk premiums is typically subjective rather than grounded in a formal equilibrium model.






24. 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.






25. A swaption that allows the holder to enter into a swap as the fixed-rate receiver and floating-rate payer.






26. Regulation that allowsprices to reflect only the actual average cost ofproduction and no monopoly profits.






27. A type of interest rate swap in which the floating payment is set at the end of the period and the interest is paid at that same time.






28. The price received to sell an asset or trans-fer a liability.






29. 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.






30. A country that during its entire his-tory has invested more in the rest of the world than other countries have invested in it.






31. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.






32. The use of computer networks to conduct financial transactions electronically.






33. Events such that only one can occur at a time.






34. Ratio of sales on credit to the average balance in accounts receivable.






35. An adjustment used to facilitate delivery on bond futures contracts in which any of a number of bonds with different characteristics are eligible for delivery.






36. Valuation approach that values an asset as the present discounted value of the income expected from it.






37. FIrm The cash flow available to the company's suppliers of capital after all operat-ing expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made.






38. A gain in value caused bychanges in price levels. Monetary liabilities expe-rience purchasing power gains during periods ofinflation.






39. A breakdown of accounts into cate-gories of days outstanding.






40. The analyst'S estimate of a stock's value at a particular point in the future .






41. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.






42. The unlevered beta; reflects the business risk of the assets; the asset's systematic risk.






43. Options that are far in-the-money.






44. The expected total e b urn on an asset over a stated olding period; for stocks - the sum of tne expected dividend yield and the expected price appreciation over the holding period.






45. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.






46. An extra return that compen-sates investors for expected inflation.






47. Diminishment in value as a result of car-rying (book) value exceeding fair value and/or recoverable value.






48. The potential for asymmetric information to bring about a general decline in product quality in an industry.






49. Investments in which investors exert significant influence - but not con-trol - over the investee. Typically - the investor has 20 to 50 % ownership in the investee.






50. A dividend payout pol-icy under which earnings in excess of the funds necessary to finance the equity portion of com-pany's capital budget are paid out in dividends.