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






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






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






4. Financial Management - Capital Markets - & Investments






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






6. 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


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






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






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






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






11. Dividends paid to common shareholders / Common shares outstanding






12. 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






13. 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)






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






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


16. 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)






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






18. Current assets - Current liabilities






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


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






21. 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






22. 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'






23. 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






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






25. 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






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






27. 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






28. 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






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






30. 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






31. 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






32. 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






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






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






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






36. 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






37. Bears = pessimists - Bulls = optimists






38. 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






39. Net income / Common shares outstanding






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






41. Regulates banks and controls the supply of money






42. 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






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






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






45. 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






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






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






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






49. 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






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