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. 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)






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






3. 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






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






5. 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'






6. An investor whose views determine the actual stock price






7. Finding the proper values of individual securities






8. Net income / Common shares outstanding






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






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






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






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






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






14. Current assets - Current liabilities






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






16. Dividends paid to common shareholders / Common shares outstanding






17. 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)






18. 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






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






20. 1 for the IRS - the other for reporting to investors






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






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






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






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






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


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






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






28. 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






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






30. 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






31. 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






32. 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






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






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






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






36. 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






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






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. 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






40. 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






41. 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






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






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






44. Total common equity / Common shares outstanding






45. 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






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






49. Bears = pessimists - Bulls = optimists






50. Financial Management - Capital Markets - & Investments