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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. A strategy used to replicate an index. It is also used to take a given amount of cash and turn it into an equity position while maintaining the liquidity provided by the cash.






2. A finan-cial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its oper-ations; equal to days of inventory on hand + days of sales outstanding - number of days of






3. An extra return that compensates investors for the increased sensitivity of the mar-ket value of debt to a change in market interest rates as maturity is extended.






4. The accounting system of recording transactions in which every recorded transaction affects at least two accounts so as to keep the basic accounting equation (assets = liabilities + owners' equity) in balance.






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






6. Observations that are depen-dent on each other.






7. Independent projects are projects whose cash flows are independent ofeach other.






8. When a company is acquired and the purchase price is less than the fai r value of the net assets. The current treatment of the excess of fair value over the purchase price is diffe re t under IFRS and U.S. CAAP. The excess is never accounted for as n






9. Financial statements in which all elements (accounts) are stated as a per-centage of a key figure such as revenue for an income statement or total assets for a balance sheet.






10. A sample measure of the degree of a distribution's peakedness.






11. A potential business combina-tion that is endorsed by the managers of both companies.






12. The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard deviation of return.






13. The amount to which a payment or series of payments will grow by a stated future date.






14. An option to enter into a swap.






15. A fUl !lction giving the probability of joint occurrences of values of stated random variables.






16. Accounting method in which the only relevant transactions for the financial statements are those that involve cash.






17. The first in - first out - method of accounting for inventory - which matches sales against the costs of items of inventory in the order in which they were placed in inventory.






18. The amount at which an asset or liability is valued for tax purposes.






19. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.






20. A ratio in property valua-tion; net operating income divided by sale price. Also known as the going-in rate.






21. Costs that remain at the same level regardless of a company's level of production and sales.






22. An agreement between two parties in which one party - the buyer - agrees to buy from the other party - the seller - an underlying asset at a later date for a price established at the start of the contract.






23. The time between settlement dates.






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






25. A rate of return that reflects the rela-tionship between differently dated cash flows; a discount rate.






26. Under U.S. GAAP -a special purpose entity structured to avoid consol-idation that must meet qualification criteria.






27. An option on the yield spread on a bond.






28. The problem or issue of popu-lation regression parameters that have changed over time.






29. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.






30. A person or organization seeking to profit by acquiring a company and reselling it - or seeking to profit from the takeover attempt itself (e.g. - greenmail).






31. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.






32. Cash-settled for-ward contracts - used predominately with respect to foreign exchange forwards.






33. 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






34. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.






35. A set of techniques for estimating losses in extremely unfavorable combinations of events or scenarios.






36. The error of not rejecting a false null hypothesis.






37. A decision rule for choos-ing between two investments based on their means and variances.






38. Liabilities related to expenses that have been incurred butnot yet paid as of the end of an accountingperiod-an example of an accrued expense is rent that has been incurred but not yet paid -resulting in a liability 'rent payable.'






39. A yield on a basis comparable to the quoted yield on an interest-bearing money market instrument that pays interest on a 360-<iay basis; the annualized holding period yield - assuming a 360-<iay year.






40. 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.






41. A profitability ratio calculated as earnings before taxes divided by revenue.






42. With reference to regression errors - errors that are correlated across observations.






43. A measure of th e yield on the undel~ ing bond of a futures contract implied by pricing it as though the underlying will be delivered at the futures expiration.






44. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe






45. An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company's stock relative to its bonds. The addi-tional yield is often estimated using historic






46. An experiment that can produce one of two outcomes.






47. Division ofnet operating income by an overall capitalization rate to arrive at market value.






48. Aka 'Residual income.'






49. The most frequently occurring value in a set of observations.






50. The positive square root of the variance; a measure of dispersion in the same units as the original data.