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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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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 excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.
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2. An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.
Variance
Catalyst
Roy's safety first criterion
Accelerated methods of depreciation
3. A public document that provides the material facts concerning matters on which shareholders will vote.
Elasticity
Gross income multiplier (GIM)
Proxy statement
Projected benefit obligation
4. All members of a specified group.
Population
Marketability discount
Other post-employment benefits
Opportunity cost
5. A stock's current mar-ket price divided by the most recent four quarters of earnings per share.
Target semivariance
Imports
Functional currency
Trailing P/E (or current PIE)
6. A fUl !lction giving the probability of joint occurrences of values of stated random variables.
Current exchange rate
J oint probability function
Comparables (comps - guideline assets - guideline com-panies)
Noncurrent assets
7. The amount for which one can sell some-thing - or the amount one must pay to acquire something.
Taxable income
Value
Market rate
Credit
8. The error of rejecting a true null hypothesis.
Type I error
Measure of location
Transactions motive
Residual income (or economic profit or abnormal earnings)
9. Approach to translating for-eign currency financial statements for consolida-tion in which all assets and liabilities are translated at the current exchange rate. The cur-rent rate method is the prevalent method of translation.
Current rate method
Treasury shares
Discount
Hedging
10. With reference to equity investors - investors who seek to invest in high-earnings-growth companies.
Add-on interest
Minority passive investments (passive investments)
Range
Growth investors
11. Assets that are expected to be consumed or converted into cash in the near future - typically one year or less.
New growth theory
Cumulative relative frequency
Factor risk premium (or factor price)
Current assets - or liquid assets
12. CAPM An adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.
Price to sales
Depreciation
Expanded
Down transition probability
13. A purchase involving a buyer that would benefit from certain synergies associ-ated with owning the target firm.
Strategic transaction
Share repurchase
Breusch-Pagan test
P Value
14. The market value of a swap.
American option
Replacement value
Arrears swap
Historical exchange rates
15. The interest earned each period on the original investment; interest calculated on the principal only.
Present value model or discounted cash flow model
Covered interest arbitrage
Simple interest
Antidilutive
16. An average in which each observation is weighted by an index of its relative importance.
Weighted mean
Continuous random variable
Agency costs of equity
Indirect format (indirect method)
17. Small numbers of observations at either extreme (small or large) ofa sample.
Outliers
Normalized
Growth option or expansion option
Functional currency
18. The risk associated with operating earnings. Operating earnings are uncertain because total revenues and many of the expendi-tures contributed to produce those revenues are uncertain.
Business risk
Convertible debt
Bond yield plus risk premium approach
Tangible assets
19. A graphical depic-tion of a company's investment opportunities ordered from highest to lowest expected return. A company's optimal capital budget is found where the investment opportunity schedule inter-sects with the company's marginal cost of capit
Probit model
Free cash flow to equity model
Accounting estimates
Investment opportunity schedule
20. An aggregate of an entity's income tax payable (or recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabili-ties. It is essentially the income tax payable or recoverable if these had been determined based on accoun
Tax expense
Monitoring costs
Exhaustive
Functional currency
21. A rule explaining the uncon-ditional probability of an event in terms of proba-bilities of the event conditional on mutually exclusive and exhaustive scenarios.
Vertical merger
Total probability rule
Correlation analysis
Economic order quantity-reorder point
22. The process of systematically allocat-ing the cost of long-lived (tangible) assets to theperiods during which the assets are expected toprovide economic benefits.
Two-sided hypothesis test (or two-tailed hypothesis test)
Simulation trial
Derivatives dealers
Depreciation
23. An experiment that can produce one of two outcomes.
Split-off
In-the-money
Cash price or spot price
Bernoulli trial
24. The annual percentage change in real CDP.
Settlement risk
Economic growth rate
Real risk-free interest rate
Univariate distribution
25. Valuation approach that values an asset based on pricing multiples from sales of assets viewed as similar to the subject asset.
Bundling
Market approach
Risk management
Debt covenants
26. A process used in a deliverable forward contract in which the long pays the agreed-upon price to the short - which in turn delivers the underlying asset to the long.
Basis point value (BPV)
Adjusted present value (APV)
Random walk
Delivery
27. A combination of interest rate put options designed to hedge a lender against lower rates on a floating-rate loan.
Leveraged buyout (LBO)
Floor
Securities offering
Recapture premium
28. The time between settlement dates.
Settlement period
Range
Vertical analysis
Voluntary export restraint
29. A business owned and operated by more than one individual.
Fixed-rate perpetual preferred stock
Partnership
Adjusted beta
Commodity swap
30. The revaluation of a financial asset or liability to its current market value or fair value.
Tree diagram
Ex-dividend date
Mark-ta-market
Sales returns and allowances
31. Members ips in a derivatives exchange.
Seats
Inventory blanket lien
Measure of location
Nonparametric test
32. The rate at which periodic interest payments are calculated.
Semilogarithmic
Cap
Share-the-gains - share-the-pains theory
Stated rate (nominal rate or coupon rate)
33. An entity associated with a futures market that act~ as middleman between the con-tracting parties and guarantees to each party the performance of the other.
Clearinghouse
Conditional variances
Performance measurement
U.S. interest rate differential
34. As an approach to valuing a company - the sum of the value of the company - assuming no use of debt - and the net present value of any effects of debt on company value.
Alpha (or abnormal return)
Adjusted present value (APV)
Solvency ratios
Managerialism theories
35. Total assets minus total liabilities.
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36. Investments in which the investor has no signifi-cant influence or control over the operations of the investee.
Minority passive investments (passive investments)
U.S. official reserves
Method based on forecasted fundamentals
Risk premium
37. A graph of a frequency distri-bution obtained by drawing straight lines join-ing successive points representing the class frequencies.
Operating risk
Frequency polygon
Commodity option
Enterprise risk management
38. With reference to statistical infer-ence - the subdivision dealing with the testing ofhypotheses about one or more populations.
Hypothesis testing
Tracking risk
Initial public offering (IPO)
Receivables turnover
39. With respect to the application of the LIFO inventory method - the liquidation of old - relatively low-priced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old - low
Bond yield plus risk premium approach
Catalyst
LIFO layer liquidation (LIFO liquidation)
North
40. The ability to make additional investments in a project at some future time if the financial results are strong.
Financing activities
Growth option or expansion option
Acquiring company - or acquirer
Synthetic put
41. Any test (or procedure) concerned with parameters or whose validity depends on assumptions concerning the population generat-ing the sample.
Arbitrage
Interval
Time value of money
Parametric test
42. Financial ratios measuring the com-pany's ability to meet its short-term obligations.
Mixed factor models
Univariate distribution
Price relative
Liquidity ratios
43. Temporary differ-ences that result in a taxable amount in a future period when determining the taxable profit as the balance sheet item is recovered or settled. t-Distribution A symmetrical distribution defined by a single parameter - degrees of free
Guideline transactions method
Differentiation
Taxable temporary differences
Defined benefit obligation
44. Aka marking to market.
Long
FIFO method
Daily settlement
Trade credit
45. A public offer whereby the acquirer invites target shareholders to submit ('tender') their shares in return for the proposed payment.
Long-term liability
Exchange ratio
Purchasing power loss
Tender offer
46. A country's record of international trading - borrowing - and lending.
Balance of payments accounts
Diluted earnings per share (diluted
Build-up method
Put-call parity
47. The risk that failures by company man-agers to effectively manage a company's environ-mental - social - and governance risk exposures will lead to lawsuits and other judicial remedies - resulting in potentially catastrophic losses for the company; th
Residual loss
Other comprehensive income
Legal risk
Normal distribution
48. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.
Sampling plan
Pseudo-random numbers
Revaluation
Information ratio (IR)
49. For accounting purposes - the exchange rates that existed when the assets and liabilities were initially recorded.
Gross profit argin
Prior transaction method
Geometric mean
Historical exchange rates
50. An active investment strategy whereby the timing of cash outflows is not matched with investment maturities.
Equity charge
Value at risk (VAR)
Molodovsky effect
Mismatching strategy