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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. The ratio of P I E-ta-growt - calculated as the stock's P /.E divided by the expected earnings growth rate in percent.
Price limits
Call
Clearinghouse
PEG ratio
2. Serial correlation in which a positive e rror for one observation increases the chance of a negative error for another observation - and vice versa.
Cash conversion cycle (net operating cycle)
Negative serial correlation
Total asset turnover
Swap
3. A function with non-negative values such that probability can be described by areas under the curve graphing the function.
Linear association
Financial flexibility
Probability density function
Empirical probability
4. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.
Company fundamental factors
Heteroskedasticity
Liquidity discount
Homogenization
5. Revenue that has been earned but not yet billed to customers as of the end of an accounting period.
Market timing
Balance of payments accounts
Unbilled revenue (accrued revenue)
Box spread
6. The ability to react and adapt to financial adversities and opportunities.
Financial flexibility
Imports
Going-concern assumption
Creative response
7. An act passed by the U.S. Con-gress in 2002 that created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors.
Storage costs or carrying costs
Sarbanes-Oxley Act
Drag on li
Market-oriented investors
8. A dividend payout pol-icy under which earnings in excess of the funds necessary to finance the equity portion of com-pany's capital budget are paid out in dividends.
Amortizing and accreting swaps
Spread
Going-concern assumption
Residual dividend approach
9. The amount of money that a trader deposits in a margin account. The term is derived from the stock market practice in which an investor bor-rows a portion of the money required to purchase a certain amount of stock. In futures markets - there is no b
Conditional probability
Price multiple
Margin
Variable costs
10. The rate at which an option's time value decays.
Covariance matrix
Rule of 72
Theta
Investment opportunity schedule
11. A model that specifies an asset's intrinsic value.
Absolute valuation model
Valuation ratios
Investment value
Frequency polygon
12. A method of estimating VAR that uses data from the returns of the portfolio over a recent past period and compiles this data in the form of a histogram.
Financial leverage ratio
Perfect collinearity
Historical method
Generalized least squares
13. The income tax expected to be recovered - from the taxing authority - on the basis of taxable income. It is a recovery of previ-ously remitted taxes or future taxes owed by the company.
Liquidity discount
Noncurrent
Income tax recoverable
Cumulative relative frequency
14. The slope coefficients in a multiple regression.
Partial regression coefficients or partial slope coeffi-cients
Measure of central tendency
Sample variance
Mean-variance analysis
15. A form ofcommon-size analysis in which the accounts in agiven period are used as the benchmark or baseperiod - and every account is restated in subse-quent periods as a percentage of the base period'ssame account.
Premise of value
Horizontal merger
Safety stock
Horizontal common-size analysis
16. For accounting purposes - the spot exchange rate on the balance sheet date.
Current exchange rate
Cost of debt
Income
Pet projects
17. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.
Law of one price
Commodity swap
Positive serial correlation
Enterprise risk management
18. PIE (or forward PIE or prospective PIE) A stock's current price divided by the next year's expected earnings.
Sampling plan
Leading
Swap
Factor risk premium (or factor price)
19. A depreciation method tHat allocates the cost of a long-lived asset based on-actual usage during the period .
Regression coefficients
Share-the-gains - share-the-pains theory
Covariance matrix
Units-of-production method
20. A swap in which the floating payments have a lower limit.
Current assets - or liquid assets
Floored swap
Takeover premium
asis swap
21. A legal contract specifYing the terms of a bond issue.
Bond indentnre
Unearned revenue (deferred revenue)
Before-tax cash flow
Standard normal distribution (or unit normal distribu-tion)
22. Method of managing inventory that minimizes in-process inventory stocks. kth order autocorrelation The correlation between observations in a time series separated by k periods.
Quota
Just-in-time method
Financial risk
Random walk
23. Public-company com-parables for the company being valued.
Payables turnover
Debt-to-assets ratio
Earnings expectation management
Guideline public companies
24. The mix of debt and equity that a company uses to finance its business; a company's specific mixture of long-term financing.
Capital structure
Component cost of capital
Strategic transaction
Agency costs
25. The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transac-tions should be recorded.
Accounting risk
Permutation
Optimizer
Growth option or expansion option
26. Generally - a synonym for revenue; 'sales' is generally understood to refer to the sale of goods - whereas 'revenue' is understood to include the sale of goods or services.
Payer swaption
Fixed-income forward
Risk-neutral probabilities
Sales
27. The fair value of the estimated costs to be incurred at the end of a tangible asset's service life. The fair value of the liability is determined on the basis of discounted cash flows.
Working capital management
Materiality
Backward integration
Asset retirement obligations (AROs)
28. An approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marke
Reporting unit
Dividend discount model based approach
Performance guarantee
Caplet
29. The hypothesis to be tested.
Synthetic put
Null hypothesis
Going-concern assumption
Face value (also principal - par value - stated value - or maturity value)
30. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Shareholders' equity
Probability function
Anticipation stock
Multiple
31. Ratios that measure a company's ability to generate profitable sales from its resources (assets).
Price limits
Continuous random variable
IRR rule
Profitability ratios
32. The period benefited~y the employee's service - usually th e period between the grant date and the vesting date.
Service period
Economic value added (EVA)
Projected unit credit method
Liquidity premium
33. To reduce the value of a future payment in allowance for how far away it is in time; to calcu-late the present value of some future amount. Also - the amount by which an instrument is priced below its face value.
Economic sectors
Discount
Overall capitalization rate
Standardizing
34. The process of obtaining a sample.
Sampling
Fair value
Trailirig dividend yield
Statistics
35. A purchase involving a buyer that would benefit from certain synergies associ-ated with owning the target firm.
Lack of marketability discount
Holding period return
Inverse price ratio
Strategic transaction
36. 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
Derivatives dealers
Transactions motive
Cherry-picking
Delta hedge
37. The required rate of return on com-mon stock.
Friendly transaction
Net exports
Segment ROA
Cost of equity
38. With respect to the format of a bal-ance sheet - a format in which assets - liabilities - and equity are listed in a single column.
Report format
Lemons problem
Adjusted R2
Bottom-up investing
39. The expected value (the probability-weighted average) of squared deviations from a random variable's expected value.
Variance
Before-tax cash flow
Sample standard deviation
Ordinary annuity
40. The probabili ty that a confi-dence interval ind udes the unknown population parameter.
Number of days of payables
Degree of confidence
Accounts payable
Revaluation
41. A post-offer takeover defense mechanism that involves the assumption of a large amount of debt that is then used to finance share repurchases; the effect is to dramat-ically change the company's capital structure while attempting to deliver a value t
Leveraged recapitalization
Real risk-free interest rate
Statistics
Cyclical businesses
42. The granting of stock options to employees as a form of compensation.
Stock options (stock option grants)
Bonding costs
Legal risk
Monetary assets and liabilities
43. A portfolio offering the highest expected return for a given level of risk as mea-sured by variance or standard deviation of return.
Indexing
Build-up method
Efficient portfolio
Liabilities
44. An amount or percent-age deducted from the pro rata share of 100 per-cent of the value of an equity interest in a business to reflect the absence of some or all of the powers of control.
Parameter instability
Optimal capital structure
Discount for lack of control
Pre-investing
45. The use of inven-tory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e. - a warehouse company) that supervises the inventory.
Enterprise value (EV)
Statistic
Warehouse receipt arrangement
Day trader
46. A reduction in proportional ownership inter-est as a result of the issuance of new shares.
Dilution
Central limit theorem
Heteroskedastic
Net exports
47. The discount possibly applied by the market to the stock of a company operating in multiple - unrelated businesses.
Free cash flow to the
Strategic transaction
Conglomerate discount
Covered interest arbitrage
48. Residual income after the forecast horizon.
Continuing residual income
Monetary/nonmonetary method
Liabilities
Annuity due
49. An experiment that can produce one of two outcomes.
Compounding
Current liabilities
Bernoulli trial
Future value (FV)
50. The graph of the capital asset pricing model.
Commodity forward
Ope ating profit margin (operating margin)
ecurity market line (SML)
Notes payable