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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. The time remaining in the life of a derivative - typically expressed in years.






2. The amount charged for the delivery of goods or services in the ordinary activities of a business over a stated period; the inflows of eco-nomic resources to a company over a stated period.






3. A limit move in the futures market in which the price at which a transaction would be made is at or below the lower limit.






4. A gain in value caused bychanges in price levels. Monetary liabilities expe-rience purchasing power gains during periods ofinflation.






5. A company's profits on its usual business activities before deducting taxes.






6. In the context of the weighted average cost of capital (WACC) - a break point is the amount of capital at which the cost of one or more of the sources of capital changes - leading to a change in the WACC.






7. Costs of inven tories including costs of purchase - costs of conversion - other costs to bring the inventories to their present location and condition - and the allocated portion of) fixed production overhead costs.






8. Total company valme (the market value of debt - common equity - and preferred equity) minus the value of cash and investments.






9. Increases in economic benefits in the form of inflows or enhancements of assets - or decreases of liabilities that result in an increase in equity (other than increases resulting from contribu-tions by owners) .






10. The most frequently occurring value in a set of observations.






11. A test in which the null hypothesis is rejected in favor of the alternative hypothesis if the evidence indicates that the population param-eter is either smaller or larger than a hypothe-sized value.






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






13. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.






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






15. Debt and equity secu-rities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general - available-for-sale securities are reported at fair value on the bala






16. The amount that each unit sold contributes to covering fixed costs- that is - the difference between the price per unit and the variable cost per unit.






17. A variation of VAR that reflects the risk of a company's cash flow instead of its market value.






18. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.






19. A model of intrinsic value that views the value of an asset as the present value of the asset's expected future cash flows.






20. Unearned fees are recognized when a company receives cash payment for fees prior to earning them.






21. The compound rate of growth of one unit of currency invested in a port-folio during a stated measurement period; a mea-sure of investment performance that is not sensitive to the timing and amount of withdrawals or additions to the portfolio.






22. Under U.S. GAAP -a special purpose entity structured to avoid consol-idation that must meet qualification criteria.






23. 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.






24. When disbursements are paid tooquickly or trade credit availability is limited -requiring companies to expend funds beforethey receive funds from sales that could cover theliability.






25. The net amount of cash provided from operating activities.






26. With reference to the cash flow statement - a format for the presentation of the statement in which cash flow from operat-ing activities is shown as operating cash receipts less operating cash disburseme ts.






27. Division ofnet operating income by an overall capitalization rate to arrive at market value.






28. The amount at which an asset or liability is valued according to account-ing principles.






29. With reference to equity investors - investors whose investment disciplines cannot be clearly categorized as value or growth.






30. 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.






31. The relationship amongputs - calls - and forward contracts.






32. A sample measure of the degree of dispersion of a distribution - calculated by dividing the sum of the squared deviations from the sam-ple mean by the sample size minus 1.






33. In the con-text of private company valuation - valuation model based on an assumption of a constant growth rate of free cash flow to the firm or a con-stant growth rate of free cash flow to equity.






34. 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.






35. In the context of corporate finance - leverage refers to the use of fixed costs within a company's cost structure. Fixed costs that are operating costs (such as depreciation or rent) create operating leverage. Fixed costs that are financial costs (su






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






37. Quantiles that divide a distribution into five equal parts.






38. Ratios that measure a company's ability to meet its long-term obligations.






39. Agency costs that are incurred despite adequate monitoring and bonding of management.






40. Financial ratios measuring the com-pany's ability to meet its short-term obligations.






41. Futures contracts in which the underlying is a stock - bond - or currency.






42. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.






43. An option in which the underlying is a bond; primarily traded in over-the-counter markets.






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






45. A country that during its entire his-tory has invested more in the rest of the world than other countries have invested in it.






46. Tax expenses that have been recognized and recorded on a company's income statement but which have not yet been paid.






47. A list of accounts used in an entity's accounting system.






48. Economic characteristics of a busi-ness such as profitability - financial strength - and risk.






49. 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.






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