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






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






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






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






5. Financial Management - Capital Markets - & Investments






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

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






8. 1 for the IRS - the other for reporting to investors






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






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






11. 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






12. Current assets - Current liabilities






13. 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






14. 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)






15. 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'






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






17. 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






18. 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






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






20. Total common equity / Common shares outstanding






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






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






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






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

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25. 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






26. 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)






27. 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






28. 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






29. 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

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30. Regulates banks and controls the supply of money






31. 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






32. 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






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






34. 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






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






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






37. 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






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






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






40. 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






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






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






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






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






45. Dividends paid to common shareholders / Common shares outstanding






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. 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






48. Net income / Common shares outstanding






49. 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






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