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






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






3. 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






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






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






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






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. 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)






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






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






11. Bears = pessimists - Bulls = optimists






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






13. 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






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






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


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






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






18. 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






19. 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






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






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






22. Dividends paid to common shareholders / Common shares outstanding






23. 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


24. 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






25. Net income / Common shares outstanding






26. 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






27. 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






28. 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






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






30. 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






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






32. Regulates banks and controls the supply of money






33. Total common equity / Common shares outstanding






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






35. 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'






36. Financial Management - Capital Markets - & Investments






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






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






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






40. 1 for the IRS - the other for reporting to investors






41. 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






42. Finding the proper values of individual securities






43. 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






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


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






46. 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






47. 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






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






49. 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






50. An investor whose views determine the actual stock price