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. 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






3. 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






4. 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






5. Dividends paid to common shareholders / Common shares outstanding






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






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






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






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






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






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






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






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






14. 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






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






16. Regulates banks and controls the supply of money






17. 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






18. An investor whose views determine the actual stock price






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






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






21. 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






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






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. 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






25. 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






26. 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






27. 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






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






29. Financial Management - Capital Markets - & Investments






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






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






32. 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






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


34. Current assets - Current liabilities






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






36. 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






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






38. 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






39. 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


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






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






42. 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






43. Finding the proper values of individual securities






44. Net income / Common shares outstanding






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


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






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






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






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






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