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Test your basic knowledge |
CFA Level2 Vocab
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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. Items that affect comprehensive income but which bypass the income statement.
No-growth value per share
Dirty surplus items
Box spread
Cnsistent
2. The ratio of the percentage change in net income to the percentage change in units sold; the sensitivity of the cash flows to owners to changes in the number of units pro-duced and sold.
Active specific risk or asset selection risk
Probability distribution
Degree of total leverage
Log-log regression model
3. A process used in a deliverable forward contract in which the long pays the agreed-upon price to the short - which in turn delivers the underlying asset to the long.
Arbitrage
Delivery
Discount for lack of control
Excess kurtosis
4. A valuation that sums the estimated values of each of a company's busi-nesses as if each business were an independent going concern.
First-differencing
Exercise date
Tracking error
Sum-of-the-parts valuation
5. The procedure of drawing a sample to satisfy the definition of a simple ran-dom sample.
Convertible debt
Simple random sampling
Defined-contribution pension plans
Weighted average cost method
6. 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.
Linear regression
Moneyness
Accumulated depreciation
Sales-type lease
7. 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
Financial futures
Market efficiency
Prior probabilities
Gross profit argin
8. A synonym for robust standard errors.
Fundamental factor models
White-corrected standard errors
Cash flow at risk (CFAR)
Double declining balance depreciation
9. The market price of an asset or lia-bility that trades regularly.
Transition phase
Agency costs of equity
Covariance
Fair market value
10. Accounting method in which the only relevant transactions for the financial statements are those that involve cash.
Cash basis
Performance appraisal
Labor productivity
Bond yield plus risk premium approach
11. A mean computed after assigning a stated percent of the lowest values equal to one specified low value - and a stated percent of the highest values equal to one specified high value.
Rule of 70
Shareholders' equity
Winsorized mean
Capital budgeting
12. An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine pay-ments for services.
Direct debit program
Subjective probability
Platykurtic
Panel data
13. Serial correlation in which a positive error for one observation increases the chance of a positive error for another observation - and a negative error for one observation increases the chance of a negative error for another observation.
Positive serial correlation
Gross profit (gross margin)
Guideline public company method
Dividend displacement of earnings
14. A balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit. The taxable income is less than the accounting profit and income tax payable is less than tax expense. The company expects to eliminat
Deferred tax liabilities
Marking to market
New growth theory
Direct debit program
15. ROA) A prof-itability ratio calculated as operating income divided by average total assets.
London Interbank Offer Rate (LIBOR)
Vega
Economic order quantity-reorder point
Operating return on assets (operating
16. The cash flow that is real-ized because of a decision; the changes or incre-ments to cash flows resulting from a decision or action.
Systematic factors
Incremental cash flow
Catalyst
Dirty surplus accounting
17. Momentum indicators based on price.
Exp ected holding-period return
Type II error
Earnings game
Technical indicators
18. CAPM An adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.
Effective annual rate
Expanded
Single-payment loan
Dynamic hedging
19. A record of foreign investment in a country minus its investment abroad.
Portfolio performance attribution
Capital account
Normal backwardation
Macaulay duration
20. A model for pricing options in which the underlying price can move to only one of two possible new prices.
Bear hug
Factor sensitivity (also factor betas or factor loadings)
Binomial model
Nonstationarity
21. A specialized computer program or a spreadsheet that solves for the portfolio weights that will result in the lowest risk for a specified level of expected return.
Days of inventory on hand (DOH)
Optimizer
Homogenization
Capitalized inventory costs
22. An exchange rate is deter-mined by demand and supply with no direct inter-vention in the foreign exchange market by the central bank.
Flexible exchange rate
Spurious correlation
Real GDP per person
Double taxation
23. A variation of the market approach; considers actual transactions in the stock of the subject private company.
Orthogonal
Prior transaction method
Frequency polygon
Inverse floater
24. The ratio of P I E-ta-growt - calculated as the stock's P /.E divided by the expected earnings growth rate in percent.
Statutory merger
Heteroskedasticity-consistent standard errors
Price-setting option
PEG ratio
25. A method of presentation of accounting transactions in which effects on assets appear at the left and effects on liabilities and equity appear at the right of a central dividing line; also known as T-account format.
PEG ratio
Purchase method
Account format
Cost of carry model
26. Asset inflows not directly related to the ordi-nary activities of the business.
Day trader
Operating cycle
Price to cash flow
Gains
27. The duration without dividing by 1 plus the bond's yield to maturity. The term - named for one of the economists who first derived it - is used to distinguish the calculation from mod-ified duration. See also modified duration.
Macaulay duration
Legislative and regulatory risk
Activity ratios (asset utilization or operating efficiency ratios)
Uniting of interests method
28. 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.
Net lender
Population
Grouping by function
Statement of retained earnings
29. The number of shares that target stockholders are to receive in exchange for each of their shares in the target company.
Exchange ratio
Unit root
Hedging
Trend
30. 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.
Asian call option
Amortizing and accreting swaps
Standardized beta
Breakup value or private market value
31. The cost of debt financing to a com-pany - such as when it issues a bond or takes out abank loan.
PEG
Cost of debt
Range
Enterprise value multiple
32. The owners' remaining claim on the company's assets after the liabilities are deducted.
Cost of goods sold
Residual claim
Debt covenants
Delta-normal method
33. The currency of the country where a company is located.
Hurdle rate
Sales
Local currency
Netting
34. An option in which the underlying is a bond; primarily traded in over-the-counter markets.
Cost approach to value
Bond option
Daily settlement
Transactions motive
35. Provision for a return of invest-ment - net of value appreciation.
Recapture premium
Linear regression
Active specific risk or asset selection risk
Conglomerate discount
36. An estimate of the equity risk pre-mium that is based upon estimates provided by a panel of finance experts.
Due diligence
Survey approach
Accumulated benefit obligation
Markowitz decision rule
37. The business of acting as agents for buy-ers or sellers - usually in return for commissions.
Static trade-off theory of capital structure
Long-term equity anticipatory securities (LEAPS)
Brokerage
Capital rationing
38. The positive square root of the sample variance.
Marketability discount
Sample standard deviation
Matching principle
Capital asset pricing model (CAPM)
39. The slope coefficients in a multiple regression.
Asian call option
Nontariff barrier
Minimum-variance portfolio
Partial regression coefficients or partial slope coeffi-cients
40. A transaction between two affiliates - an investor company and an associate company such that the associate company records a profit on its income statement. An example is a sale of inven-tory by the associate to the investor company.
Upstream
Stock-out losses
Imputation
Net realizable value
41. A dividend yield based on the anticipated dividend during the next 12 months.
Bernoulli random variable
Passive strategy
Multi-step format
Forward dividend yield
42. A measure of th e yield on the undel~ ing bond of a futures contract implied by pricing it as though the underlying will be delivered at the futures expiration.
omparable company
Implied yield
Equitizing cash
Blockage factor
43. The risk that environmental - social - or governance risk fac tors will result in significant costs or other losses to a company and its share-holders; the risk arising from a company's obliga-tion to meet required payments under its financ-ing agree
Factor
Reverse stock split
Financial risk
Butterfly spread
44. 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.
Cash
Arbitrage opportunity
Financial risk
Special purpose entity (special purpose vehicle or variable interest entity)
45. The setting of overall policies and standards in risk management
Risk governance
Current ratio
Single-step format
Accrual basis
46. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.
Nonparametric test
Transaction exposure
Conversion factor
Stock-out losses
47. Forecasted dividends per share over the next year divided by current stock price.
Defined benefit obligation
Working capital
Leading dividend yield
Money-weighted rate of return
48. A distribution that specifies the probabilities of a random variable's possible outcomes.
Probability distribution
Active strategy
Net present value (NPV)
Going-concern assumption
49. Lack of bias. A desirable property of estimators - an unbiased estimator is one whose expected value (the mean of its sampling distri-bution) equals the parameter it is intended to estimate.
Unbiasedness
Lockbox system
Tariff
Pretax margin
50. A stage of growth in which a company typically enjoys rapidly expanding markets - high profit margins - and an abnormally high growth rate in earnings per share.
Expensed
Growth phase
Generalized least squares
Portfolio performance attribution