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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 form of restructuring in which sharehold-ers of a parent company receive a proportional number of shares in a new - separate entity; share-holders end up owning stock in two different companies where there used to be one.






2. PIE The price-to-earnings ratio that is fair - warranted - or justified on the basis of forecasted fundamentals.






3. A transaction in exchange-listed deriva-tive markets in which a party re-enters the market to close out a position.






4. 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






5. A method of revenue recognition in which - in each accounting period - the company estimates what percentage of the contract is complete and then reports that per-centage of the total contract revenue in its income statement.






6. With reference to portfolio strategies - the application of a strategy's portfolio selection rules to historical data to assess what would have been the strategy's historical performance.






7. With respect to revenue recognition - a method that s ecifies that the portion of the total profit of the sale that . s recognized in each pe riod is deter-mined by the percentage of the total sales price for which the seller has received cash.






8. An active investment strategy that includes intentional matching of the timing of cash outflows with investment maturities.






9. A non-operating entity created to carry out a specified purpose - such as leasing assets or securitizing receivables; can be a corporation - partnership - trust - limited liability - or partnership formed to facilitate a specific type of business act






10. The competitive strategy of being the lowest cost producer while offering products comparable to those of other firms - so that prod-ucts can be priced at or near the industry average.






11. Accounting in which some income items are reported as part of stockholders' equity rather than as gains and losses on the income statement; certain items of comprehensive income bypass the income statement and appear as direct adjustments to sharehol






12. 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.






13. The company in a merger or acquisition that is acquiring the target.






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






15. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.






16. A company's ability to satisfY its short-term obligations using assets that are most readily con-verted into cash; the ability to trade a futures con-tract - either selling a previously purchased contract or purchasing a previously sold contract.






17. A rate of interest based on the secu-rity's face value.






18. An attempt to acquire a com-pany against the wishes of the target's managers.






19. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.






20. An unlimited funds environment assumes that the company can raise the funds it wants for all profitable projects simply by paying the required rate of return.






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






22. The purchase of some portion of one company by another; the purchase may be for assets - a definable segment of another entity - orthe purchase of an entire company.






23. Commercial and investmentbanks that make markets in derivatives.






24. A merger in which the company being purchased becomes a subsidiary of the purchaser.






25. An option strategy that is equiva-lent to a short butterfly spread.






26. An option strategy involving the purchase of one option and sale of another option that is identical to the first in all respects except either exercise price or expiration.






27. The value per share of a no-growth company - equal to the expected level amount of earnings divided by the stock's req uired rate of return.






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






29. The positive square root of the sample variance.






30. An ordered listing.






31. 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.






32. The risk that govern-mental laws and regulations directly or indirectly affecting a company's operations will change with potentially severe adverse effects on the com-pany's continued profitabiliny and even its long-term sustainability.






33. An option in which the asset underlying the futures is a commodity - such as oil - gold - wheat - or soybeans.






34. An account that offsets another account.






35. The party obtaining the use of an asset through a lease.






36. An adjustment used to facilitate delivery on bond futures contracts in which any of a number of bonds with different characteristics are eligible for delivery.






37. A solvency ratio measuring the number of times interest and lease payments are covered by operating income - calculated as (EBIT + lease payments) divided by (interest payments + lease payments).






38. A listing in which tile order of tile listed items does not matter.






39. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.

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40. An increase in a company's earnings that results as a consequence of the idio-syncrasies of a merger transaction itself rather than because of resulting economic benefits ofthe combination.






41. 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.






42. The difference between reported earnings per share and expected earnings per share.






43. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.






44. Covering or containing all possible outcomes.






45. An activity ratio equal to the number of days in period divided by receivables turnover.






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






47. Another term for the historical method of estimating VAR. This term is somewhat misleading in that the method involves not a simulation of the past butrather what actually happened in the past - some-times adjusted to reflect the fact that a differen






48. 1) The simultaneous purchase of an undervalued asset or portfolio and sale of an over-valued but equivalent asset or portfolio - in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free






49. The use of inven-tory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e. - a warehouse company) that supervises the inventory.






50. Each value on a binomial tree from which suc-cessive moves or outcomes branch.