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CFA Level2 Vocab
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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 extent to which a company's operations are predictable with substantial confidence.
VISibility
Tenor
Price momentum
LIFO method
2. 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.
Minority active investments
Payables turnover
Opportunity cost
Covariance matrix
3. The rate of dividend (and earnings) growth that can be sustained over time for a given level of re turn on equity - keeping the capi tal structure constant and wi thout issuing addi tional common stock.
Sustainable growth rate
Mature growth rate
Direct income capitalization approach
Interest rate collar
4. The dollar amount of cash divi-dends paid during a period per share of common stock.
Asset-based loan
Instability in the minimum-variance frontier
Dividend discount model (DDM)
Dividends per share
5. A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrowe
Zero-cost collar
Unconditional heteroskedasticity
Exercise or exercising the option
Fixed charge coverage
6. The problem or issue of popu-lation regression parameters that have changed over time.
Information ratio (IR)
Central limit theorem
Parameter instability
Vertical analysis
7. With reference to the presenta-tion of expenses in an income statement - the grouping together of expenses by similar nature - e.g. - all depreciation expenses.
Clean surplus accounting
Grouping by nature
Defensive interval ratio
Share-the-gains - share-the-pains theory
8. Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Cost of goods sold
Lower bound
Safety-first Rules
LIFO reserve
9. A method for determining the required rate of return on equity as the sum ofrisk premiums - in which one or more of the risk premiums is typically subjective rather than grounded in a formal equilibrium model.
Differential expectations
Build-up method
Residual autocorrelations
Horizontal common-size analysis
10. With reference to regression analysis - the estimated values of the population intercept and population slope coeffi-cien t(s) in a regression.
Exercise date
Estimated (or fitted) parameters
Externality
Lessor
11. Essentially - the pur-chase of some asset by the buyer (lessee) that is directly financed by the seller (lessor).
Financial reporting quality
Finance lease (capital lease)
Antidilutive
Proxy statement
12. The ratio of the market value of debt and equity to the replacement cost of total assets.
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13. A country that is lending more to the rest of the world than it is borrowing from it.
Partnership
Capital account
Net lender
Asset-based valuation
14. A number between - 1 and + 1 that measures the co-movement (linear association) between two random variables.
Face value (also principal - par value - stated value - or maturity value)
Correlation
Cash-generating unit
omparable company
15. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.
Portfolio performance attribution
Managerialism theories
Taxable income
Target balance
16. Segment liabilities divided by segment assets.
Segment debt ratio
Amortization
Noncurrent
Ex-dividend date
17. The cash flow available to a company's common shareholders after all operat-ing expenses - interest - and principal payments have been made - and necessary investments in working and fixed capital have been made.
Nontariff barrier
Robust standard errors
Analysis of variance (ANOVA)
Free cash flow to equity
18. A dividend yield based on the anticipated dividend during the next 12 months.
LIFO reserve
Forward dividend yield
Consolidation
Projected unit credit method
19. Rate of return that dis-counts future cash flows from an investment to the exact amount of the investment; the discount rate that makes the present value of an invest-ment's costs (outflows) equal to the present value of the investment's benefits (in
Internal rate of return (IRR)
Debt-to-capital ratio
Total probability rule for expected value
Type I error
20. A condition in the futures markets in which the price at which a transaction would be made is at or beyond the price limits.
Sell-side analysts
Liruit move
Floorlet
Bear hug
21. The value of the middle item of a set of items that has been sorted into ascending or descending order; the 50th percentile.
Per unit contribution margin
Median
Discrete random variable
Tobin's q
22. With reference to equity investors - investors who are focused on paying a relatively low share price in relation to earnings or assets per share.
Operations risk or operational risk
Cash-flow-statement-based aggregate accruals
Value investors
Exit price
23. When settling a contract - the risk that one party could be in the process of paying the counterparty while the counterparty is declar-ing bankruptcy.
Settlement risk
Investment value
Error term
Comprehensive income
24. The amount charged for the delivery of goods or services in the ordinary activities of a business over a stated period; the inflows of eco-nomic resources to a company over a stated period.
Revenue
Trade credit
Period costs
Deliveryoption
25. 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.
Floor
Net lender
Direct format (direct method)
Quality of earnings analysis
26. A formula that expresses the equivalence or parity of spot and forward rates - after adjusting for differences in the interest rates.
Interest rate parity
Cash conversion cycle (net operating cycle)
Sample skewness
Standard normal distribution (or unit normal distribu-tion)
27. The allocation of funds to rela-tively long-range projects or investments.
Plain vanilla swap
Capital budgeting
Time value decay
Exercise or exercising the option
28. A measure of dispersion relat-ing to a population - calculated as the mean of the squared deviations around the population mean.
Net profit margin (profit margin or return on sales)
Present value (PV)
Population variance
Plain vanilla swap
29. Unex-pected earnings per share divided by the standard deviation of unexpected earnings per share over a specified prior time period.
Settlement date or payment date
Standardized unexpected earnings (SUE)
Arrears swap
Rejection point (or critical value)
30. Private equity investors in development-stage companies.
Fixed asset turnover
Financial analysis
Venture capital investors
Securities Act of 1933
31. A basis for reporting investment income in which the investing entity recognizes a share of income as earned rather than as divi-dends when received. These transactions are typi-cally reflected in Investments in Associates or Equity Method Investment
Equity method
Residual income (or economic profit or abnormal earnings)
Commodity futures
Sensitivity analysis
32. A procedure used in certain deriva-tive transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Tax expense
Electronic funds transfer
Hmnan capital
Cash settlement
33. Ratios that measure how efficiently a company performs day-to-day tasks - such as the collection of receivables and management of inventory.
After-tax equity reversion (ATER)
Activity ratios (asset utilization or operating efficiency ratios)
Days of sales outstanding (DSO)
Market rate
34. The difference between the observed value of a statistic and the quantity it is intended to estimate.
Net borrower
Liquidity
Earnings expectation management
Sampling error
35. A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; consists of three parts: cash flows from oper-ating activities - cash flows from investing activities - and cash flows from financing activities
Number of days of receivables
Cash flow statement (statement of cash flows)
Currency option
Split-off
36. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.
Local currency
Account
In-the-money
Contingent consideration
37. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.
Multiple
Constant maturity swap or
Tax loss carry forward
Working capital management
38. Observations that are depen-dent on each other.
Paired observations
Cash flow additivity principle
Net income (loss)
Settlement risk
39. Heteroskedasticity of the error term that is not correlated with the values of the independent variable(s) in the regression.
Active factor risk
Unconditional heteroskedasticity
Portfolio performance attribution
Double declining balance depreciation
40. 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.
Designated fair value instruments
Collar
Delta-normal method
Chain rule of forecasting
41. Lack of bias. A desirable property of estimators - an unbiased estimator is one whose expected value (the mean of its sampling distri-bution) equals the parameter it is intended to estimate.
Alternative hypothesis
Prepaid expense
Unbiasedness
Economic profit
42. 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.
Closeout netting
Likelibood
Box spread
Vested benefit obligation
43. The analysis of portfolio performance in terms of the contribu-tions from various sources of risk.
Going-concern assumption
Portfolio performance attribution
Heteroskedasticity-consistent standard errors
Technical indicators
44. An estimate of the country spread (country equity premium) for a develop-ing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the differ-ence between a government bo
Diff swaps
Working capital
Marking to market
Sovereign yield spread
45. The amount the company estimates that it can sell the asset for at the end of its useful life.
Salvage value
Objective probabilities
Node
Sales
46. An approach to investment analysis and security selection.
Monetary/nonmonetary method
Current cost
Spreadsheet modeling
Investment strategy
47. A si gle numerical estimate of an unknown quantity - such as a population parameter.
Money market yield (or CD equivalent yield
Point estimate
Leptokurtic
Deliveryoption
48. Sales price less disposition costs - amortized mortgage loan bal-ance - and capital gains taxes.
Horizontal merger
After-tax equity reversion (ATER)
Statistical inference
Matching principle
49. The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Cash basis
Venturers
Other comprehensive income
Standardized beta
50. A merger involving the pur-chase of a target ahead of the acquirer in the value or production chain; for example - to acquire a supplier.
NPV rule
Bonding costs
American option
Backward integration
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