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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. Financial Management - Capital Markets - & Investments






2. An investor whose views determine the actual stock price






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






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






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






6. 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






7. 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


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






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






10. Regulates banks and controls the supply of money






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






12. Bears = pessimists - Bulls = optimists






13. 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






14. 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






15. Total common equity / Common shares outstanding






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






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






18. 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)






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






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






21. 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






22. 1 for the IRS - the other for reporting to investors






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






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


25. 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






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






27. 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






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






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






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






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






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






34. 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






35. Dividends paid to common shareholders / Common shares outstanding






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


37. 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






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






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






40. 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






41. 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)






42. 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






43. 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






44. 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






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






46. 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






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






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






49. 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






50. 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






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