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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. An option strategy that involves buying a call with a lower exercise price and selling a call with a higher exercise price. It can also be exe-cuted with puts.






2. The differential of infor-mation between corporate insiders and outsiders regarding the company's performance and prospects. Managers typically have more informa-tion about the company's performance and prospects than owners and creditors.






3. An investment decision rule that states that an investment should be undertaken if its NPV is positive but not undertaken if its NPV is negative.






4. An offset to accounts receivable for the amount of accounts receivable that are estimated to be uncollectible.






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






6. The analyst'S estimate of a stock's value at a particular point in the future .






7. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.






8. The difference between current assets and current liabilities.






9. A merger or acquisition in which target shareholders are to receive shares of the acquirer's common stock as compensation.






10. Standard errors of the esti-mated parameters of a regression that correct for the presence of heteroskedastici ty in the regres-sion's error te






11. An industry's underlying eco-nomic and technical characteristics.






12. A time series that is not covariance station-ary is said to have a unit root.






13. Theories that posit that cor-porate executives are motivated to engage in mergers to maximize the size of their company rather than shareholder value.






14. A reserve created against deferred tax assets - based on the likelihood of realizing the deferred tax assets in future account-ing periods.






15. Assets and liabilities with value equal to the amount of currency con-tracted for - a fixed amount of currency. Examples are cash - accounts receivable - mortgages receiv-able - accounts payable - bonds payable - and mort-gages payable. Inventory is






16. 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






17. The company's total cost of capital in money terms.






18. 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.






19. The interest earned each period on the original investment; interest calculated on the principal only.






20. 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.






21. The rate of dividend (and earnings) growth that can be sustained over time for a given level of re turn on equity - keeping the capi tal structure constant and wi thout issuing addi tional common stock.






22. A model for pncmg futurescontracts in which the futures price is determinedby adding the cost of carry to the spot price.






23. A factor related to the econ-omy - such as the inflation rate - industrial produc-tion - or economic sector membership. acroeconomic factor model A multifac tor model in which the factors are surprises in macroeco-nomic variables that significan tly






24. The amount at which an asset or liability is valued for tax purposes.






25. The price paid to buy an asset.






26. 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.






27. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.






28. Estimate of the aver-age number of days it takes to collect on credit accounts.






29. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.






30. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.






31. Research and development costs relating to projects that are not yet completed - such as have been incurred by a company that is being acquired.






32. The difference between the observed value of a statistic and the quantity it is intended to estimate.






33. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.






34. Income rate that reflects the relationship between equity income and equity capital.






35. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).






36. The ratio ofthe percentage change in operating income to the percentage change in units sold; the sensitivity of operating income to changes in units sold.






37. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.






38. 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.






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






40. Public-company com-parables for the company being valued.






41. A type of top-down investing approach that involves emphasizing different eco-nomic sectors based on considerations such as macroeconomic forecasts.






42. 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.






43. The positive square root of the variance; a measure of dispersion in the same units as the original data.






44. Debt or equity financial assets bought with the inten-tion to sell them in the near term - usually less than three months; securities that a company intends to trade.






45. A type of finance lease - from a lessor perspective - where the present value of the lease payments (lease receivable) equals the carry-ing value of the leased asset. The revenues earned by the lessor are financing in nature.

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46. Cannibalization occurs when an investment takes customers and sales away from another part of the company.






47. The U.S. interest rate minus the foreign interest rate.






48. A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.






49. A set of observations on a variable's out-comes in different time periods.






50. Common sharehold-ers' equity minus intangible assets from the bal-ance sheet - divided by the number of shares outstanding.