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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. The risk that govern-mental laws and regulations directly or indirectly affecting a company's operations will change with potentially severe adverse effects on the com-pany's continued profitabiliny and even its long-term sustainability.






2. The earnings growth rate in a company's mature phase; an earnings growth rate that can be sustained long term.






3. Agreements made by a company in bankruptcy under which a company's capital struc-ture is altered and/ or alternative arrangements are made for debt repayment; U.S. Chapter II bankruptcy. The company emerges from bank-ruptcyas a going concern.






4. The ratio of cash dividends paid to earnings for a period.






5. A set of techniques for estimating losses in extremely unfavorable combinations of events or scenarios.






6. An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.






7. The change in the bond price for a 1 basis point change in yield. Also called basis point value (BPV).






8. A potential business combina-tion that is endorsed by the managers of both companies.






9. The original time to maturity on a swap.






10. The income tax expected to be recovered - from the taxing authority - on the basis of taxable income. It is a recovery of previ-ously remitted taxes or future taxes owed by the company.






11. American Free Trade Agreement An agree-ment - which became effective on January 1 - 1994 - to eliminate all barriers to international trade between the United States - Canada - and Mexico after a 15-year phasing-in period.






12. The principle that the approximate num-ber of years necessary for an investment to double is 72 divided by the stated interest rate.






13. An intangible that cannot be acquired singly and that typically possesses an indefinite benefit period; an example is account-ing goodwill.






14. Describes a distribution with kurtosis identical to that of the normal distribution.






15. An intangible asset that represents the excess of the purchase price of an acquired com-pany over the value of the net assets acquired.






16. An investment where the investor exerts control over the investee - typically by having a greater than 50 percent ownership in the investee.






17. The variance of one variable - given the outcome of another.






18. Management's focus on reporting earnings that meet consensus estimates.






19. An option strategy that combines two bull or bear spreads and has three exercise prices.






20. Heightened uncertainty regarding a company's ability to meet its various obligations because of lower or negative earnings.






21. A sample measure of the degree of a distribution's peakedness.






22. Observations on characteristic(s) of the same observational unit through time.






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






24. Bias introduced by systemati-cally exclua ing some members of the population according to a particular attribute-for example - the bias introduced when data availability leads to certain observations being excluded from the analysis.






25. An equation expressing the equiva-lence (parity) of a portfolio of a call and a bondwith a portfolio of a put and the underlying -which leads to the relationship between put andcall prices






26. An approach to portfolio analysis using expected means - variances - and covariances of asset returns.






27. Segment liabilities divided by segment assets.






28. 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.






29. Aka marking to market.






30. Historical beta adjusted to reflect the tendency of beta to be mean reverting.






31. An acceler-ated depreciation method that involves depreciat-ing the asset at double the straight-line rate. This rate is multiplied by the book value of the asset at the beginning of the period (a declining balance) to calculate depreciation expense.






32. A type of top-down investing approach that involves emphasizing different eco-nomic sectors based on considerations such as macroeconomic forecasts.






33. The costs of holding an asset - generally a function of the physical char-acteristics of the underlying asset.






34. The percentage of a market that a particular fi rm supplies; used as the primary measure of monopoly power.






35. A swap transaction in which at least one cash flow is tied to the return to an equity portfo-lio position - often an equity index.






36. 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






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






38. A payment system in which cus-tomer payments are mailed to a post office box and the banking institution retrieves and deposits these payments several times a day - enabling the company to hav use of the fund sooner than in a centralized system in wh






39. A method of valuing prop-erty based on site value plus current construction costs less accrued depreciation.






40. Estimates of items such as the useful lives of assets - warranty costs - and the amount of uncollectible receivables.






41. A method of account-ing in which combined companies were portrayed as if they had always operated as a single eco-nomic entity. Called pooling of interests under






42. The strategy of using futures contracts to enter the market without an immediate outlay of cash.






43. Factors related to the company's internal performance - such as factors relating to earnings growth - earnings variability - earnings momentum - and financial leverage.






44. CMT swap A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security.






45. 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.






46. An exchange rate is deter-mined by demand and supply with no direct inter-vention in the foreign exchange market by the central bank.






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






48. The return on an asset in excess of the asset's required rate of return; the risk-adjusted return.






49. PIE PI Es based on normalized EPS data.






50. In reference to <wrporate taxes a split-rate system taxes earnings to be distributed as dividends at a different rate than earnings to be retained. Corporate profits distributed as dividends are taxed at a lower rate than those retained in the busine







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