SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
CFA Level2 Vocab
Start Test
Study First
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. An offset to accounts receivable for the amount of accounts receivable that are estimated to be uncollectible.
Allowance for bad debts
Statistics
U.S. official reserves
Residual dividend approach
2. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.
Futures commission merchants (FCMs)
Activity ratios (asset utilization or operating efficiency ratios)
Relative dispersion
Total return swap
3. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.
Segment ROA
Target balance
Caplet
Normalized earnings
4. A type of swap transaction used as a credit derivative in which one party makes peri-odic payments to the other and receives the prom-ise of a payoff if a third party defaults.
Dividend payout policy
Weighted average cost method
Credit swap
Comprehensive income
5. Sales minus the cost of sales ~.e . - the cost of goods sold for a manufactur-ing cOlp pany) .
Population
Strap
Gross profit (gross margin)
Covered call
6. The nonmonetary return offered by an asset when the asset is in short supply - often associated with assets with seasonal production processes.
Convenience yield
Cost of capital
Uniting of interests method
Efficient frontier
7. In accounting - a liability of uncertain tim-ing or amount.
Provision
Risk governance
Covariance matrix
Brokerage
8. An act passed by the U.S. Congress in 1934 that created the Securi-ties and Exchange Commission (SEC) - gave the SEC authority over all aspects of the securities industry - and empowered the SEC to require peri-odic reporting by companies with public
Conglomerate merger
Transactions motive
Free cash flow hypothesis
Securities Exchange Act of 1934
9. A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.
Arithmetic mean
Real GDP per person
Discount interest
External growth
10. The graph of the set of portfolios that have minimum variance for their level of expected return.
Target capital structure
Built-up method
Histogram
Minimum-variance frontier
11. A system that allows individual units within an organization to manage risk. Decentralization results in duplication ofeffort but has the advantage of having people closer to the risk be more d irectly involved in its management.
Prior probabilities
Net exports
Decentralized risk management
Independent and identically distributed (l
12. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.
Segment margin
Foreign currency
Management buyout (MBO)
Bond option
13. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.
Volatility
Financial leverage ratio
Alpha (or abnormal return)
Shark repellents
14. 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.
Capitalized cash flow model (method)
Event
Contingent clain
Cost approach to value
15. With reference to the error term of a regression - having a variance that differs across observations.
Fixed exchange rate
Heteroskedastic
Functional currency
Subsistence real wage rate
16. ID) With respect to random variables - the property of ran-dom variables that are independent of each otherbut follow the identical probability distribution.
Independent and identically distributed (l
omparable company
Random walk
Quintiles
17. Aka Liquidity discount.
Residual dividend approach
Liquidation
Mean-variance analysis
Illiquidity discount
18. Systems that capture transaction data at the physical location in which the sale is made.
Valuation
Point of sale
Accounts payable
Screening
19. The expected return on equi-ties minus the risk-free rate; the premium that investors demand for investing in equities.
Classical growth theory
NPV rule
Equity risk premium
Sampling plan
20. 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.
Earnings management activity
Exchange ratio
Company fundamental factors
Sharpe ratio
21. Earnings exclud-ing nonrecurring components.
Imports
Pet projects
Common-size analysis
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
22. The rate of return that must be met fora project to be accepted.
Hurdle rate
Partial regression coefficients or partial slope coeffi-cients
Add-on interest
Divestiture
23. A numerical measure of how sensitive an option's delta is to a change in the underlying.
Financial transaction
Time to expiration
Gamma
Payment date
24. The amount the company estimates that it can sell the asset for at the end of its useful life.
Equitizing cash
Target semivariance
Salvage value
Cost of equity
25. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.
Cash flow at risk (CFAR)
Unlimited funds
Diluted earnings per share (diluted
Nonearning assets
26. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; provides information about an entity's cash inflows and cash outflows as they pertain to oper-ating - investing - and financing activities.
Centralized risk management or companywide risk management
Operating activities
Statement of cash flows (cash flow statement)
Operations risk or operational risk
27. A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g. - current and noncurrent) .
Justified (fundamental)
Classified balance sheet
Method based on forecasted fundamentals
Nonparametric test
28. A strategic corporate goal repre-senting the long-term proportion of earnings that the company intends to distribute to shareholders as dividends.
Skewed
Target payout ratio
Centralization permits economies of scale and allows a company to use some of its risks to offset other risks.
Unearned revenue (deferred revenue)
29. A business's value under a going-concern assumption.
Interest rate option
Justified (fundamental)
U.S. interest rate differential
Going-concern value
30. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.
Dirty surplus accounting
Residual income method (or excess earnings method)
Financial reporting quality
Sample statistic or statistic
31. A business owned and operated by more than one individual.
Dilution
Synthetic call
Partnership
Independent and identically distributed (l
32. In reference to mergers - it is the savings achieved through the consolidation of operations and elimination of duplicate resources.
Multiplication rule for probabilities
Economies of scale
Cash-flow-statement-based aggregate accruals
Debtor nation
33. The day that employees actually exer-cise the options and convert them to stock.
Weighted harmonic mean
In-process research and development
Likelibood
Exercise date
34. ROA) A prof-itability ratio calculated as operating income divided by average total assets.
Capital market line (CML)
Operating return on assets (operating
Unbilled revenue (accrued revenue)
Stress testing
35. The return on a portfolio minus the return on the portfolio's benchmark.
Organic growth
Univariate distribution
Active return
Exports
36. (No longer allowed under U.S. GAAP or IFRS.)
U.S. GAAP and uniting of interests under IFRS
Cross-product netting
Dynamic hedging
Random variable
37. A financial state-ment that reconciles beginning-of-period ana end-of-period balance sheet values of retained income; shows the linkage between the balance sheet and income statement.
Probability
Captive rmance subsidiary
Defined-benefit pension plans
Statement of retained earnings
38. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.
Parameter instability
Mean
North
Sampling error
39. The average exchange rate - with individual currencies weighted by their importance in U.S. international trade.
Variable costs
Partial regression coefficients or partial slope coeffi-cients
Forward price or forward rate
Trade-weighted index
40. 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.
Growth accounting
Investment opportunity schedule
Forward contract
Block
41. An approach to investing that typically begins with macroeconomic forecasts.
Price to sales
Top-down investing
Differentiation
Deliveryoption
42. In reference to assets - the amount paid to purchase an asset - including any costs of acquisition and! or preparation; with reference to liabilities - the amount of proceeds received in exchange in issuing the liability.
Sector rotation strategy
Debt-to-assets ratio
Overnight index swap (OIS)
Historical cost
43. Method used to estimate the overall capitalization rate by dividing the sale price of a comparable income property into the net operating income.
Quick ratio - or acid test ratio
Market-extraction method
Financial analysis
Fair value
44. A financial instrument that gives one party the right - but not the obligation - to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claims.
Option
Market share test
Momentum indicators
Financial reporting quality
45. A con-flict of interest that arises when the agent in an agency relationship has goals and incentives that differ from the principal to whom the agent owes a fiduciary duty.
Agency problem - or principal-agent problem
Cnsistent
Unlimited funds
Consolidation
46. The U.S. interest rate minus the foreign interest rate.
U.S. interest rate differential
Vesting date
Inflation premium
Qualifying special purpose entities
47. The value of exports of goods and ser-vices minus the value of imports of goods and services.
Days of inventory on hand (DOH)
Current rate method
Net exports
Cash
48. The line with an inter-cept point equal to the risk-free rate that is tangent to the efficient frontier of risky assets; represents the efficient frontier when a risk-free asset is available for investment.
Marking to market
Capital market line (CML)
IRR rule
Fixed exchange rate
49. Deliberate activity aimed at influencing reporting earnings numbers - often with the goal of placing management in a favorable light; the opportunistic use of accruals to manage earnings.
Earnings management activity
American option
Minimum-variance frontier
Impairment of capital rule
50. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.
Book value of equity (or book value)
Securities Exchange Act of 1934
Multicollinearity
Before-tax cash flow