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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. 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






2. The number of successes in n Bernoulli trials for which the probability of success is constan t for all trials and the trials are independent.






3. Segment liabilities divided by segment assets.






4. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.






5. 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.






6. A limit move in the futures market in which the price at which a transaction would be made is at or above the upper limit.






7. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.






8. A merger involving companies inthe same line of business - usually as competitors.






9. A dividend yield based on the anticipated dividend during the next 12 months.






10. The variance of one variable - given the outcome of another.






11. A multifactor model in which the factors are attributes of stocks or com-panies that are important in explaining cross-sectional differences in stock prices.






12. Options that - if exercised - would result in the value received being worth more than the payment required to exercise.






13. Activities that are part of the day-to-day business functioning of an entity - such as selling inven tory and providing services.






14. The amount of time between check issuance and a check's clearing back against the company's account.






15. A si gle numerical estimate of an unknown quantity - such as a population parameter.






16. The equal value of differ-ent monies.






17. 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.






18. An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.






19. A company's operating profit with adjustments to normalize the effects of capital structure.






20. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.






21. An average in which each observation is weighted by an index of its relative importance.






22. The seller of a derivative contract. Also refers to the position of being short a derivative.






23. The operational flexibility to adjust prices when demand varies from forecast. For example - when demand exceeds capacity - the company could benefit from the excess demand by increasing prices.






24. PIE PI Es based on normalized EPS data.






25. A poison pill takeover defense that gives target company shareholders the right to purchase shares of the acquirer at a significant discount to the market price - which has the effect of causing dilution to all existing acquiring com-pany shareholder






26. The preference some investors have for shares that exhibit certain characteristics.






27. A business owned and operated by a single person.






28. A measure of VAR equivalentto the analytical method bu t that refers to the use of delta to estimate the option's price sensitivity.






29. The nonmonetary return offered by an asset when the asset is in short supply - often associated with assets with seasonal production processes.






30. Aka Liquidity discount.






31. CAPM An adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.






32. The portfolio that exploits an arbitrage opportunity.






33. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.






34. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value of benefits (whether vested or non-vested) attributed by the pension benefit formula to employee service rendered b






35. The P/E to-growth ratio - calculated as the stock's PI E divided by the expected earnings growth rate.






36. Quantiles that divide a distribution into 10 equal parts.






37. The value to a specific buyer - tak-ing account of potential synergies based on the investor's requirements and expectations.






38. Fees charged to companies b)' invest-menJ ~nkers and other costs assooiated witli: rai'.. ing new capital.






39. A share of any profits that is paid to the general partner (manager) of an investment partnership - such as a private equity or hedge fund - as a form of compensation designed to be an incentive to the manager to maximize per-formance of the investme






40. Valuation approach that values an asset based on pricing multiples from sales of assets viewed as similar to the subject asset.






41. 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.






42. 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






43. The return that aninvestor earns during a specified holding period;holding period re turn with reference to a fixed-income instuument.






44. The amount of funds originally invested in a project or instrument; the face value to be paid at maturity.






45. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.






46. Sales on a bill-and-hold basis involve selling products but not delivering those products until a later date.






47. The contri-bution to active risk squared resulting from the portfolio's active weights on individual assets as those weights interact with assets' residual risk.






48. The sale - liquidation - or spin-off of a d'vi-sion or subsidiary.






49. An entity associated with a futures market that act~ as middleman between the con-tracting parties and guarantees to each party the performance of the other.






50. The hypothesis to be tested.