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. 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






2. 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






3. 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






4. 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)






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






6. Financial Management - Capital Markets - & Investments






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






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






10. Dividends paid to common shareholders / Common shares outstanding






11. 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






12. 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






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






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






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






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






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






18. 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'






19. 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






20. Current assets - Current liabilities






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






22. 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






23. 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






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






25. 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






26. Bears = pessimists - Bulls = optimists






27. Charge used to reflect the cost of long term assets used up in the production process over their useful life (not a cash outlay). Accelerated generally used for the IRS and straight line for investors






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






29. Total common equity / Common shares outstanding






30. 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






31. Finding the proper values of individual securities






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






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






34. 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

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35. SE = Paid-in Capital + Retained Earnings or SE = Total Assets - Total Liabilities

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36. An investor whose views determine the actual stock price






37. 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






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






39. 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






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






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






42. 1 for the IRS - the other for reporting to investors






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






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






45. 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






46. Net income / Common shares outstanding






47. 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)






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






49. 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






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