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Test your basic knowledge |
Finance Basics
Start Test
Study First
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. SE = Paid-in Capital + Retained Earnings or SE = Total Assets - Total Liabilities
2. An individual who targets a corporation for takeover because it is undervalued
Operating Income /(EBIT)
Earnings Per Share (EPS)
Stock Market
Corporate Raider
3. Expected % Gain of Stock Price = Increase of stock $ less original stock $ ($1 - 000 - $10) divided by original stock price (/ $10 x 100%) (100% is a constant)
Depreciation
Sets of Financial Statements
Expected % Gain of Stock Price
Stock Valuation
4. Categorized as current assets because are used & then replaced
Security Analysis
Stockholders' Equity
Working Capital
Statement of Cash Flows
5. Shows the amount of equity the stockholders had at the start of the year - the items that increased or decreased it and the equity at the end of the year
6. Dividends paid to common shareholders / Common shares outstanding
Bondholders
Working Capital
Dividends Per Share (DPS)
Depreciation
7. Principal task is to evaluate proposed decisions and judge how they will affect the stock price and thus shareholder wealth. Success or lack thereof of projects can determine the stock prices
Hostile Takeover
Negative FCF
Finance Department
Convertible Bonds
8. Finding the proper values of individual securities
Security Analysis
Statement of Cash Flows
Depreciation
Earnings Per Share (EPS)
9. Regulates banks and controls the supply of money
Stockholders' Equity
Depreciation
Federal Reserve System
Net Operating Profit After Taxes (NOPAT)
10. 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
Statement of Stockholders' Equity
Operating Income /(EBIT)
Market Price
Behavioral Finance
11. Acquisition of a company over the opposition of its management
Market Price
Limited Liability Corporation (LLC)
Operating Income /(EBIT)
Hostile Takeover
12. 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
Balance Sheet
Equilibrium
3 Reasons to Form a Corporation
Statement of Cash Flows
13. Focuses on decisions relating to how much and what types of assets to acquire - how to raise the capital needed to purchase assets - and how to run the firm so as to maximize its value
Retained Earnings
Financial Management/Corporate Finance
Corporation or C Corporation
Working Capital
14. Sole Proprietorships - Partnerships - Corporations (incl. S Corp. and Non-profits - Limited Liability Companies (LLC) and Limited Liability Partnerships
Net Operating Profit After Taxes (NOPAT)
Amoritization
Legal Structures of Business Organizations
Operating Income /(EBIT)
15. Bears = pessimists - Bulls = optimists
Marginal Investor
Investments
Annual Report
Stock Market
16. What investors would expect if they had all of the information that existed about a company
Capital Markets
Sole Proprietorships
Amoritization
True Valuation
17. Receive more when the company does better - often in conflict with bondholders
Stockholders
Market Analysis
Annual Report
Preferred Stock
18. Regulates the trading of stocks and bonds in public markets
Limited Liability Partnership (LLP)
Net Operating Working Capital (NWOC)
Securities and Exchange Commission (SEC)
Sarbanes-Oxley Act
19. Usually considered a debt (fixed charge) by stockholders and equity by bondholders. A hybrid between convertible bonds and long-term leases
Market Analysis
Asset Valuation
Preferred Stock
Financial Management/Corporate Finance
20. Represents the amount that stockholders paid the company when shares were purchased and the amount or earnings the company has retained since its origination
21. Sales revenues - operating costs (including depreciation & amoritizaton)
Behavioral Finance
Operating Income /(EBIT)
Depreciation
Finance Department
22. Current assets - (Current liabilities - Notes payables)
Net Operating Working Capital (NOWC)
Bondholders
Operating Income /(EBIT)
Stock Valuation
23. A relatively new type of organization that is a hybrid between a partnership and a corporation. It has limited liability like corporations - but is taxed like partnerships. Investors have votes in proportion to their share of ownership
Annual Report
Limited Liability Corporation (LLC)
Financial Management/Corporate Finance
Stock Valuation
24. Similar to an LLC but used for professional firms in the fields of accounting - law - and architecture. It has limited liability like corporations - but is taxed like partnerships.Investors have votes in proportion to their share of ownership
Depreciation
Important Business Trends
Limited Liability Partnership (LLP)
True Valuation
25. A company's attitude and conduct toward its employees - customers - community - and stockholders
Areas of Finance
Financial Management/Corporate Finance
Business Ethics
Sarbanes-Oxley Act
26. The larger the expected cash flows - and the lower the perceived risk the higher the stock's price
Investments
Annual Report
Stock Valuation
Depreciation
27. Total common equity / Common shares outstanding
S Corporation
Stockholders' Equity
Book Value Per Share (BPS)
Depreciation
28. 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
Corporation or C Corporation
Corporate Raider
Statement of Cash Flows
Capital Markets
29. An uninicorporated business owned by one individual. 3 advantages - Easy and inexpensive to form - subject to few government regulations - and subject to lower income taxes than corporations. 3 disadvantages - Unlimited personal liability for the bu
Stock Valuation
Sole Proprietorships
Retained Earnings
Depreciation
30. Net income / Common shares outstanding
True Valuation
Earnings Per Share (EPS)
Statement of Stockholders' Equity
Expected Stock Price Formula
31. 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
Preferred Stock
Intrinsic Value
Net Working Capital (NWC)
Market Analysis
32. An unincorporated business owned by 2 or more persons. 3 advantages - Easy and inexpensive to form - subject to few government regulations - and subject to lower income taxes than corporations. 3 disadvantages - Unlimited personal liability for the
EBITDA
Corporation or C Corporation
Working Capital
Partnership
33. Accomplished through a combination of current liabilities - long-term debt - and common equity
Investments
Sarbanes-Oxley Act
Asset Funding
Book Value Per Share (BPS)
34. 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
Stock Market
Balance Sheet
Expected % Gain of Stock Price
S Corporation
35. 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
Statement of Cash Flows
Capital Markets
Expected Stock Price Formula
Sole Proprietorships
36. 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
Finance Department
Expected Stock $
Market Analysis
Security Analysis
37. Earnings Before Interest - Taxes - Depreciation & Amoritization = Sales revenues - operating costs
EBITDA
Capital Markets
Financial Management/Corporate Finance
Finance Department
38. Situation in which the actual market price equals the intrinsic value so investors are indifferent between buying or selling a stock
Expected Stock Price Formula
Equilibrium
Dividends Per Share (DPS)
Limited Liability Corporation (LLC)
39. Receive fix payments regardless of how well the company does - often in conflict with stockholders
Expected % Gain of Stock Price
Important Business Trends
Stockholders
Bondholders
40. A non-cash charge similar to depreciation except that it is used to write off the costs of intangible assets over their useful life
Federal Reserve System
Bondholders
Retained Earnings
Amoritization
41. Financial Management - Capital Markets - & Investments
Depreciation
Areas of Finance
Hostile Takeover
Net Operating Working Capital (NOWC)
42. 1 for the IRS - the other for reporting to investors
Statement of Stockholders' Equity
Net Working Capital (NWC)
Working Capital
Sets of Financial Statements
43. 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'
Areas of Finance
Statement of Stockholders' Equity
Market Analysis
Asset Valuation
44. 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)
Perceived Valuation
Preferred Stock
Sarbanes-Oxley Act
Income Statement
45. Stock value based on 'perceived' but possibly incorrect information as seen by the marginal investor
Limited Liability Corporation (LLC)
Sole Proprietorships
Equilibrium
Market Price
46. Indicates a rapidly growing company (investing in new assets) which is ok as long as the company eventually utilizes the assets to become profitable and contribute to its FCF
Negative FCF
3 Reasons to Form a Corporation
Convertible Bonds
Income Statement
47. Debt securities that give the bondholder an option to exchange their bonds for shares of common stock
Convertible Bonds
Intrinsic Value
Sarbanes-Oxley Act
Annual Report
48. 1) Increased globalization of business 2) Ever improving information technology 3) Corporate governance (the way top managers operate and interface with stockholders)
Income Statement
Financial Management/Corporate Finance
Important Business Trends
Limited Liability Corporation (LLC)
49. Current assets - Current liabilities
Net Working Capital (NWC)
Portfolio Theory
Retained Earnings
Federal Reserve System
50. The markets where interest rates - along with stock and bond prices are determined
Capital Markets
Limited Liability Corporation (LLC)
Sets of Financial Statements
Portfolio Theory