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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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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. FIrm model A model of stock valuation that views the value of a firm as the pres-ent value of expected future free cash flows to the firm.






2. 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






3. Describes a distribution that is more peaked than a normal distribution.






4. 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).






5. An activity ratio equal to rev-enue divided by average receivables.






6. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.






7. The ratio of a set of observations' standard deviation to the observa-tions' mean value.






8. An option to enter into a swap.






9. A business's value under a going-concern assumption.






10. The probabili ty that a confi-dence interval ind udes the unknown population parameter.






11. A business owned and operated by a single person.






12. A yield on a basis comparable to the quoted yield on an interest-bearing money market instrument that pays interest on a 360-<iay basis; the annualized holding period yield - assuming a 360-<iay year.






13. A normal operating expense that has been paid in advance of when it is due.






14. A variation of the market approach; considers actual transactions in the stock of the subject private company.






15. An amount or percentage deducted from the value of an owner-ship interest to reflect the relative absence ofmarketability.






16. The arithmetic mean value of a population; the arithmetic mean of all the obser-vations or values in the population.






17. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.






18. The ratio of the market value of debt and equity to the replacement cost of total assets.

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19. The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.






20. When a company has a single risk management group that monitors and controls all of the risk-taking activities of the organization.






21. The management of a company's short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers) .






22. Covering or containing all possible outcomes.






23. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.






24. The risk that portfolio value will fall below some minimum acceptable level over some time horizon.






25. 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.






26. 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.






27. 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.






28. With reference to an interval of grouped data - the number of observations in the interval divided by the total number of observa-tions in the sample.






29. Equity shares that are subordinate to all other types of. equity (e.g. - p refe rred equi ty) .






30. 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.






31. The value of exports of goods and ser-vices minus the value of imports of goods and services.






32. The margin requirementon the first day of a transaction as well as on anyday in which additional margin funds must be deposited.






33. 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






34. An offset to property - plant - and equipment (PPE) reflecting the amount of the cost of PPE that has been allocated to current and previous accounting periods.






35. The original time to maturity on a swap.






36. Method of valu-ing property based on recen t sales prices of simi-lar properties.






37. Mutually exclusive proj-ects compete directly with each other. For example - if Projects A and B are mutually exclusive - you can choose A or B - but you cannot choose both. n Factorial For a positive integer n - the product of the first n positive i






38. A matrix or square array whoseentries are covariances; also known as a variance-covariance matrix.






39. The purchase of the accumulated shares of a hostile investor by a company that is targeted for takeover by that investor - usually at a substan-tial premium over market price.






40. An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.






41. A policy regime is one that selects a target path for the exchange rate with interven-tion in the foreign exchange market to achieve that path.






42. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe






43. A model that specifies an asset's intrinsic value.






44. 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






45. The portion of the minimum-variance frontier beginning with the global mmlmum-variance portfolio and continuing above it; the graph of the set of portfolios offering the maximum expected return for their level of variance of return.






46. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.






47. An account that offsets another account.






48. The owners' remaining claim on the company's assets after the liabilities are deducted.






49. Heightened uncertainty regarding a company's ability to meet its various obligations because of lower or negative earnings.






50. Interest earned but not yet paid.