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


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






3. 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)






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






5. 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


6. Dividends paid to common shareholders / Common shares outstanding






7. 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






8. Finding the proper values of individual securities






9. Regulates banks and controls the supply of money






10. 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






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






12. 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






13. 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






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






15. Bears = pessimists - Bulls = optimists






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






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






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






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






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


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






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






23. 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






24. 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






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






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






27. Total common equity / Common shares outstanding






28. 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






29. 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






30. Net income / Common shares outstanding






31. 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






32. 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






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






34. 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






35. 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






36. 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






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






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






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






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






41. Financial Management - Capital Markets - & Investments






42. 1 for the IRS - the other for reporting to investors






43. 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'






44. 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)






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






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






49. Current assets - Current liabilities






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