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. Current assets - (Current liabilities - Notes payables)






3. 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






4. Dividends paid to common shareholders / Common shares outstanding






5. 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






6. Current assets - Current liabilities






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






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






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


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






11. 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






12. 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






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






14. 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






15. 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






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






17. 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






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






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






20. Financial Management - Capital Markets - & Investments






21. Regulates banks and controls the supply of money






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






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






24. 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






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






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. Bears = pessimists - Bulls = optimists






29. 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






30. 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)






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






32. 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


33. 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






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






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






36. 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)






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






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






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






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






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






42. 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






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






44. 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






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






46. 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






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






48. Finding the proper values of individual securities






49. An investor whose views determine the actual stock price






50. Net income / Common shares outstanding