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Test your basic knowledge |
CFA Level2 Vocab
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Study First
Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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. A model of stock val-uation that views a stock's intrinsic value as the present value of expected future free cash flows to equity.
Vested benefits
Free cash flow to equity model
After-tax equity reversion (ATER)
Gross income multiplier (GIM)
2. With reference to estimators - describes an estimator for which the probability of estimates close to the value of the population parameter increases as sample size increases.
Trailing P/E (or current PIE)
Pseudo-random numbers
Cnsistent
Equity forward
3. The risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Tax risk
Shortfall risk
Exercise price (strike price - striking price - or strike)
Factor
4. The proportional annual benefit that results from making an investment.
Futures exchange
Rate of return
Differential expectations
Bond indentnre
5. Amounts owed by a business to credi-tors as a result of borrowings that are evidenced by (short-term) loan agreements. n-Period moving average The average of the current and immediately prior n - 1 values of a time series.
Divestiture
Cash conversion cycle (net operating cycle)
Objective probabilities
Notes payable
6. Quantiles that divide a distribution into 10 equal parts.
Deciles
Declaration date
Inventory turnover
Accelerated methods of depreciation
7. An intangible that can beacquired singly and is typically linked to specificrights or privileges having finite benefit periods(e.g. - a patent or trademark).
Incremental cash flow
Discount
Pseudo-random numbers
Identifiable intangible
8. A form ofcommon-size analysis in which the accounts in agiven period are used as the benchmark or baseperiod - and every account is restated in subse-quent periods as a percentage of the base period'ssame account.
Debt covenants
Horizontal common-size analysis
Active risk
Financial leverage
9. A contract signed by both parties to a merger that clarifies the details of the transaction - including the terms - war-ranties - conditions - termination details - and the rights of all parties.
Diluted shares
Definitive merger agreement
Arithmetic mean
Comprehensive income
10. Present obligations of an enterprise aris-ing from past events - the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors' claims on the resources of a company.
Systematic factors
Liabilities
Consolidation
Data mining
11. 1) An agent who executes orders to buy orsell securities on behalf of a client in exchange for a commission. 2) See Futures commission merchants.
Broker
Rho
Dispersion
Negative serial correlation
12. The amount of book value (also called carrying value) of common equity per share of common stock - calculated by dividing the book value of shareholders' equity by the num-ber of shares of common stock outstanding.
After-tax cash flow (ATCF)
Asset-based loan
Reporting unit
Book value equity per share
13. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.
Flip-in pill
Reviewed fmancial statements
Free cash flow hypothesis
Accounts payable
14. An accelerated depre-ciation method - i.e. - one that allocates a relativelylarge proportion of the cost of an asset to the early years of the asset's useful life.
Defined benefit obligation
Diminishing balance method
Flip-in pill
Market timing
15. 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
Time value or speculative value
Internal rate of return (IRR)
Stated rate (nominal rate or coupon rate)
Active investment managers
16. A measure of the co-movement (linearassociation) between two random variables.
Time value of money
American
Bill-and-hold basis
Covariance
17. Assets that are expected to provide economic benefits over a future period of time - typically greater than one year.
Sample kurtosis
Interval
Statistically significant
Long-lived assets (or long-term assets)
18. An exchange rate is deter-mined by demand and supply with no direct inter-vention in the foreign exchange market by the central bank.
Flexible exchange rate
Investment value
Net liability balance sheet exposure
Corporate governance
19. The date on which the parties to a swap make payments.
Settlement date or payment date
Externality
Dutch Book theorem
Molodovsky effect
20. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.
Cost recovery method
Sarbanes-Oxley Act
Valuation ratios
Confidence interval
21. 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.
Mean excess return
Passive portfolio
Statement of retained earnings
Labor productivity
22. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Units-of-production method
Vertical common-size analysis
Arithmetic mean
Scaled earnings surprise
23. 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
Arbitrage portfolio
Flip-over pill
Central limit theorem
Breusch-Pagan test
24. A tool that calculates the contri-bution to real CDP growth of each of its sources.
Growth accounting
Accounting profit (income before taxes or pretax income)
Estimated (or fitted) parameters
Anticipation stock
25. Segment profit (loss) divided by segment revenue.
Put-call-forward parity
Multiple
Segment margin
Management buyout (MBO)
26. A measure of goodness-of-fit of a regres-sion that is adjusted for degrees of freedom and hence does not automatically increase when another independent variable is added to a regression.
Mature growth rate
Replacement value
Adjusted R2
Days of sales outstanding (DSO)
27. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.
Net operating cycle
Discount for lack of control
Total asset turnover
Percentiles
28. Method of valu-ing property based on recen t sales prices of simi-lar properties.
Supernormal growth
Direct sales-comparison approach
Active investment managers
Comparative advantage
29. Observations of a variable over time.
U.S. interest rate differential
Descriptive statistics
Time-series data
Winner's curse
30. 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.
Company share-related factors
Lemons problem
Convenience yield
Relative strength (RSTR) indicators
31. The graph of the capital asset pricing model.
ecurity market line (SML)
Discount rate
Platykurtic
Voluntary export restraint
32. Any test (or procedure) concerned with parameters or whose validity depends on assumptions concerning the population generat-ing the sample.
Parametric test
Volatility
synunetric information
Central limit theorem
33. Analysts who work at brokerages.
Compiled f'mancial statements
Sensitivity analysis
Antidilutive
Sell-side analysts
34. Events such that only one can occur at a time.
Estimate
Cross-sectional analysis
Mutually exclusive events
Economic order quantity-reorder point
35. The variance of active returns; active risk raised to the second power.
Vested benefits
Ordinary shares (common stock or common shares)
Common-size analysis
Active risk squared
36. Approach to trans-lating foreign currency financial statements for consolidation in which monetary assets and liabil-ities are translated at the current exchange rate. Nonmonetary assets and liabilities are translated at historical exchange rates (th
Monetary/nonmonetary method
Liruit up
At the money
Present value model or discounted cash flow model
37. A synonym for robust standard errors.
Projected unit credit method
Corporation
White-corrected standard errors
Index option
38. A quantity computed from or used to describe a sample of data.
Leptokurtic
Statistic
White-corrected standard errors
U.S. GAAP and uniting of interests under IFRS
39. The set of assets available for investment.
Share repurchase
Market timing
Payoff
Opportunity set
40. Assets that are expected to bene-fit the company over an extended period of time (usually more than one year).
synunetric information
Project sequencing
Annuity
Noncurrent assets
41. A graphical representa-tion of the expected return and risk of all portfo-lios that can be formed using two assets.
Number of days of inventory
Linear interpolation
Portfolio possibilities curve
Outliers
42. 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
Modal interval
Payment date
Tangible assets
43. A regression that expresses the dependen t and independent vari-ables as natural logarithms.
Log-log regression model
Number of days of payables
Time series
Economic profit
44. 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.
Monitoring costs
Dumping
Holding period return
Common size statements
45. Valuation approach that values an asset as the present discounted value of the income expected from it.
Imputation
Delta
Present value (PV)
Income approach
46. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.
Normalized earnings
Cherry-picking
Solvency
Minority interest (noncontrolling interest)
47. In the context of customer receipts - the amount of money that is in transit between pay-ments made by customers and the funds that are usable by the company.
Noncurrent
Pairs trading
Earnings yield
Float
48. The tendency of a time series to fall when its level is above its mean and rise when its level is below its mean; a mean-reverting time series tends to re turn to its long-term mean.
Vertical analysis
Mean reversion
Scenario analysis
Interest rate
49. An option strategy involving the hold-ing of an asset and sale of a call on the asset.
Estimation
Covered call
Likelibood
Survey approach
50. Aka 'Residual income.'
Earnings per share
Downstream
Abnormal earnings
Ex-dividend