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






2. Net income / Common shares outstanding






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






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






5. 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






6. Finding the proper values of individual securities






7. 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






8. 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






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






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






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






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






14. 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






15. Total common equity / Common shares outstanding






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






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






18. Dividends paid to common shareholders / Common shares outstanding






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






20. 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






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






22. An investor whose views determine the actual stock price






23. 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






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






25. 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






26. 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'






27. 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






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. 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






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






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






32. 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)






33. Current assets - Current liabilities






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






35. 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






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






37. 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






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






39. 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






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






41. Financial Management - Capital Markets - & Investments






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






43. 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






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






45. 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






46. 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






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






48. 1 for the IRS - the other for reporting to investors






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






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