Test your basic knowledge |

Finance Basics

Subject : business-skills
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. Financial Management - Capital Markets - & Investments






2. A special designation that allows small businesses that meet qualifications to be taxed as if they were a proprietorship or a partnership rather than a corporation - exempt from corporate tax - must have less than 100 stockholders to qualify






3. Accomplished through a combination of current liabilities - long-term debt - and common equity






4. Receive fix payments regardless of how well the company does - often in conflict with stockholders






5. Earnings Before Interest - Taxes - Depreciation & Amoritization = Sales revenues - operating costs






6. New investments - raise funds through financing - repurchased debt or equity - or paid dividends. How much cash the firm started the year with - how much it ended up with and what it did to increase or decrease its cash. A report that shows how th






7. Cumulative total of all earnings kept by the company during its life - a claim against assets - they do not represent cash on the balance sheet






8. A company's attitude and conduct toward its employees - customers - community - and stockholders






9. 1) Increased globalization of business 2) Ever improving information technology 3) Corporate governance (the way top managers operate and interface with stockholders)






10. Amount of cash that could be withdrawn from a firm without harming its ability to operate and to produce future cash flows/ how much cash a firm can distribute to its investors - [ EBIT x (1-T) + Depreciation & Amoritization] - [Capital expenditures






11. Represents the amount that stockholders paid the company when shares were purchased and the amount or earnings the company has retained since its origination

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12. An individual who targets a corporation for takeover because it is undervalued






13. Issued annually by a corporation to its stockholders - containing basic financial statements as well as management's analysis of the firm's past operations and future prospects. Provides 4 basic reports - Balance Sheet - Income Statement - Stateme






14. Current assets - Current liabilities






15. Sales revenues - operating costs (including depreciation & amoritizaton)






16. Focuses on decisions concerning stocks and bonds and includes a number of activities - 1) Security Analysis - 2) Portfolio Theory - & 3) Market Analysis






17. How did sales perform and did it make a profit? A report summarizing a firm's revenues - expenses and profits during a reporting period (generally a quarter or a year)






18. Current assets - (Current liabilities - Notes payables)






19. The value of any asset is the present value or the stream of cash flows that the asset provides to its owners over time. In general the valuation is different if it is the 'market value' or the 'book value'






20. Sole Proprietorships - Partnerships - Corporations (incl. S Corp. and Non-profits - Limited Liability Companies (LLC) and Limited Liability Partnerships






21. An estimate of a stock's 'true' value based on accurate risk adn return data - it can be estimated but not measured precisely - estimate by stock analysts - a long term concept - management should maximize this value not the market price






22. Net income / Common shares outstanding






23. Law passed by Congress that requires CEO's & CFO's to certify their firms financial statements are accurate and deal with the consequences if the statements are not accurate






24. Stock value based on 'perceived' but possibly incorrect information as seen by the marginal investor






25. A non-cash charge similar to depreciation except that it is used to write off the costs of intangible assets over their useful life






26. What investors DO expect given the limited information they actually have






27. The best way to structure portfolios or 'baskets' of stocks and bonds






28. The larger the expected cash flows - and the lower the perceived risk the higher the stock's price






29. The primary goal for managers of publicly owned companies implies that decisions should be made to maximize the long-run value of the firm's common stock. Corporate social responsibility is not inconsistent with maximizing shareholder value






30. 1) Limited liability reduces the risks borne by investors - the lower the risk - the higher the value. 2) Firm's value is dependent on its growth opportunities - less risk easier to attract investor - more money more growth opportunities. 3) Valu






31. Usually considered a debt (fixed charge) by stockholders and equity by bondholders. A hybrid between convertible bonds and long-term leases






32. 1 for the IRS - the other for reporting to investors






33. The markets where interest rates - along with stock and bond prices are determined






34. Investor psychology is examined in an effort to determine if stock prices have been bid up to unreasonable heights in a speculative bubble or driven down to unreasonable lows in a fit of irrational pessimism






35. Debt securities that give the bondholder an option to exchange their bonds for shares of common stock






36. Acquisition of a company over the opposition of its management






37. Categorized as current assets because are used & then replaced






38. Current assets - (Current liabilities - Notes payable)






39. What investors would expect if they had all of the information that existed about a company






40. For example - based on 50% probability of failure/success and current bond value of $1000 - a current stock price of $10 and projected new stock price of $2000 if successful






41. Situation in which the actual market price equals the intrinsic value so investors are indifferent between buying or selling a stock






42. Total common equity / Common shares outstanding






43. Bears = pessimists - Bulls = optimists






44. Indicates how large a company is. What assets the company owns & who has claims on those assets as of a given date. Displayed in 2 columns with the assets (what the company owns) on the left side and the firms liabilities and equity on the right side






45. Success (0.5 x $2000) + Failure (0.50 x $0) = $1 - 000 (New Stock Price)






46. Regulates banks and controls the supply of money






47. The issue of whether stock and bond markets at any given time are 'too high' or 'too low' or 'about right' - Behavioral Finance is a tool often used to aid in this analysis






48. A legal entity created by a state - separate and distinct from its owners and managers - having unlimited life - easy transferability of ownership an limited liability. Major drawback is double taxation - earnings are taxed and dividends paid out






49. Receive more when the company does better - often in conflict with bondholders






50. Profit a company would generate if it had no debt and held only operating assets - = EBIT x (1-T)