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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. A list of accounts used in an entity's accounting system.
Horizontal merger
Chart of accounts
Working capital turnover
Sample statistic or statistic
2. Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Downstream
Vertical analysis
Safety-first Rules
Taxable temporary differences
3. Offering two or more products for sale as a set.
At the money
Moneyness
Futures contract
Bundling
4. Aka Harmonic mean.
Weighted harmonic mean
Operating profit (operating income)
Autocorrelation
Credit risk or default risk
5. Describes a distribution that is more peaked than a normal distribution.
Nontariff barrier
Imputation
Market-oriented investors
Leptokurtic
6. The ability to react and adapt to financial adversities and opportunities.
If-converted method
Antidilutive
Cost of debt
Financial flexibility
7. Individuals or companies b hat execute fu tures transactions for other parties off the exchange.
Interest rate put
Futures commission merchants (FCMs)
Held-to-maturity investments
Number of days of payables
8. 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
Scenario analysis
Closeout netting
Cash-flow-statement-based aggregate accruals
Economic profit
9. 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.
Classical growth theory
Financial transaction
Equity
Net exports
10. The first date that a share trades without (i.e. - 'ex') the dividend.
Local currency
Managerialism theories
Ex-dividend date
Price discovery
11. With respect to double-entry accounting - a credit records increases in liability - owners' equity - and revenue accounts or decreases in asset accounts; with respect to borrowing - the willing-ness and ability of the borrower to make promised paymen
Proxy statement
Pseudo-random numbers
Credit
Standardized beta
12. Additional margin that must be deposited in an amount sufficient to bring the balance up to the initial margin requirement.
Principal
Operating profit (operating income)
Equity forward
Variation margin
13. Estimate of the aver-age number of days it takes to collect on credit accounts.
Number of days of receivables
Analysis of variance (ANOVA)
Parametric test
Monte
14. An offset to revenue reflecting any cash refunds - credits on account - and discounts from sales prices given to cus-tomers who purchased defective or unsatisfactory items.
Anticipation stock
Bond-equivalent yield
Sales returns and allowances
Real exchange rate
15. 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.
Compiled f'mancial statements
Weighted-average cost of capital (WACC)
Stress testing
Panel data
16. A profitability ratio calcu-lated as net income divided by average total assets; indicates a company's net profit generated per dollar invested in total assets.
Return on assets (ROA)
Unidentifiable intangible
Exercise rate or strike rate
Lessor
17. 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.
Specific identification method
Cash flow from operations (cash flow from operating activities or operating cash flow)
Bayes' formula
Standard deviation
18. Ratios that measure a company's ability to meet its long-term obligations.
Single-payment loan
Anticipation stock
Solvency ratios
Comprehensive income
19. A contract in which the under-lying asset is oil - a precious metal - or some other commodity.
Generalized least squares
Commodity forward
Target company - or target
Opportunity cost
20. An index fund position cre-ated by combining risk-free bonds and futures on the desired index.
Active portfolio
Synthetic index fund
Asset retirement obligations (AROs)
Valuation allowance
21. A method for estimating a company's before-tax cost of debt based upon the yield on comparably rated bonds for maturities that closely match that of the company's existing debt.
Weighted-average cost of capital (WACC)
Correlation
Sample skewness
Debt rating approach
22. A method of accounting for a business combination where the acquirer is required to measure each identifiable asset and liability at fair value. This method was the result ofa joint project of the IASB and FASB aiming at convergence in standards for
Joint probability
Acquisition method
Risk-neutral probabilities
Statutory merger
23. A quoted interest rate that does not account for compounding within the year.
Stated annual interest rate or quoted interest rate
Trade receivables (commercial receivables or accounts receivable)
Purchase method
Liruit down
24. Company growth in output or sales that is achieved by buying the necessary resources externally (i.e. - achieved through mergers and acquisitions) .
PEG ratio
External growth
Asset-based loan
Absolute valuation model
25. The quality of being relatively unaffected by a violation of assumptions.
Fair market value
Pairs trading
Performance guarantee
Robust
26. The ratio ofthe percentage change in operating income to the percentage change in units sold; the sensitivity of operating income to changes in units sold.
General Agreement on Tariffs and Trade
Settlement period
American option
Degree of operating leverage (DOL)
27. The expected return on equi-ties minus the risk-free rate; the premium that investors demand for investing in equities.
Equity risk premium
Lack of marketability discount
Covered interest arbitrage
Closeout netting
28. The difference between net operating assets at the end and the beginning of the period compared to the average net operating assets over the period.
Linear interpolation
Activity ratios (asset utilization or operating efficiency ratios)
Balance-sheet-based accruals ratio
No-growth value per share
29. Approach that values a private company based on the values of the underlying assets of the entity less the value of any related liabilities.
Asset-based approach
Equity
Delta hedge
Skewness
30. A rule explaining the uncon-ditional probability of an event in terms of proba-bilities of the event conditional on mutually exclusive and exhaustive scenarios.
Covariance matrix
Likelibood
Total probability rule
Scenario analysis
31. The number of indepen-dent observations used.
Realizable value (settlement value)
Degrees of freedom (df)
Transition phase
Sampling error
32. Purchases of one product that are per-mitted by the seller only if the consumer buys another good or service from the same firm.
Tie-in sales
Passive portfolio
Money market
Real exchange rate
33. A swap in which the floating rate is the cumulative value of a single unit of currency invested at an overnight rate dur-ing the settlement period.
Overnight index swap (OIS)
Impairment of capital rule
European-style option or
Type II error
34. When disbursements are paid tooquickly or trade credit availability is limited -requiring companies to expend funds beforethey receive funds from sales that could cover theliability.
Days of inventory on hand (DOH)
Risk governance
Fixed asset turnover
Pull on liquidity
35. An increment or premium to value associated with a controlling ownership interest in a company.
Compiled f'mancial statements
Theory of contestable markets
Control premium
Vested benefit obligation
36. The sum of the observations divided by the number of observations.
Arithmetic mean
Proportionate consolidation
Real risk-free interest rate
Cost recovery method
37. 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.
Semivariance
Flip-in pill
Residual dividend approach
Harmonic mean
38. A limit move in the futures market in which the price at which a transaction would be made is at or below the lower limit.
Arbitrage
Inverse price ratio
Liruit down
Designated fair value instruments
39. An offset to property - plant - and equipment (PPE) reflecting the amount of the cost of PPE that has been allocated to current and previous accounting periods.
Expiration date
Robust standard errors
Accumulated depreciation
Multivariate distribution
40. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.
Theory of contestable markets
Financial reporting quality
Cost of capital
Single-step format
41. The use of fixed costs in operations.
Current cost
Nominal scale
Operating leverage
Days of inventory on hand (DOH)
42. 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.
Fixed-income forward
Safety stock
Holding period return
Rule of 70
43. The date on which a derivative con-tract expi res.
Arithmetic mean
Risk-neutral valuation
Capped swap
Expiration date
44. Serial correlation in which a positive e rror for one observation increases the chance of a negative error for another observation - and vice versa.
Present value model or discounted cash flow model
Adjusted present value (APV)
Negative serial correlation
Credit derivatives
45. The amount by which the takeover price for each share of stock must exceed the current stock price in order to entice shareholders to relinquish control of the com-pany to an acquirer.
Simple random sample
Cross-product netting
Arbitrage opportunity
Takeover premium
46. Options that - if exercised - would result in the value received being worth more than the payment required to exercise.
Implied yield
Exposure to foreign exchange risk
Forward integration
In-the-money
47. With respect to the format of the income statement - a format that does not subtotal for gross profit (revenue minus cost of goods sold) .
Single-step format
Cash flow from operations (cash flow from operating activities or operating cash flow)
Adjusted R2
Per unit contribution margin
48. Describes a time series whenits expected value and variance are cons tan t andfinite in all periods and when its covariance withitself for a fixed number of periods in the past orfuture is constant and finite in all periods.
Constant maturity swap or
Exercise or exercising the option
Covariance stationary
Special purpose entity (special purpose vehicle or variable interest entity)
49. The periodic investment of a fixed amount of money.
Direct format (direct method)
Breusch-Pagan test
Cost averaging
Horizontal common-size analysis
50. Attempts by management to encourage analysts to forecast a slightly lower number for expected earnings than the analysts would otherwise forecast.
Crawling peg
Cost recovery method
Capital charge
Earnings expectation management