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Test your basic knowledge |
CFA Level2 Vocab
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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. Ratio of sales on credit to the average balance in accounts receivable.
Bayes' formula
Accounts receivable turnover
LIFO method
Exports
2. A share of any profits that is paid to the general partner (manager) of an investment partnership - such as a private equity or hedge fund - as a form of compensation designed to be an incentive to the manager to maximize per-formance of the investme
Decentralized risk management
Leptokurtic
Carried interest
Long-term equity anticipatory securities (LEAPS)
3. As used in option pricing - the standard deviation of the continuously compounded returns on the underlying asset.
Unconditional heteroskedasticity
Normal backwardation
Nonstationarity
Volatility
4. An acquisition in which the acquirer purchases the target company's assets and pay-ment is made directly to the target company.
Asset purchase
Constant maturity swap or
Modal interval
Income tax paid
5. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
Abandonment option
Sum-of-the-parts valuation
Company fundamental factors
Netting
6. When parties agree to exchange only the net amount owed from one party to the other.
Target payout ratio
Transaction exposure
Degree of financial leverage (DFL)
Netting
7. Said of a sale in which proceeds are to be paid in installments over an extended period of time.
Installment
Price multiple
Owners' equity
Broker
8. A random variable that can take on at most a countable number of possi-ble values.
First-order serial correlation
Residual income method (or excess earnings method)
Discrete random variable
Buy-side analysts
9. Under U.S. GAAP - a measure used in estimating a defined-benefit pen-sion plan's liabilities - defined as 'the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee ser-vice rendered prior to that
Permutation
Macroeconomic factor
Projected benefit obligation
Addition rule for probabilities
10. The differ-ence between reported net income on an accrual basis and the cash flows from operating and investing activities compared to the average net operating assets over the period.
Tenor
Cash-flow-statement-based accruals ratio
Operating risk
Financial transaction
11. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.
Capture hypothesis
Reputational risk
Friendly transaction
Futures commission merchants (FCMs)
12. A finance perspective on capital markets that deals with the relationship of price to intrinsic value. The traditional efficient mar-kets formulation asserts that an asset's price is the best available estimate of its intrinsic value. The rational ef
Market efficiency
Probability distribution
Degrees of freedom (df)
Anticipation stock
13. A condition in the futures markets in which the benefits of holding an asset exceed the costs - leaving the futures price less than the spot price.
ackwardation
Downstream
Lessor
Fixed asset turnover
14. An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
Backtesting
Contingent consideration
IRR rule
Friendly transaction
15. The portfolio with the each given level of minimum variance for expected return.
Minimum-variance portfolio
Population
Illiquidity discount
Systematic factors
16. The operational flexibility to adjust prices when demand varies from forecast. For example - when demand exceeds capacity - the company could benefit from the excess demand by increasing prices.
Price-setting option
Grouping by nature
Decentralized risk management
Cost of equity
17. The hypothesis to be tested.
Swap spread
Null hypothesis
Controlling interest
Abandonment option
18. A country that is borrowing more from the rest of the world than it is lending to it.
Parametric test
Foreign exchange market
Dutch Book theorem
Net borrower
19. With reference to regression analysis - the estimated values of the population intercept and population slope coeffi-cien t(s) in a regression.
Estimated (or fitted) parameters
Residual dividend approach
Dealing securities
Complement
20. A model that specifies an asset's value relative to the value of another asset.
Direct income capitalization approach
Economic value added (EVA)
Relative valuation models
Current ratio
21. Nonconvertible - noncallable preferred stock with a specified divi-dend rate that has a claim on earnings senior to the claim of common stock - and no maturity date.
Double declining balance depreciation
Fixed-rate perpetual preferred stock
Orderly liquidation value
Posterior probability
22. The amount the company estimates that it can sell the asset for at the end of its useful life.
Salvage value
Holding period return
Stated annual interest rate or quoted interest rate
Accounting estimates
23. A merger; the term may be applied to any transaction - but is often used in reference to hos-tile transactions.
Foreign currency transactions
Takeover
Allowance for bad debts
Cost of capital
24. The condition in futures markets in which futures prices are lower than expected spot prices.
Normal backwardation
Transactions motive
Elasticity
Option
25. Aka marking to market.
Daily settlement
Justified (fundamental)
Alternative hypothesis
LIFO layer liquidation (LIFO liquidation)
26. The establishment of objectives for individuals - groups - or divisions of an organiza-tion that takes into account the allocation of an acceptable level of risk.
Top-down forecasting approach
Convertible debt
Efficiency
Risk budgeting
27. The risk that a company will suffer an extended diminution in market value relative to other companies in the same industry due to a demonstrated lack of concern for environmental - social - and governance risk factors.
Discount rate
Target payout ratio
Strap
Reputational risk
28. The possibility that when we use a time-series sample - our statistical conclusion may be sensitive to the starting and ending dates of the sample.
Time-period bias
Permutation
Temporal method
Nondeliverable forwards (NDFs)
29. Agency costs that are incurred despite adequate monitoring and bonding of management.
Interval scale
Floating-rate loan
Residual loss
Modal interval
30. A valuation that sums the estimated values of each of a company's busi-nesses as if each business were an independent going concern.
Losses
Equity swap
Nonparametric test
Sum-of-the-parts valuation
31. Projects in which influential managers want the corporation to invest. Often - unfortu-nately - pet projects are selected without undergo-ing normal capital budgeting analysis.
Pooling of interests accounting method
Probit model
Pet projects
Cost of equity
32. 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.
Forward dividend yield
Interest rate parity
Direct format (direct method)
Vertical common-size analysis
33. A solvency ratio calculated as EBIT divided by interest payments.
Differentiation
Interest coverage
Cash o£ fering
Nominal rate
34. A legal corporate entity whose shareholders are its members. The members of the exchange have the privilege of executing transactions directly on the exchange.
Futures exchange
Liquidity ratios
Instability in the minimum-variance frontier
Continuing residual income
35. The prooability of an observation - given a par ticular set of conditions.
Likelibood
Divestiture
Cost averaging
Diluted shares
36. A measurement scale that has all the characteristics of interval measurement scales as well as a true zero point as the origin.
Matching strategy
Ratio scales
Winsorized mean
Gamma
37. The expected return on an invest-ment minus the risk-free rate.
Swap
Component cost of capital
Risk premium
Earnings expectation management
38. Large industry groupings.
Money market yield (or CD equivalent yield
Financial futures
Bottom-up investing
Economic sectors
39. Hirschman Index A measure of rna ket concentration that is calculated by summing the squared mar et shares for competing companies in an industry; high HHI readings or mergers that would result in large HHI increases are more likely to result in regu
Fixed asset turnover
Band-of-investment method
Her rmdahl-
Currency option
40. 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.
Exhaustive
Capitalized cash flow model (method)
Minimum-variance frontier
Objective probabilities
41. 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.
Market value of invested capital
Definitive merger agreement
Capitalized inventory costs
Pairs trading
42. Quantiles that divide a distribution into five equal parts.
Quintiles
Managerialism theories
Arbitrage
Estimate
43. The day that options are granted to employees; usually the date that compensation expense is measured if both the number of shares and option price are known.
World Trade Organization
Partial regression coefficients or partial slope coeffi-cients
Residual claim
Grant date
44. A legal contract specifYing the terms of a bond issue.
Normalized earnings per share (or normal earnings per share)
Bond indentnre
Tender offer
Cost of carry
45. A probability based on logical analysis rather than on observation or personal judgment.
Initial public offering (IPO)
Treasury shares
Tender offer
A priori probability
46. 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).
Cannibalization
Target balance
Committed lines of credit
Valuation
47. A method of valuing prop-erty based on site value plus current construction costs less accrued depreciation.
Cost approach to value
Subsidiary merger
Accounts receivable turnover
Mean reversion
48. The mix of a company's variable costsand fixed costs.
Contra account
Deductible temporary differences
Call
Cost structure
49. A variation of a floating-rate note that has some type of unusual characteristic such as a leverage factor or in which the rate moves opposite to interest rates.
Manufacturing resource planning (MRP)
Chain rule of forecasting
Structured note
Survey approach
50. An option strategy in which a position in an asset is converted to a risk-free position with a position in a specific number of options. The number of options per unit of the underlying changes through time - and the position must be revised to maint
Delta hedge
Vertical common-size analysis
Convenience yield
Sharpe's measure