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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.
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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. Asset outflows not directly related to the ordi-nary activities of the business.
Binomial random variable
Accrued expenses (accrued liabilities)
Spin-off
Losses
2. The number of successes in n Bernoulli trials for which the probability of success is constan t for all trials and the trials are independent.
Binomial random variable
Rule of 70
Direct format (direct method)
Bank discount basis
3. Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.
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4. Aka 'Residual income.'
Definition of value (or standard of value)
Du Pont analysis
Free cash flow to the
Abnormal earnings
5. Uncorrelated; at a right angle.
Orthogonal
Corporate governance
Diluted shares
Fundamentals
6. A factor related to the econ-omy - such as the inflation rate - industrial produc-tion - or economic sector membership. acroeconomic factor model A multifac tor model in which the factors are surprises in macroeco-nomic variables that significan tly
Macroeconomic factor
Nonstationarity
If-converted method
Bernoulli trial
7. A company without positive expected net present value projects.
Derivatives dealers
Conversion factor
Managerialism theories
No-growth company
8. A theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level - a population explo-sion eventually brings it back to subsistence level.
Volatility
Financial distress
Ordinary least squares (OLS)
Classical growth theory
9. The value of an option at expiration.
Accounts receivable turnover
Business risk
Expected value
Payoff
10. 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.
Cumulative relative frequency
Exercise or exercising the option
Modified duration
Ratio spread
11. The value per share of a no-growth company - equal to the expected level amount of earnings divided by the stock's req uired rate of return.
Market approach
Top-down analysis
No-growth value per share
Exp ected holding-period return
12. The number of shares that target stockholders are to receive in exchange for each of their shares in the target company.
Tax loss carry forward
Exchange ratio
Optimal capital structure
Securities Exchange Act of 1934
13. Potential future payments to the seller that are contingent on the achieve-ment of certain agreed on occurrences.
Market share test
Target balance
Contingent consideration
Debt rating approach
14. In the context ofmerger analysis - it is an estimate of a target com-pany's value found by discounting the company's expected future free cash flows to the present.
Linear association
Discounted cash flow analysis
Bond yield plus risk premium approach
Leptokurtic
15. The expected value (the probability-weighted average) of squared deviations from a random variable's expected value.
Laddering strategy
Heteroskedasticity
Variance
Inverse price ratio
16. A valuation ratio calculated as price per share divided by cash flow per share.
Current cost
Price to cash flow
Marking to market
Book value equity per share
17. The date on which a derivative con-tract expi res.
Trade credit
Expiration date
Bank discount basis
Dispersion
18. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.
Target balance
Nontariff barrier
Purchasing power gain
Financial analysis
19. Costs that remain at the same level regardless of a company's level of production and sales.
Number of days of inventory
Fixed costs
Current account
Differentiation
20. The setting of overall policies and standards in risk management
Risk governance
Homogenization
Storage costs or carrying costs
Built-up method
21. All members of a specified group.
Cost structure
Population
Defensive interval ratio
Log-log regression model
22. 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
Caplet
Price multiple
Operating risk
Skewed
23. A probability distri-bution for a group of random variables that is completely defined by the means and variances of the variables plus all the correlations between pairs of the variables.
Bonding costs
Active portfolio
Valuation
Multivariate normal distribution
24. Momentum indicators based on price.
Cap
Purchasing power parity
Technical indicators
Brokerage
25. A variation of a straddle in which the put and call have different exercise prices.
Enhanced derivatives products companies (EDPC)
Strangle
Cash flow from operations (cash flow from operating activities or operating cash flow)
Conglomerate merger
26. Company growth in output or sales that is achieved by making investments internally (i.e. - excludes growth achieved through mergers and acquisitions).
Subjective probability
Cross-sectional data
Pecking order theory
Organic growth
27. Any outcome or specified set of outcomes of a random variable.
Long
Cost of debt
Event
Ex-dividend
28. A money measure of the mini-mum value of losses expected during a specified time period at a given level of probability.
Value at risk (VAR)
Comparative advantage
Homogenization
Modified duration
29. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power - as distinguished from growth or development as a consequence of a superior product - business acumen - or historical accident.
Adjusted present value (APV)
Free cash flow to equity model
Monopolization
Minority interest (noncontrolling interest)
30. A theory of regulatory behavior that holds that regulators must take account of the demands of three groups: legislators - who established and oversee the regulatory agency; firms in the regulated industry; and consumers of the regulated indus-try's
Joint venture
Share-the-gains - share-the-pains theory
Finance lease (capital lease)
Contribution margin
31. A legal restriction that dividends cannot exceed retained earnings.
Impairment of capital rule
Bonding costs
ackwardation
Floor traders or locals
32. A function that specifies the probability that the random variable takes on a specific value.
Probability function
Robust standard errors
Optimizer
Day trader
33. Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Cannibalization
Tenor
Receiver swaption
Discount interest
34. 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
LIFO reserve
Residual claim
Scenario analysis
Unexpected earnings (also earnings surprise)
35. The combination of the underlying - puts - calls - and risk-free bonds that replicates a forward contract.
Synthetic forward contract
Seats
Sensitivity analysis
Special purpose entity (special purpose vehicle or variable interest entity)
36. A conventional cash flow pattern is one with an ini tial outflow followed by a series of in ows.
Variation margin
Standard normal distribution (or unit normal distribu-tion)
Conventional cash flow
Downstream
37. A graphical representa-tion of the expected return and risk of all portfo-lios that can be formed using two assets.
Portfolio possibilities curve
Butterfly spread
Binomial model
Nominal risk-free interest rate
38. A forward contract calling for one party to make a fixed interest payment and the other to make an interest pay-ment at a rate to be determined at the contract expiration.
Forward rate agreement (FRA)
White sqnire
Discount interest
Cash basis
39. The value of the U.S. dollar expressed in units of foreign currency per U.S. dollar.
Nominal exchange rate
Market rate
Independent
Book value of equity (or book value)
40. Equity shares that are subordinate to all other types of. equity (e.g. - p refe rred equi ty) .
Cost-of-service regulation
Bottom-up analysis
Macaulay duration
Ordinary shares (common stock or common shares)
41. The strategy a company fol-lows with regard to the amount and timing of div-idend payments.
Dividend payout policy
Asset-based loan
Currency forward
Collar
42. The process of accumulating interest on interest.
Defensive interval ratio
Temporal method
Compounding
Cherry-picking
43. The ratio of gross profi t to revenues.
Gross profit argin
Current assets - or liquid assets
Number of days of receivables
Performance guarantee
44. A variation of the monetary/ nonmonetary translation method that requires not only monetary assets and liabilities - but also nonmonetary assets and liabilities that are mea-sured at their current value on the balance sheet date to be translated at t
Temporal method
Histogram
Method of comparables
Committed lines of credit
45. The set of assets available for investment.
Pet projects
Price to sales
Mutually exclusive events
Opportunity set
46. The variable whose variationabout its mean is to be explained by the regres-sion; the left-hand-side variable in a regressionequation.
Sharpe ratio
Top-down investing
Dependent variable
Population mean
47. An experiment that can produce one of two outcomes.
Mean-variance analysis
Bernoulli trial
Operating leverage
Down transition probability
48. The process of selecting - evaluat-ing - and interpreting financial data in order to formulate an assessment of a company's present and future financial condition and performance.
Financial analysis
Capital allocation line (CAL)
Upstream
Put-call parity
49. Instruments that payinterest as the difference between the amountborrowed and the amount paid back.
Pure discount instruments
Capital budgeting
Add-on interest
PEG
50. With reference to fundamental factor models - the value of the attribute for an asset minus the average value of the attribute across all stocks - divided by the standard deviation of the attribute across all stocks.
Time-period bias
Standardized beta
Portfolio possibilities curve
Winner's curse