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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
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study here
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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 use of computer networks to conduct financial transactions electronically.
Cost-of-service regulation
Electronic funds transfer
Descriptive statistics
Equity swap
2. The risk that a financial instrument cannot be purchased or sold without a significant concession in price due to the size of the market.
Creditor nation
Liquidity risk
White knight
Sarbanes-Oxley Act
3. Fees charged to companies b)' invest-menJ ~nkers and other costs assooiated witli: rai'.. ing new capital.
Gains
Purchasing power loss
Flotation cost
Mispricing
4. A valuation ratio calculated as price per share divided by cash flow per share.
Price to cash flow
Point estimate
Monetary assets and liabilities
Monitoring costs
5. With the accounting systems - a formal record of increases and decreases in a specific asset - liability - component of owners' equity - rev-enue - or expense.
ackwardation
Account
Interest rate parity
Complement
6. The income tax owed by the company on the basis of taxable income.
Income tax payable
World Trade Organization
Backtesting
Duration
7. The analysis of the strength of the linear relationship between two data series.
Built-up method
Active return
Correlation analysis
Cash
8. An operating segment or one level below an operating segment (referred to as a component) .
Reporting unit
Percentiles
Historical equity risk premium approach
Passive strategy
9. An activity ratio equal to rev-enue divided by average receivables.
Legal risk
Receivables turnover
Cash o£ fering
Hedge ratio
10. The use of inventory as collat-eral for a loan. Though the lender has claim to some or all of the company's inventory - the com-pany may still sell or use the inventory in the ordi-nary course of business.
American option
Breusch-Pagan test
Inventory blanket lien
Legislative and regulatory risk
11. With reference to assets - the amount of cash or cash equivalents that could currently be obtained by sell ing the asset i an orderly disposal; with reference to lia-bilities - the undiscounted amount of cash or cash equivalents expected to be paid t
Realizable value (settlement value)
Capital account
Notes payable
Commercial paper
12. An arrangement whereby someone - an agent - acts on behalf of another per-son - the principal.
Agency relationships
Vertical common-size analysis
Tobin's q
Ope ating profit margin (operating margin)
13. A criterion asserting that the optimal portfolio is the one that minimizes the probability that portfolio return falls below a threshold level.
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14. Probabilities reflecting beliefs prior to the arrival of new information.
Tree diagram
Face value (also principal - par value - stated value - or maturity value)
Termination date
Prior probabilities
15. 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.
Break point
Active risk squared
Weighted-average cost of capital (WACC)
Earnings expectation management
16. An agreement between two parties to exchange a series of future cash flows.
Swap
Tax risk
Unearned revenue (deferred revenue)
Built-up method
17. The amount of time between check issuance and a check's clearing back against the company's account.
Complement
Disbursement float
Floor
Exercise price (strike price - striking price - or strike)
18. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.
Prior transaction method
Eurodollar
Currency option
Growth phase
19. With reference to grouped data - the most frequently occurring interval.
Point estimate
Panel data
Delta
Modal interval
20. The relationship of the quantity of an asset being hedged to the quantity of the deriva-tive used for hedging.
Hedge ratio
Mixed factor models
Double taxation
Quartiles
21. 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.
Sales returns and allowances
Credit scoring model
Cap
Earnings at risk (EAR)
22. 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.
Contribution margin
Net exports
Safety stock
Logit model
23. A reduction in the number of shares outstanding with a corresponding increase in share price - but no change to the company's underlying fundamentals.
Bonding costs
Reverse stock split
Sell-side analysts
Balance-sheet-based aggregate accruals
24. 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.
Investment constraints
Time-weighted rate of return
Other post-employment benefits
Residual autocorrelations
25. An asset's sensitivity to a particular factor; a mea-sure of the response of return to each unit of increase in a factor - holding all other factors constant.
Depreciation
Sales
Pull on liquidity
Factor sensitivity (also factor betas or factor loadings)
26. An extra return that compen-sates investors for expected inflation.
Inflation premium
Free cash flow to equity model
Payoff
Shortfall risk
27. 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.
Double declining balance depreciation
Dutch Book theorem
Bull spread
Regression coefficients
28. An approach to decomposing return on investment - e.g. - return on equity - as the product of other financial ratios.
Measurement scales
Probability
Credit scoring model
Du Pont analysis
29. Common sharehold-ers' equity minus intangible assets from the bal-ance sheet - divided by the number of shares outstanding.
Tangible book value per share
Enterprise value (EV)
Gross profit argin
LIFO reserve
30. A statistical test for differ-ences based on paired observations drawn from samples that are dependent on each other.
Special purpose entity (special purpose vehicle or variable interest entity)
Stock purchase
Paired comparisons test
Confidence interval
31. 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
Compounding
Statement of retained earnings
U.S. official reserves
Macroeconomic factor
32. The smallest level of significance at whichthe null hypothesis can be rejected; also called themarginal significance level.
P Value
Owners' equity
Weighted-average cost of capital (WACC)
Temporal method
33. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.
Contingent consideration
Market share test
Normalized earnings per share (or normal earnings per share)
Time to expiration
34. 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.
Up transition probability
Futures commission merchants (FCMs)
Bond-equivalent basis
Unlimited funds
35. With eference to grouped data - a se t or val-ues within w ich an observation falls.
Report format
Interval
Sampling
Standard deviation
36. The amount at which an asset or liability is valued for tax purposes.
Swap
Tax base (tax basis)
Accumulated depreciation
Variable costs
37. The official price - designated by the clearinghouse - from which daily gains and losses will be determined and marked to market.
Specific identification method
Floor
Periodic rate
Settlement price
38. A profitabili ty ratio calcu-lated as EBIT divided by the sum of short-and long-te debt and equi ty.
Return on total capital
Fundamentals
Statistics
Debt covenants
39. Resolving differences in indications of value when estimating market value.
Reconciliation
Dynamic hedging
Historical equity risk premium approach
Treasury shares
40. A type of weighted mean computed by averaging the reciprocals of the ohservations - then taking the reciprocal of that average.
Disbursement float
Harmonic mean
Foreign currency
Target semideviation
41. A contract signed by both parties to a merger that clarifies the details of the transaction - including the terms - war-ranties - conditions - termination details - and the rights of all parties.
Risk premium
Definitive merger agreement
Adjusted present value (APV)
Market-oriented investors
42. The strategy of using futures contracts to enter the market without an immediate outlay of cash.
Discount for lack of marketability
Pre-investing
Official settlements account
Leverage
43. Under IFRS - the liability of a defined benefit pension.
Estimated (or fitted) parameters
Underlying
Defined benefit obligation
U.S. GAAP and uniting of interests under IFRS
44. An equation expressing the equiva-lence (parity) of a portfolio of a call and a bondwith a portfolio of a put and the underlying -which leads to the relationship between put andcall prices
Active specific risk or asset selection risk
Put-call parity
Mismatching strategy
Credit spread option
45. Long-term assets with physical sub-stance that are used in company operations - such as land (property) - plant - and equipment.
Dividend discount model (DDM)
Tangible assets
Operating activities
Comprehensive income
46. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.
Historical exchange rates
Normalized earnings
Anticipation stock
Tender offer
47. The amount available for fixed costs and profit after paying variable costs; rev-enue minus variable costs.
Normal contango
Contribution margin
Standard deviation
After-tax cash flow (ATCF)
48. Stan-dard errors of the estimated parameters of a regression that correct for the presence of het-eroskedasticity in the regression's error term.
Overnight index swap (OIS)
Mean absolute deviation
Heteroskedasticity-consistent standard errors
Capital allocation line (CAL)
49. The government's holding of foreign cun; - e.!}cy.
U.S. official reserves
Currency option
Equity forward
Relative frequency
50. A mean computed after assigning a stated percent of the lowest values equal to one specified low value - and a stated percent of the highest values equal to one specified high value.
Losses
Number of days of receivables
Winsorized mean
Relative dispersion