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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 legal entity with rights similar to those of a person. The chief officers - executives - or top managers act as agents for the firm and are legally entitled to authorize corporate activi-ties and to enter into contracts on behalf of the business.






2. With reference to investmentselection processes - an approach that involves selection from all securities within a specified investment universe - i.e. - without prior narrowiNg of the universe on the bas' s of macroeconomj c or overall market consid






3. The actual value of a variable minus its pre-dicted (or expected) value.






4. A form of centralized risk management that typically encompasses the man-agement of a broad variety of risks - ind uding insuran -ce risk.






5. A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option - or $0 - whichever is greater.






6. Estimate of the aver-age number of days it takes to collect on credit accounts.






7. A swap in which the underlying is a commodity such as oil - gold - or an agricultural product.






8. Independent projects are projects whose cash flows are independent ofeach other.






9. 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.






10. To sell the assets of a company - division - or subsidiary piecemeal - typically because of bank-ruptcy; the form of bankruptcy that allows for the orderly satisfaction of creditors' claims after which the company ceases to exist.






11. A measurement scale that categorizes data but does not rank them.






12. The operational flexibility to alter production when demand varies from fore-cast. For example - if demand is strong - a company may profit from employees working overtime or from adding additional shifts.






13. Residual income after the forecast horizon.






14. Asset inflows not directly related to the ordi-nary activities of the business.






15. The principles governing equivalence relationships between cash flows with different dates.






16. The ratio of P I E-ta-growt - calculated as the stock's P /.E divided by the expected earnings growth rate in percent.






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






18. An approach to investment analysis and security selection.






19. An association or relationship between variables that cannot be graphed as a straight line.






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






21. A pre-offer takeover defense mechanism that makes it prohibitively costly for an acquirer to take control of a target without the prior approval of the target's board of directors.






22. With reference to time-series mod-els - a model in which the growth rate of the time series as a function of time is constant.






23. A subset of a larger popula-tion created in such a way that each element of the population has an equal probability of being selected to the subset.






24. The ratio of gross profi t to revenues.






25. A liquidi ty ratio calculated as (cash + short-term marketable investments) divided by current liabilities; measures a company's ability to meet its current obligations with just the cash and cash equivalents on hand.






26. The value derived using a sum-of-the-parts valuation.






27. An industry's underlying eco-nomic and technical characteristics.






28. Aka 'Market efficiency.






29. The market for short-term debt instruments (one-year maturity or less).






30. A model that specifies an asset's value relative to the value of another asset.






31. A conventional cash flow pattern is one with an ini tial outflow followed by a series of in ows.






32. The government's holding of foreign cun; - e.!}cy.






33. The process of using an option to buy or sell the underlying.






34. 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.






35. The amount of income earned during a period per share of common stock.






36. Tax expenses that have been recognized and recorded on a company's income statement but which have not yet been paid.






37. A number between 0 and 1 describing the chance that a stated event will occur.






38. A company's profits on its usual business activities before deducting taxes.






39. A weighted average of the after-tax required rates of return on a company's common stock - preferred stock - and long-term debt - where the weights are the fraction of each source of financing in the company's target capital structure.






40. 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






41. A range that has a given proba-bility that it will contain the population parameter it is intended to estimate.






42. A con-flict of interest that arises when the agent in an agency relationship has goals and incentives that differ from the principal to whom the agent owes a fiduciary duty.






43. A cost that has already been incurred.






44. Debt and equity secu-rities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general - available-for-sale securities are reported at fair value on the bala






45. The competitive strategy of seeking a compet-itive advantage within a target segment or seg-ments of the industry - either on the basis of cost leadership (cost focus) or differen tiation (differ-entiation focus) .






46. A legal contract specifYing the terms of a bond issue.






47. The lowest possible value of an option.






48. A liquidity ratio that esti-mates the number of days that an entity could meet cash needs from liquid assets; calculated as (cash + short-term marketable investments + receivables) divided by daily cash expenditures.






49. All members of a specified group.






50. The contribution to active risk squared resulting from the portfolio's different-than-benchmark exposures relative to factors specified in the risk model.