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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 after-tax net operating profits as a percent of total assets or capital.
Finance lease (capital lease)
Return on invested capital (ROIC)
Fundamentals
Time value of money
2. A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits - share repurchases use corporate cash.
Free cash flow to the
Potential credit risk
Share repurchase
Exchange ratio
3. The number of observations in a given interval (for grouped data) .
Definitive merger agreement
Partial regression coefficients or partial slope coeffi-cients
Absolute frequency
Quintiles
4. The difference between the yield on a bond and the yield on a default-free security - usu-ally a government note - of the same maturity. The yield spread is primarily determined by the mar-ket's perception of the credit risk on the bond.
Investment value
Fair market value
Yield spread
Traditional efficient markets formulation
5. FRA A contract in which the initial value is intentionally set at a value other than zero and therefore requires a cash payment at the start from one party to the other.
Share repurchase
Method based on forecasted fundamentals
Off-market
Cost of carry
6. The graphical representation of a model of asset price dynamics in which - at each period - the asset moves up wi t probability p or down with probability (I - p).
Equity carve-out
Nominal exchange rate
Binomial tree
Maturity premium
7. A probability distribution that specifies the probabilities for a group of related random variables.
Voluntary export restraint
Multivariate distribution
Accrual basis
Long
8. A procedure used primarily in futures markets in which the parties to a contract settle the amount owed daily. Also known as the daily settlement.
Marking to market
Standardized unexpected earnings (SUE)
Deliveryoption
Netting
9. The principle that dol-lar amounts indexed at the same point in time are additive.
Standard normal distribution (or unit normal distribu-tion)
Cost of carry model
Cash flow additivity principle
Heteroskedasticity-consistent standard errors
10. Residual income after the forecast horizon.
Continuing residual income
Monitoring costs
Forward P/E (also leading P/E or prospective P/E)
Abnormal earnings
11. The practice of determining a model by extensive searching through a dataset for statisti-cally significant patterns.
Sinking fund factor
Data mining
Financial leverage ratio
Decision rule
12. An operating segment or one level below an operating segment (referred to as a component) .
Accrued expenses (accrued liabilities)
Conglomerate discount
Active risk
Reporting unit
13. A swap in which the floating payments have an upper limit.
Implied repo rate
Market rate
Monitoring costs
Capped swap
14. A model for pricing options in which the underlying price can move to only one of two possible new prices.
Cost recovery method
Tax loss carry forward
Binomial model
Free cash flow method
15. The portion of the minimum-variance frontier beginning with the global mmlmum-variance portfolio and continuing above it; the graph of the set of portfolios offering the maximum expected return for their level of variance of return.
Matching strategy
Futures contract
Day trader
Efficient frontier
16. An asset's sensitivity to a particular factor; a mea-sure of the response of return to each unit of increase in a factor - holding all other factors constant.
Unbilled revenue (accrued revenue)
Cash conversion cycle (net operating cycle)
Purchased in-process research and development costs
Factor sensitivity (also factor betas or factor loadings)
17. The net amount of cash provided from operating activities.
Cash flow from operations (cash flow from operating activities or operating cash flow)
Securities Exchange Act of 1934
Simple random sample
Floor
18. A process used in a deliverable forward contract in which the long pays the agreed-upon price to the short - which in turn delivers the underlying asset to the long.
Delivery
Fixed charge coverage
Normalized earnings
Sector neutral
19. An approach to recognizing credit losses on customer receivables in which the company waits until such time as a customer has defaulted and only then recognizes the loss.
Single-step format
Investing activities
Random number
Direct write-off method
20. Large industry groupings.
Currency swap
Foreign currency
Economic sectors
Discount interest
21. An esti-mate of a country's equity risk premium that is based upon the historical averages of the risk-free rate and the rate of return on the market portfolio.
Equity method
Normal contango
Cash-flow-statement-based aggregate accruals
Historical equity risk premium approach
22. Correlation between adj acent observations in a time ser ies.
Market efficiency
Unearned revenue (deferred revenue)
First-order serial correlation
Median
23. A formula that expresses the equivalence or parity of spot and forward rates - after adjusting for differences in the interest rates.
Interest rate parity
Chart of accounts
Model risk
Orthogonal
24. The uncertainty associated with tax laws.
Leveraged floating-rate note or leveraged floater
Duration
Greenmail
Tax risk
25. A tool that calculates the contri-bution to real CDP growth of each of its sources.
Growth accounting
Bernoulli random variable
Floating-rate loan
Leveraged recapitalization
26. With respect to financial statement analy-sis - the ability of a company to fulfill its long-term obligations.
Solvency
Valuation ratios
Conversion factor
Cash-flow-statement-based accruals ratio
27. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.
Alpha (or abnormal return)
Taxable income
Direct f'mancing lease
Free cash flow to the
28. A valuation that sums the estimated values of each of a company's busi-nesses as if each business were an independent going concern.
Systematic sampling
Dividend payout ratio
Free cash flow to the
Sum-of-the-parts valuation
29. A complete pass through the steps of a simula tion .
Simulation trial
Terms of trade
Continuous random variable
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
30. A standardized measure of systematic risk based upon an asset's covariance with the market portfolio.
Beta
Arithmetic mean
Expiration date
Financial reporting quality
31. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.
Node
Simple random sample
Permanent differences
Butterfly spread
32. A sample measure of the degree of a distribution's peakedness.
Sample kurtosis
Present value (PV)
Relative strength (RSTR) indicators
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
33. Asset outflows not directly related to the ordi-nary activities of the business.
Losses
Regression coefficients
Currency swap
Nonearning assets
34. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Multiple
Degree of confidence
Traditional efficient markets formulation
Financial leverage ratio
35. Amounts owed to the company from parties other than customers.
Other receivables
Synthetic index fund
Compounding
Vertical merger
36. The difference between the third and fi rst quarti les of a dataset.
Taxable income
Deciles
Interquartile range
Money market
37. The earnings growth rate in a company's mature phase; an earnings growth rate that can be sustained long term.
White sqnire
Correlation analysis
Pet projects
Mature growth rate
38. The evaluation of risk-adjusted performance; the evaluation of invest-ment skill.
Performance appraisal
Income statement (statement of operations or profit and loss statement)
Divestiture
NTM P/E
39. Rate of return that dis-counts future cash flows from an investment to the exact amount of the investment; the discount rate that makes the present value of an invest-ment's costs (outflows) equal to the present value of the investment's benefits (in
Implied repo rate
Quota
Internal rate of return (IRR)
Depreciation
40. The share price at a particular point in the future.
Modal interval
Period costs
Terminal share price
Total return swap
41. A money measure of the goods and services produced within a country's borders over a stated time period.
Reverse stock split
Cost of goods sold
Gross domestic product
Generalized least squares
42. A pre-offer takeover defense mechanism that makes it prohibitively costly for an acquirer to take control of a target without the prior approval of the target's board of directors.
Forward price or forward rate
Ex-dividend date
Investment strategy
Poison pill
43. 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.
Index amortizing swap
Warehouse receipt arrangement
Enhanced derivatives products companies (EDPC)
Statistically significant
44. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.
Financial transaction
Monopolization
Payment date
Direct debit program
45. The ratio of a set of observations' standard deviation to the observa-tions' mean value.
Noncurrent assets
Coefficient of variation (CV)
Cash flow additivity principle
Residual autocorrelations
46. With eference to grouped data - a se t or val-ues within w ich an observation falls.
Capitalized cash flow model (method)
Synthetic call
Interval
Qualitative dependent variables
47. A random variable that can take on at most a countable number of possi-ble values.
Annual percentage rate
Discrete random variable
Currency option
Report format
48. With reference to cash flow statements - a format for the presenta-tion of the statement which - in the operating cash flow section - begins with net income then shows additions and subtractions to arrive at operatingcash flow.
Residual income model (RIM) (also discounted ahnormal earnings model or Edwards-Bell-Ohlson model)
Trading securities (held-for-trading securities)
Indirect format (indirect method)
Lessee
49. Cash and investments (specifi-cally cash - cash equivalents - and short-term investments) .
Lessee
Estimate
Nonearning assets
Static trade-off theory of capital structure
50. A trend in which the dependent vari-able changes at a constant rate with time.
Linear trend
Equity swap
Free cash flow to the
Cheapest to deliver