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. Regulates the trading of stocks and bonds in public markets






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






3. Current assets - Current liabilities






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






5. 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






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






7. 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






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






9. 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






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






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






12. An investor whose views determine the actual stock price






13. 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






14. 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






15. Finding the proper values of individual securities






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






17. 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






18. 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






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






20. 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






21. Dividends paid to common shareholders / Common shares outstanding






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






23. Total common equity / Common shares outstanding






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






25. Bears = pessimists - Bulls = optimists






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






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






28. 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






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






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






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






32. 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






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






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






35. Financial Management - Capital Markets - & Investments






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






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


38. 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






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






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






41. Regulates banks and controls the supply of money






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






44. Net income / Common shares outstanding






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






46. 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






47. 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






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






49. 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)






50. 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)