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 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






2. 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






3. Net income / Common shares outstanding






4. Regulates the trading of stocks and bonds in public markets






5. Current assets - Current liabilities






6. 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)






7. 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






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






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






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






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






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






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






14. 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'






15. 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






16. An investor whose views determine the actual stock price






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






18. 1 for the IRS - the other for reporting to investors






19. Regulates banks and controls the supply of money






20. Bears = pessimists - Bulls = optimists






21. 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






22. Dividends paid to common shareholders / Common shares outstanding






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






24. Financial Management - Capital Markets - & Investments






25. Finding the proper values of individual securities






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


27. 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






28. 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






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






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






31. 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






32. 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






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






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






35. 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






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






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






38. 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






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






40. 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






41. 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






42. 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






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






44. 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)






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






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






47. 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






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






49. 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






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