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Test your basic knowledge |
CFA Level2 Vocab
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Subjects
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certifications
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cfa
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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. Liabilities related to expenses that have been incurred butnot yet paid as of the end of an accountingperiod-an example of an accrued expense is rent that has been incurred but not yet paid -resulting in a liability 'rent payable.'
Accrued expenses (accrued liabilities)
Sharpe ratio
Equity
Fixed exchange rate
2. A permissible delivery procedure used by futures market participants - in which the long and short arrange a delivery pro-cedure other than the normal procedures stipu-lated by the futures exchange.
Exchange for physicals (EFP)
In-process research and development
Covered call
Monopolization
3. Controlling additional property throughreinvestment - refinancing - and exchanging.
Interest rate parity
Paired comparisons test
Pyramiding
Takeover
4. Orders to buy or sell that are too large for the liquidity ordinarily available in dealer networks or stock exchanges.
Underlying earnings (or persistent earnings - continu-ing earnings - or core earnings)
Free cash flow to the
Treasury shares
Block
5. The rate of return required by suppliers of capital for an individual source of a company's funding - such as debt or equity.
Estimated (or fitted) parameters
Greenmail
Component cost of capital
Tracking error
6. The risk that failures by company man-agers to effectively manage a company's environ-mental - social - and governance risk exposures will lead to lawsuits and other judicial remedies - resulting in potentially catastrophic losses for the company; th
Unearned fees
Bonding costs
Legal risk
Target balance
7. The required rate of return on com-mon stock.
Financial risk
Nonconventional cash flow
Cost of equity
Agency costs of equity
8. Regression that models the straight-line relationship between the dependent and independen t variable (s) .
Matching strategy
Interest rate swap
Linear regression
Before-tax cash flow
9. Unex-pected earnings per share divided by the standard deviation of unexpected earnings per share over a specified prior time period.
Collar
Standardized unexpected earnings (SUE)
Capital asset pricing model (CAPM)
Flip-over pill
10. A pre-offer takeover defense mech-anism involving the corporate charter (e.g. - stag-gered boards of directors and supermajority provisions) .
Amortization
Generalized least squares
Shark repellents
Nonmonetary assets and liabilities
11. Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.
Horizontal common-size analysis
Treasury shares
Cointegrated
Equity carve-out
12. An inventory account-ing method that identifies which specific inventory items were sold and which remained in inventory to be carried over to later periods.
Catalyst
Specific identification method
Off-balance sheet imancing
Carried interest
13. The number of units produced and sold at which the company's net income is zero (revenues = total costs).
Total probability rule
Strap
Current ratio
Breakeven point
14. A swap in which each party makes ayments to the other in different currenmes.
Currency swap
Passive strategy
Decentralized risk management
Robust standard errors
15. The analysis of portfolio performance in terms of the contribu-tions from various sources of risk.
Investment objectives
Agency costs of equity
Diluted shares
Portfolio performance attribution
16. An option in which the underly-ing is an interest rate.
Simple interest
Terminal price multiple
Interest rate option
Floor
17. An international organi-zation that places greater obligations on its mem-ber countries to observe the GATT rules.
Fixed asset turnover
Swap spread
World Trade Organization
Out-of-sample test
18. A merger; the term may be applied to any transaction - but is often used in reference to hos-tile transactions.
Takeover
Dumping
Market approach
Safety-first Rules
19. The minimum real wage rate needed to maintain life.
Liquidity ratios
Subsistence real wage rate
Going-concern assumption
Cost of preferred stock
20. The investigation of issues relating to the accuracy of reported accounting results as reflections of economic per-formance; quality of earnings analysis is broadly understood to include not only earnings manage-ment - but also balance sheet manageme
Frequency polygon
Quality of earnings analysis
Transaction exposure
Bill-and-hold basis
21. Quantiles that divide a distribution into 10 equal parts.
Balance sheet ratios
Lemons problem
Delta hedge
Deciles
22. Bias that may result when failed or defunct companies are excluded from member-ship in a group.
Survivorship bias
Marking to market
Ratio spread
Sovereign yield spread
23. In accounting contexts - cash on hand (e.g. - petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.
Spread
Cash
Account
Bond yield plus risk premium approach
24. The positive square root of semivari-ance (sometimes called semistandard deviation) .
Float
Semideviation
Revaluation
Closeout netting
25. An estimate of the equity risk pre-mium that is based upon estimates provided by a panel of finance experts.
Debtor nation
North
Survey approach
Confidence interval
26. The owners' remaining claim on the company's assets after the liabilities are deducted.
Target balance
Initial margin requirement
Variation margin
Residual claim
27. A procedure by which a population is divided into subpopulations (strata) based on one or more classification criteria. Sim-ple random samples are then drawn from each stratum in sizes proportional to the relative size of each stratum in the populati
Perfect collinearity
Dutch Book theorem
Debt incurrence test
Stratified random sampling
28. Heightened uncertainty regarding a company's ability to meet its various obligations because of lower or negative earnings.
Exit price
Break point
Nonmonetary assets and liabilities
Financial distress
29. A set of techniques for estimating losses in extremely unfavorable combinations of events or scenarios.
Paired observations
Prepaid expense
Stress testing
Dividend payout ratio
30. A type of subsidiary engaged in derivatives trans-actions that is separated from the parent company in order to have a higher credit rating than the parent company.
Abnormal earnings
Enhanced derivatives products companies (EDPC)
Price to sales
Acquiring company - or acquirer
31. 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.
Enterprise risk management
Population standard deviation
Fiduciary call
Recapture premium
32. A merger involving compa-nies that are in unrelated businesses.
Quota
Bond yield plus risk premium approach
Conglomerate merger
Cnsistent
33. R The correlation between the actual and forecasted values of the dependent variable in a regression.
Kurtosis
Cash flow statement (statement of cash flows)
Multiple
Trust receipt arrangement
34. 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
Model specification
Absolute dispersion
Presentation currency
35. The difference between the actual value per share and the no-growth value per share.
Chart of accounts
Bernoulli trial
Annuity
Present value of growth opportunities (or value of growth)
36. The internal rate of return on a portfol io - taking account of all cash flows.
Legal risk
Split-rate
Arithmetic mean
Money-weighted rate of return
37. The risk attributed to the operating cost structure - in particular the use of fixed costs in operations; the risk arising from the mix of fixed and variable costs; the risk that a company's operations may be severely affected by environ-mental - soc
Operating risk
Time value decay
Level of significance
Intangible assets
38. Amounts that a business owes to its vendors for goods and services that were pur-chased from them but which have not yet been paid.
Terminal value of the stock (or continuing value of the stock)
LIFO layer liquidation (LIFO liquidation)
Arbitrage opportunity
Accounts payable
39. A financial instrument that gives one party the right - but not the obligation - to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claims.
Screening
Look-ahead bias
Credit analysis
Option
40. The probability of an event given (conditioned on) another event.
Noncurrent
Current exchange rate
Conditional probability
Capitalized inventory costs
41. Total company valme (the market value of debt - common equity - and preferred equity) minus the value of cash and investments.
Deep out of the money
Ordinary annuity
Enterprise value (EV)
Up transition probability
42. 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.
Binomial random variable
Market share test
Grant date
Shortfall risk
43. Observations through time on a single characteristic of multiple observational units.
Panel data
Antidilutive
Common-size analysis
Macroeconomic factor
44. The quantity of goods and services that a country exports to pay for its imports of goods and services.
Offsetting
Declaration date
Alpha (or abnormal return)
Terms of trade
45. Futures contracts in which the underlying is a traditional agricultural - metal - or petroleum product.
Commodity futures
Monetary assets and liabilities
Interval scale
Enterprise value (EV)
46. Aka 'Residual income. '
Discount interest
Her rmdahl-
Multiple linear regression
Economic profit
47. The present value of an investment's cash inflows (benefits) minus the present value of its cash outflows (costs).
Stated rate (nominal rate or coupon rate)
Capture hypothesis
Net present value (NPV)
Debt-to-equity ratio
48. 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
Periodic rate
Assets
Lessor
49. A type of interest rate swap in which the floating payment is set at the end of the period and the interest is paid at that same time.
Time value or speculative value
Project sequencing
Arrears swap
Return on total capital
50. Debt or equity financial assets bought with the inten-tion to sell them in the near term - usually less than three months; securities that a company intends to trade.
Debit
Blockage factor
Held-for-trading securities (trading securities)
Hypothesis