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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.
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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 actual cash that would be avail-able to the company's investors after making all investments necessary to maintain the company as an ongoing en terprise (also referred to as free cash flow to the firm); the internally generated funds that can be






2. Sales minus the cost of sales ~.e . - the cost of goods sold for a manufactur-ing cOlp pany) .






3. FIrm model A model of stock valuation that views the value of a firm as the pres-ent value of expected future free cash flows to the firm.






4. A comparison of revenues with working capital to produce a measure that shows how efficiently working capital is employed.






5. The set of assets available for investment.






6. A set of observations on a variable's out-comes in different time periods.






7. The most recent quarterly dividend multiplied by four.






8. A test in which the null hypothesis is rejected only if the evidence indicates that the population parameter is greater than (smaller than) eo- The alternative hypothesis also has one side.






9. Financial instru-ments that an entity chooses to measure at fairvalue per lAS 39 or SFAS 159. Generally - the elec-tion to use the fair value option is irrevocable.






10. Transactions that are denominated in a currency other than a com-pany's functional currency.






11. Netting the market values of all derivative contracts between two parties to deter-mine one overall value owed by one party to another in the event of bankruptcy.






12. Making forecasts - estimates - or judgments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.






13. Said of a sale in which proceeds are to be paid in installments over an extended period of time.






14. For accounting purposes - the spot exchange rate on the balance sheet date.






15. Earnings adjusted for nonrecur-ring - non-economic - or other unusual items to elim-inate anomalies andlor facilitate comparisons.






16. A scheme of measuring differ-ences. The four types of measurement scales are nominal - ordinal - interval - and ratio.






17. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.






18. A distribution that specifies the probabilities of a random variable's possible outcomes.






19. Aka 'Market efficiency. '






20. When a bankrupt company is allowed to enforce contracts that are favorable to it while walking away from contracts that are unfa-vorable to it.






21. Investments in which investors exert significant influence - but not con-trol - over the investee. Typically - the investor has 20 to 50 % ownership in the investee.






22. An annuity having a first cash flow that is paid immediately.






23. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.






24. A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.






25. Interest earned but not yet paid.






26. Assets and liabili-ties that are not monetary assets and liabilities. Nonmonetary assets include inventory - fixed assets - and intangibles - and nonmonetary liabili-ties include deferred revenue.






27. A type of non-audited financial statements; typically provide an opinion letter with representations and assurances by the reviewing accountant that are less than those in audited financial statements.






28. With reference to an interval of grouped data - the number of observations in the interval divided by the total number of observa-tions in the sample.






29. The pro-portion of the ownership of a subsidiary not held by the parent (controlling) company.






30. A function giving the probability that a random variable is less than or equal to a specified value.






31. Commercial and investmentbanks that make markets in derivatives.






32. The money of other countries regardless of whether that money is in the form of notes - coins - or bank deposits.






33. A wholly-owned sub-sidiary of a company that is established to provide financing of the sales of the parent company.






34. The analysis of the strength of the linear relationship between two data series.






35. Unsecured short-term corporate debt that is characterized by a single payment at maturity.






36. The accounting principle that expenses should be recognized when the associ-ated revenue is recognized.






37. With reference to equity investors - investors who seek to invest in high-earnings-growth companies.






38. A profitabili ty ratio calcu-lated as EBIT divided by the sum of short-and long-te debt and equi ty.






39. The costs of holding an asset - generally a function of the physical char-acteristics of the underlying asset.






40. An average in which each observation is weighted by an index of its relative importance.






41. A valuation ratio calculated as price per share divided by sales per share.






42. With reference to the presen-tation of expenses in an income statement - the grouping together of expenses serving the same function - e.g. - all items that are costs of good sold.






43. The amount of money a buyer pays and seller receives to engage in an option transaction.






44. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators - who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated indus-try's






45. The number of observations in a given interval (for grouped data) .






46. Bias that may result when failed or defunct companies are excluded from member-ship in a group.






47. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.






48. The minimum rate of return required by an investor to invest in an asset - given the asset's riskiness.






49. A measure of the sensitivity of a bond's yield to a general measure of bond yields in the market that is used to refine the hedge ratio.






50. The sum of the real risk-free interest rate and the inflation premium.







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