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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. A company's operating profit with adjustments to normalize the effects of capital structure.






2. The party obtaining the use of an asset through a lease.






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






4. A valuation ratio calculated as price per share divided by book value per share.






5. With reference to assets - the amount of cash or cash equivalents that would have to be paid to buy the same or an equivalent asset today; with reference to liabilities - the un discounted amount of cash or cash equivalents that would be required to






6. 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






7. Temporary differ-ences that result in a red uction of or deduction from taxal:J e income in a future period when the balance sheet item is n~ covered or settled.






8. A measure of disper-sion relating to a population in the same unit of measurement as the observations - calculated as the positive square root of the population variance.






9. Earnings per share divided by price; the reciprocal of the PIE ratio.






10. Aka 'Market efficiency. '






11. Shares that were issued and subse-quently repurchased by the company.






12. The compound rate of growth of one unit of currency invested in a port-folio during a stated measurement period; a mea-sure of investment performance that is not sensitive to the timing and amount of withdrawals or additions to the portfolio.






13. 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.






14. Above average or abnormally high growth rate in earnings per share.






15. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.






16. The ratio of the percentage change in net income to the percent-age change in operating income; the sensitivity ofthe cash flows available to owners when operating income changes.






17. 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.






18. The hypothesis that higher debt levels discipline managers by forcing them to make fixed debt service payments and by reducing the company's free cash flow.






19. The probability of a Type I error in testing a hypothesis.






20. The combination of puts - the underly-ing - and risk-free bonds that replicates a call option.






21. A valuation multiple that relates the total market value of all sources of a company's capital (net of cash) to a measure of fundamental value for the entire company (such as a pre-interest earnings measure).






22. The assumption that the business will maintain its business activities into the foreseeable future.






23. The part of the execution step of the portfolio manage-ment process in which investment strategies are integrated with expectations to select a portfolio of assets.






24. With reference to portfolio strategies - the application of a strategy's portfolio selection rules to historical data to assess what would have been the strategy's historical performance.






25. A numerical measure of how sensitive an option's delta is to a change in the underlying.






26. A company's chosen propor-tions of debt and equity.






27. Futures contracts in which the underlying is a traditional agricultural - metal - or petroleum product.






28. The ability to react and adapt to financial adversities and opportunities.






29. Describes a distribution with kurtosis identical to that of the normal distribution.






30. An illiquidity discount that occurs when an investor sells a large amount of stock rela-tive to its trading volume (assuming it is not large enough to constitute a controlling ownership).






31. A regression that expresses the dependen t and independent vari-ables as natural logarithms.






32. Analysis that shows the changes in key financial quantities that result from given (economic) events - such as the loss of customers - the loss of a supply source - or a catastrophic event; a risk management technique involving examina-tion of the pe






33. The difference between current assets and current liabilities.






34. A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity.


35. An activity ratio calculated as purchases divided by average trade payables.






36. Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.


37. A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.






38. The percentage of total earnings paid out in dividends in any given year (in per-share terms - DPS/ EPS).






39. 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.






40. The earnings per share that a busi-ness could achieve currently under mid-cyclical conditions.






41. A method for accounting forthe effect of convertible securities on earnings pershare (EPS) that specifies what EPS would havebeen if the convertible securities had been con-verted at the beginning of the period - taking account of the effects of conv






42. The rule that - on the average - with no change in technology - a 1 percent increase in capital per hour of labor brings a 1/3 percent increase in labor productivity.






43. The amount at which an asset or liability is valued for tax purposes.






44. Estimates of items such as the useful lives of assets - warranty costs - and the amount of uncollectible receivables.






45. Securities held by banks or other financial intermediaries for trading purposes.






46. 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.






47. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.






48. An option strategy in which a long position in a certain number of options is offset by a short position in a certain number of other options on the same underlying - resulting in a risk-free position.






49. Costs that remain at the same level regardless of a company's level of production and sales.






50. The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets.