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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. Success (0.5 x $2000) + Failure (0.50 x $0) = $1 - 000 (New Stock Price)
Stock Valuation
Convertible Bonds
Partnership
Expected Stock $
2. Categorized as current assets because are used & then replaced
Stockholders
Marginal Investor
Sole Proprietorships
Working Capital
3. 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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4. What investors would expect if they had all of the information that existed about a company
Working Capital
Book Value Per Share (BPS)
Statement of Stockholders' Equity
True Valuation
5. 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
3 Reasons to Form a Corporation
Capital Markets
Balance Sheet
Important Business Trends
6. Situation in which the actual market price equals the intrinsic value so investors are indifferent between buying or selling a stock
Asset Valuation
Hostile Takeover
Statement of Cash Flows
Equilibrium
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
Stock Valuation
Important Business Trends
Finance Department
Sarbanes-Oxley Act
8. Financial Management - Capital Markets - & Investments
Partnership
Marginal Investor
Net Working Capital (NWC)
Areas of Finance
9. 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
Sole Proprietorships
EBITDA
Stockholders' Equity
Corporate Raider
10. Represents the amount that stockholders paid the company when shares were purchased and the amount or earnings the company has retained since its origination
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11. Current assets - Current liabilities
Net Working Capital (NWC)
Market Analysis
Areas of Finance
Free Cash Flow (FCF)
12. 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
Depreciation
Corporation or C Corporation
S Corporation
Free Cash Flow (FCF)
13. 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
Free Cash Flow (FCF)
Income Statement
Formulas for Calculating Stockholders' Equity (SE)
3 Reasons to Form a Corporation
14. SE = Paid-in Capital + Retained Earnings or SE = Total Assets - Total Liabilities
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15. 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
Finance Department
Shareholder Wealth Maximization
Legal Structures of Business Organizations
Depreciation
16. 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
Behavioral Finance
Limited Liability Partnership (LLP)
Sets of Financial Statements
Stock Valuation
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
Free Cash Flow (FCF)
Asset Funding
Expected Stock Price Formula
S Corporation
18. Focuses on decisions concerning stocks and bonds and includes a number of activities - 1) Security Analysis - 2) Portfolio Theory - & 3) Market Analysis
Federal Reserve System
Asset Funding
Important Business Trends
Investments
19. 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
Financial Management/Corporate Finance
Stock Market
Free Cash Flow (FCF)
EBITDA
20. Stock value based on 'perceived' but possibly incorrect information as seen by the marginal investor
Market Price
Business Ethics
Partnership
Stockholders
21. Usually considered a debt (fixed charge) by stockholders and equity by bondholders. A hybrid between convertible bonds and long-term leases
Preferred Stock
Portfolio Theory
Financial Management/Corporate Finance
Amoritization
22. Current assets - (Current liabilities - Notes payables)
Limited Liability Corporation (LLC)
Hostile Takeover
Market Price
Net Operating Working Capital (NOWC)
23. 1 for the IRS - the other for reporting to investors
Working Capital
Financial Management/Corporate Finance
Sets of Financial Statements
3 Reasons to Form a Corporation
24. The larger the expected cash flows - and the lower the perceived risk the higher the stock's price
Stock Valuation
Expected Stock $
Corporate Raider
Shareholder Wealth Maximization
25. Receive more when the company does better - often in conflict with bondholders
Sole Proprietorships
Earnings Per Share (EPS)
Partnership
Stockholders
26. Accomplished through a combination of current liabilities - long-term debt - and common equity
Investments
Asset Valuation
Asset Funding
Portfolio Theory
27. Sole Proprietorships - Partnerships - Corporations (incl. S Corp. and Non-profits - Limited Liability Companies (LLC) and Limited Liability Partnerships
Marginal Investor
Preferred Stock
Legal Structures of Business Organizations
True Valuation
28. 1) Increased globalization of business 2) Ever improving information technology 3) Corporate governance (the way top managers operate and interface with stockholders)
Net Working Capital (NWC)
Intrinsic Value
Important Business Trends
Stockholders' Equity
29. 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
Corporate Raider
Corporation or C Corporation
Federal Reserve System
Business Ethics
30. What investors DO expect given the limited information they actually have
Market Analysis
Stockholders' Equity
Perceived Valuation
Securities and Exchange Commission (SEC)
31. 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
Sarbanes-Oxley Act
Limited Liability Corporation (LLC)
Preferred Stock
Annual Report
32. An investor whose views determine the actual stock price
Marginal Investor
Hostile Takeover
Stockholders
Bondholders
33. 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
Equilibrium
Finance Department
Stockholders
Stock Valuation
34. An individual who targets a corporation for takeover because it is undervalued
Balance Sheet
Corporate Raider
Working Capital
Depreciation
35. A non-cash charge similar to depreciation except that it is used to write off the costs of intangible assets over their useful life
Net Working Capital (NWC)
True Valuation
Amoritization
EBITDA
36. Total common equity / Common shares outstanding
Hostile Takeover
Federal Reserve System
Book Value Per Share (BPS)
Asset Valuation
37. Finding the proper values of individual securities
Market Analysis
Expected Stock $
Security Analysis
Free Cash Flow (FCF)
38. Debt securities that give the bondholder an option to exchange their bonds for shares of common stock
EBITDA
Market Analysis
Expected Stock Price Formula
Convertible Bonds
39. A company's attitude and conduct toward its employees - customers - community - and stockholders
Financial Management/Corporate Finance
Portfolio Theory
Business Ethics
Balance Sheet
40. 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'
Bondholders
S Corporation
Asset Valuation
Free Cash Flow (FCF)
41. 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
Working Capital
Retained Earnings
Intrinsic Value
Legal Structures of Business Organizations
42. Profit a company would generate if it had no debt and held only operating assets - = EBIT x (1-T)
Intrinsic Value
Stockholders
Amoritization
Net Operating Profit After Taxes (NOPAT)
43. 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
Net Operating Working Capital (NWOC)
Working Capital
Partnership
Convertible Bonds
44. 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
Preferred Stock
Corporate Raider
S Corporation
Behavioral Finance
45. Acquisition of a company over the opposition of its management
Security Analysis
Income Statement
Hostile Takeover
Sets of Financial Statements
46. Dividends paid to common shareholders / Common shares outstanding
Dividends Per Share (DPS)
Statement of Cash Flows
Stockholders
Convertible Bonds
47. Receive fix payments regardless of how well the company does - often in conflict with stockholders
Sets of Financial Statements
Asset Valuation
Areas of Finance
Bondholders
48. 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)
Shareholder Wealth Maximization
Federal Reserve System
Dividends Per Share (DPS)
Expected % Gain of Stock Price
49. Bears = pessimists - Bulls = optimists
Amoritization
Convertible Bonds
Stock Market
Dividends Per Share (DPS)
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)
Income Statement
Expected % Gain of Stock Price
Equilibrium
Limited Liability Corporation (LLC)