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. Bears = pessimists - Bulls = optimists






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. 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






4. Dividends paid to common shareholders / Common shares outstanding






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






6. Net income / Common shares outstanding






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






8. 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






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






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






11. 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






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






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






14. 1 for the IRS - the other for reporting to investors






15. 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






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






17. 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






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






19. 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






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






21. Finding the proper values of individual securities






22. 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)






23. 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






24. 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






25. Regulates banks and controls the supply of money






26. Current assets - Current liabilities






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






28. 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


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






30. 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






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






32. 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






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






34. Financial Management - Capital Markets - & Investments






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






36. 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'






37. An investor whose views determine the actual stock price






38. 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






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






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






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






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






43. 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






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


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






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






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






48. 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






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






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