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






2. 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






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






4. 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






5. 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






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






7. 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'






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






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






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






11. 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






12. 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






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






14. 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






15. 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






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






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






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






19. 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






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






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






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






23. Dividends paid to common shareholders / Common shares outstanding






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






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






27. 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


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






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. Bears = pessimists - Bulls = optimists






31. 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






32. Financial Management - Capital Markets - & Investments






33. 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






34. Finding the proper values of individual securities






35. Total common equity / Common shares outstanding






36. 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






37. 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






38. Regulates banks and controls the supply of money






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. Current assets - Current liabilities






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






42. An investor whose views determine the actual stock price






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






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






45. 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)






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






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






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






49. Net income / Common shares outstanding






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