Test your basic knowledge |

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 taxable loss in the current period that may be used to reduce future taxable income.






2. Agency costs that are incurred despite adequate monitoring and bonding of management.






3. Quantiles that divide a distribution into four equal parts.






4. A model of stock val-uation that views a stock's intrinsic value as the present value of expected future free cash flows to equity.






5. A measure of goodness-of-fit of a regres-sion that is adjusted for degrees of freedom and hence does not automatically increase when another independent variable is added to a regression.






6. An approach to valuing natu-ral resource companies that estimates company value on the basis of the market value of the natu-ral resources the company controls.






7. A public document that provides the material facts concerning matters on which shareholders will vote.






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






9. A type of non-audited financial statements; typically provide an opinion letter with representations and assurances by the reviewing accountant that are less than those in audited financial statements.






10. A ratio of an ending price over a beginning price; it is equal to 1 plus the holding period return on the asset.






11. 1) A contract on an interest rate - whereby at periodic payment dates - the writer of the cap pays the difference between the market interest rate and a specified cap rate if - and only if - this differ-ence is positive. This is equivalent to a strea






12. A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.






13. Behavior on the part of a firm that allows it to comply with the letter of the law but violate the spirit - significantly lessening the law's effects.






14. A company's operating profit with adjustments to normalize the effects of capital structure.






15. A prof -itabili ty ratio calculated as operating income (i.e. - income before inte est and taxes) divided by revenue.






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






17. Very liquid short-tenn investments - usually maturing in 90 days or less.






18. The statistical measure that indicates the peakedness of a distribution.






19. The purchase of some portion of one company by another; the purchase may be for assets - a definable segment of another entity - orthe purchase of an entire company.






20. An extra return to investors to compensate for lack of a public mar-ket or lack of marketability.






21. Mutually exclusive proj-ects compete directly with each other. For example - if Projects A and B are mutually exclusive - you can choose A or B - but you cannot choose both. n Factorial For a positive integer n - the product of the first n positive i






22. A method of accounting for abusiness combination where the acquiring com-pany allocates the purchase price to each assetacquired and liability assumed at fair value. If thepurchase price exceeds the allocation - the excessis recorded as goodwill.






23. A stage of growth in which the com-pany reaches an equilibrium in which investment opportunities on average just earn their opportu-nity cost of capital.






24. Total company valme (the market value of debt - common equity - and preferred equity) minus the value of cash and investments.






25. The number of shares that would beoutstanding if all potentially dilutive claims oncommon shares (e.g. - convertible debt - convert-ible preferred stock - and employee stock options)were exercised.






26. A legal corporate entity whose shareholders are its members. The members of the exchange have the privilege of executing transactions directly on the exchange.






27. The distribution of all distinct possible values that a statistic can assume when computed from samples of the same size ran-domly drawn from the same population.






28. The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.






29. The tendency of a time series to fall when its level is above its mean and rise when its level is below its mean; a mean-reverting time series tends to re turn to its long-term mean.






30. A financial statement that provides information about a company's prof-itability over a stated period of time.






31. The graph of the set of portfolios that have minimum variance for their level of expected return.






32. Debt with the added feature that the bondholder has the option to exchange the debt for equity at prespecified terms.






33. All changes in equity other than contributions by - and distributions to - own-ers; income under clean surplus accounting; includes all changes in equity during a period except those resulting from investments by own-ers and distributions to owners;






34. Accounting that satisfies the condition that all changes in the book value of equity other than transactions with owners are reflected in income. The bottom-line income reflects all changes in shareholders' equity arising from other than owner transa






35. The part of the execution step of the portfolio management process that involves the implementation of port-folio decisions by trading desks.






36. 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.






37. An option strategy that involves buying a call with a lower exercise price and selling a call with a higher exercise price. It can also be exe-cuted with puts.






38. Essentially - the pur-chase of some asset by the buyer (lessee) that is directly financed by the seller (lessor).






39. 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.






40. An acquisition in which the acquirer purchases the target company's assets and pay-ment is made directly to the target company.






41. Commercial and investmentbanks that make markets in derivatives.






42. A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and comparison of securities with different compounding periods.






43. A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative - in which the underlying is a bond.






44. The time between settlement dates.






45. A random variable for which the range of possible outcomes is the real line (all real numbers between (-00 and +(0) or some subset of the real line.






46. The graph of the capital asset pricing model.






47. A si gle numerical estimate of an unknown quantity - such as a population parameter.






48. A quantity computed from or used to describe a sample of data.






49. An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.






50. The reciprocal of a price multi-ple - e.g. - in the case of a PI E ratio - the 'earnings yield' E/ P (where P is share price and E is earn-ings per share) .