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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
.
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 business owned and operated by a single person.
Degree of financial leverage (DFL)
Total probability rule for expected value
Operations risk or operational risk
Sole proprietorship
2. The calculation of returns in a logical and consistent manner.
Rent seeking
Performance measurement
Standard cost
Interest rate
3. With reference to the error term of a regression - having a variance that differs across observations.
Contra account
Semivariance
Relative strength (RSTR) indicators
Heteroskedastic
4. An algorithm that pro-duces uniformly distributed random numbers between 0 and 1.
Net asset balance sheet exposure
Greenmail
Gamma
Random number generator
5. The use of accounts receivable as collateral for a loan.
Dumping
Assignment of accounts receivable
Sole proprietorship
Monopolization
6. A perpetual annuity - or a set of never-ending level sequential cash flows - with the first cash flow occurring one period from now.
First-differencing
Perpetuity
Share-the-gains - share-the-pains theory
Random number
7. Method of managing inventory that minimizes in-process inventory stocks. kth order autocorrelation The correlation between observations in a time series separated by k periods.
Just-in-time method
Portfolio performance attribution
Pseudo-random numbers
Minority passive investments (passive investments)
8. An estimate of a parameter that involves combining (pooling) observations from two or more samples.
Reporting unit
Legal risk
Pooled estimate
Settlement risk
9. A solvency ratio calculated as total debt divided by total shareholders' equity.
Quintiles
External growth
Risk governance
Debt-to-equity ratio
10. In probability - with reference to an event 5 - the event that 5 does not occur; in eco-nomics - a good that is used in conjunction with another good.
Required rate of return
Complement
Market price of risk
Interest rate parity
11. 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.
Cost leadership
Proportionate consolidation
Random number
Capital asset pricing model (CAPM)
12. Internal or external limita-tions on investments.
Dirty surplus accounting
Investment constraints
Leveraged buyout (LBO)
Interest rate option
13. The currency of the primary economic environment in which an entity operates.
American
Functional currency
Breusch-Pagan test
Cnsistent
14. Events such that only one can occur at a time.
Price to book value
Efficient frontier
Sector neutral
Mutually exclusive events
15. The sum of the sample observations - divided by the sampfe size.
Monetary assets and liabilities
Equity dividend rate
Sample mean
Convenience yield
16. The market for short-term debt instruments (one-year maturity or less).
Money market
Financial leverage
Root mean square(l er ror (RMSE)
Equilibrium
17. The particular value calculated from sam-ple observations using an estimator.
Interval scale
Estimate
Cross-sectional data
Expanded
18. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Standard cost
Sinking fund factor
Venture capital investors
Hedge ratio
19. Net operating income less debt service and less taxes payable on income from operations.
After-tax cash flow (ATCF)
Residual income method (or excess earnings method)
Centralized risk management or companywide risk management
Long-term liability
20. A series of call options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A cap in general can have an underlying other than an interest ra
Interest rate cap or cap
Confidence interval
Excess kurtosis
Variance
21. A value against which a computed test statistic is compared to decide whether to reject or not reject the null hypothesis.
Income tax paid
Unit root
Rejection point (or critical value)
Performance measurement
22. A pre-offer takeover defense mecha-nism that gives target company bondholders the right to sell their bonds back to the target at a pre-specified redemption price - typically at or above par value; this defense increases the need for cash and raises
Closeout netting
Poison puts
Unclassified balance sheet
Benchmark value of the multiple
23. The margin requirement on any day other than the first day of a transaction.
Exercise or exercising the option
Maintenance margin requirement
Screening
Downstream
24. A method of valuing prop-erty based on site value plus current construction costs less accrued depreciation.
Cost approach to value
Credit swap
Giro system
Cumulative distribution function
25. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Units-of-production method
Economies of scale
Classical growth theory
Opportunity set
26. The accounting system of recording transactions in which every recorded transaction affects at least two accounts so as to keep the basic accounting equation (assets = liabilities + owners' equity) in balance.
Number of days of payables
Time-series data
Double-entry accounting
Proportionate consolidation
27. A merger; the term may be applied to any transaction - but is often used in reference to hos-tile transactions.
Maturity premium
Credit analysis
Risk management
Takeover
28. The difference between reported net income on an accrual basis and the cash flows from operating and investing activities.
Payoff
Simple random sampling
Safety-first Rules
Cash-flow-statement-based aggregate accruals
29. Cash and investments (specifi-cally cash - cash equivalents - and short-term investments) .
Report format
Nonearning assets
Ratio spread
Descriptive statistics
30. A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient - frequently understood to mean a result indicating that the corresponding population regression coefficient is different from O.
Adjusted present value (APV)
Purchased in-process research and development costs
Statistically significant
Variance
31. An acquisition in which the acquirer purchases the target company's assets and pay-ment is made directly to the target company.
Statement of changes in shareholders' equity (state-ment of owners' equity)
Asset purchase
Out-of-the-money
Financial reporting quality
32. A bias caused by using information that was not available on the test date.
Dutch Book theorem
Look-ahead bias
Fixed-rate perpetual preferred stock
Installment method (installment-sales method)
33. Sales price less disposition costs - amortized mortgage loan bal-ance - and capital gains taxes.
Orthogonal
After-tax equity reversion (ATER)
Marketability discount
Flip-over pill
34. A transaction whereby the target company management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company's outstanding shares.
Leveraged buyout (LBO)
Asset-based approach
Commercial paper
Ordinal scale
35. 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.
Capital allocation line (CAL)
Capital rationing
Sales
U.S. interest rate differential
36. A rule explaining the expected value of a random vari-able in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.
Combination
Vertical merger
Bill-and-hold basis
Total probability rule for expected value
37. Ratios that measure a company's ability to generate profitable sales from its resources (assets).
Profitability ratios
Degree of financial leverage (DFL)
Sample
Number of days of inventory
38. The divisor in the expression for the value of a perpetuity.
Delivery
Pull on liquidity
Investment strategy
Capitalization rate
39. 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.
Legislative and regulatory risk
Designated fair value instruments
Payment date
Nonparametric test
40. The difference between inventory reported as FIFO and 'nventory reported as LIFO (FIFO inventory value less LIFO inventory val e).
LIFO reserve
Statement of cash flows (cash flow statement)
Float
Linear trend
41. Common-size analysis using only one reporting period or one base financial state-ment; fo r example - an income statement in which all items are stated as percentages of sales.
Credit scoring model
Flotation cost
Vertical analysis
Strap
42. 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.
Conditional probability
Safety stock
Equitizing cash
Level of significance
43. With reference to equity investors - investors who seek to invest in high-earnings-growth companies.
Income tax recoverable
Crawling peg
Subsidiary merger
Growth investors
44. Valuation indicators that relate either price or a fundamental (such as earnings) to the time series of their own past val-ues (or in some cases to their expected value).
Sample selection bias
Commercial paper
Exposure to foreign exchange risk
Momentum indicators
45. A company that has similar business risk; usually in the same industry and preferably with a single line of business.
Systematic sampling
omparable company
Independent variable
Bank discount basis
46. The estimated gross amount of money that could be realized from the liquidation sale of an asset or assets - given a rea-sonable amount of time to find a purchaser or purchasers.
Orderly liquidation value
Flexible exchange rate
Theory of contestable markets
Current credit risk
47. A quoted interest rate that does not account for compounding within the year.
Chain rule of forecasting
Stated annual interest rate or quoted interest rate
Agency relationships
Ex-dividend
48. A solvency ratio calculated as total debt divided by total assets.
Bonding costs
Investment objectives
Balance-sheet-based aggregate accruals
Debt-to-assets ratio
49. The feature of a futures contract giv-ing the short the right to make decisions about what - when - and where to deliver.
Cash o£ fering
Arithmetic mean
Matrix pricing
Deliveryoption
50. Describes a distribution that is less peaked than the normal distribution.
Platykurtic
Segment ROA
Active factor risk
Trade credit