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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.
  • 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. An increase in a company's earnings that results as a consequence of the idio-syncrasies of a merger transaction itself rather than because of resulting economic benefits ofthe combination.






2. An accelerated depre-ciation method - i.e. - one that allocates a relativelylarge proportion of the cost of an asset to the early years of the asset's useful life.






3. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .






4. An esti-mate of a country's equity risk premium that is based upon the historical averages of the risk-free rate and the rate of return on the market portfolio.






5. The unsold units of product on hand.






6. In reference to <wrporate taxes a split-rate system taxes earnings to be distributed as dividends at a different rate than earnings to be retained. Corporate profits distributed as dividends are taxed at a lower rate than those retained in the busine






7. A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).






8. The owner of an asset that grants the right to use the asset to another party.






9. A solvency ratio calculated as total debt divided by total shareholders' equity.






10. The graphical representation of a model of asset price dynamics in which - at each period - the asset moves up wi t probability p or down with probability (I - p).






11. The present value of an investment's cash inflows (benefits) minus the present value of its cash outflows (costs).






12. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.






13. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea






14. A loss in value caused bychanges in price levels. Monetary assets experi-ence purchasing power losses during periods ofinflation.






15. A probability based on logical analysis rather than on observation or personal judgment.






16. The investigation of issues relating to the accuracy of reported accounting results as reflections of economic per-formance; quality of earnings analysis is broadly understood to include not only earnings manage-ment - but also balance sheet manageme






17. An acceler-ated depreciation method that involves depreciat-ing the asset at double the straight-line rate. This rate is multiplied by the book value of the asset at the beginning of the period (a declining balance) to calculate depreciation expense.






18. Observations over individual units at a point in time - as opposed to time-series data.






19. Time thought of as advancing in extremely small increments.






20. With respect to the format of the income statement - a format that presents a subtotal for gross profit (revenue minus cost of goods sold).






21. An agreement between two parties in which one party - the buyer - agrees to buy from the other party - the seller - an underlying asset at a later date for a price established at the start of the contract.






22. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.






23. The extent to which a company can effect - through the use of debt - a propor-tional change in the re turn on common equity that is greater than a given proportional change in operating income; also - short for the financial leverage ratio.






24. The naturalloga-rithm of 1 plus the holding period return - or equivalently - the natural logarithm of the ending price over the beginning price.






25. The relationship between the price of the underlying and an option's exercise price.






26. A transaction between two affiliates - an investor company and an associate company such that the investor company records a profit on its income statement. An example is a sale of inven-tory by the investor company to the associate.






27. A measure of correlation applied to ranked data.






28. A specifi-cation of how 'value' is to be understood in the context of a specific valuation.






29. Aka 'Market efficiency. '






30. Resources controlled by an enterprise as a result of past events and from which future eco-nomic benefits to the enterprise are expected to flow.






31. 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.






32. A poison pill takeover defense that dilutes an acquirer's ownership in a target by giv-ing other existing target company shareholders the right to buy additional target company shares at a discount.






33. The difference between revenue and expenses; what remains after subtracting all expenses (including depreciation - interest - and taxes) from revenue.






34. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.






35. A subset of a population.






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






37. Method of accounting in which the effect of transactions on financial condition and income are recorded when they occur - not when they are settled in cash.






38. When assets trans-lated at the current exchange rate are greater in amount than liabilities translated at the current exchange rate. Assets exposed to translation gains or losses exceed the exposed liabilities.






39. The difference between the yield on a bond and the yield on a default-free security - usu-ally a government note - of the same maturity. The yield spread is primarily determined by the mar-ket's perception of the credit risk on the bond.






40. The most recent quarterly dividend multiplied by four.






41. A valuation indicator based on past pdce movement.






42. Changes to equity that bypass (are not reported in) the income statement; the diffe rence between comprehensive income and net income.






43. A form of restructuring that involves the creation of a new legal entity and the sale of equity in it to outsiders.






44. A method for estimating a company's before-tax cost of debt based upon the yield on comparably rated bonds for maturities that closely match that of the company's existing debt.






45. Small numbers of observations at either extreme (small or large) ofa sample.






46. A third party that is sought out by the target company's board to purchase the target in lieu of a hostile bidde .






47. Accounting that satisfies the condition that all changes in the book value of equity other than transactions with owners are reflected in income. The bottom-line income reflects all changes in shareholders' equity arising from other than owner transa






48. Provision for a return of invest-ment - net of value appreciation.






49. A rule that states that the number of years it takes for the level of a variable to double is approximately 70 divided by the annual percent-age growth rate of the variable.






50. Bias introduced by systemati-cally exclua ing some members of the population according to a particular attribute-for example - the bias introduced when data availability leads to certain observations being excluded from the analysis.







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