SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
Finance Basics
Start Test
Study First
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
Marginal Investor
Sets of Financial Statements
Statement of Stockholders' Equity
Expected Stock $
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
Marginal Investor
Sole Proprietorships
Federal Reserve System
Partnership
3. The markets where interest rates - along with stock and bond prices are determined
Capital Markets
Limited Liability Corporation (LLC)
Net Operating Working Capital (NWOC)
Sarbanes-Oxley Act
4. Net income / Common shares outstanding
Net Working Capital (NWC)
Earnings Per Share (EPS)
Stock Valuation
3 Reasons to Form a Corporation
5. 1) Increased globalization of business 2) Ever improving information technology 3) Corporate governance (the way top managers operate and interface with stockholders)
Preferred Stock
Important Business Trends
Hostile Takeover
Finance Department
6. 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
Asset Funding
Corporation or C Corporation
Intrinsic Value
Net Operating Working Capital (NWOC)
7. 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
Stock Market
Financial Management/Corporate Finance
Expected Stock $
Capital Markets
8. 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
Important Business Trends
Expected Stock $
Depreciation
Bondholders
9. Accomplished through a combination of current liabilities - long-term debt - and common equity
Sole Proprietorships
Asset Funding
Market Analysis
Equilibrium
10. Current assets - (Current liabilities - Notes payable)
Limited Liability Corporation (LLC)
Net Operating Working Capital (NWOC)
Business Ethics
Corporate Raider
11. Success (0.5 x $2000) + Failure (0.50 x $0) = $1 - 000 (New Stock Price)
Income Statement
Sarbanes-Oxley Act
Expected Stock $
Areas of Finance
12. Categorized as current assets because are used & then replaced
Financial Management/Corporate Finance
Working Capital
Asset Valuation
Operating Income /(EBIT)
13. Earnings Before Interest - Taxes - Depreciation & Amoritization = Sales revenues - operating costs
Federal Reserve System
Net Operating Working Capital (NWOC)
Depreciation
EBITDA
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)
Income Statement
Limited Liability Partnership (LLP)
Partnership
Amoritization
15. 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
Portfolio Theory
Finance Department
Depreciation
Retained Earnings
16. 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
Negative FCF
Market Analysis
Equilibrium
Annual Report
17. 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
Expected Stock $
Working Capital
Portfolio Theory
Free Cash Flow (FCF)
18. The best way to structure portfolios or 'baskets' of stocks and bonds
Expected Stock $
Shareholder Wealth Maximization
Sole Proprietorships
Portfolio Theory
19. Regulates the trading of stocks and bonds in public markets
Dividends Per Share (DPS)
Securities and Exchange Commission (SEC)
Capital Markets
Expected Stock $
20. Debt securities that give the bondholder an option to exchange their bonds for shares of common stock
Expected % Gain of Stock Price
Stock Valuation
Convertible Bonds
Corporate Raider
21. Current assets - (Current liabilities - Notes payables)
Expected Stock $
Statement of Stockholders' Equity
Net Operating Working Capital (NOWC)
Important Business Trends
22. 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
Stock Valuation
Bondholders
Intrinsic Value
Shareholder Wealth Maximization
23. The larger the expected cash flows - and the lower the perceived risk the higher the stock's price
Stock Valuation
Limited Liability Corporation (LLC)
Statement of Cash Flows
Market Analysis
24. Receive fix payments regardless of how well the company does - often in conflict with stockholders
Sets of Financial Statements
Bondholders
Working Capital
Sarbanes-Oxley Act
25. What investors DO expect given the limited information they actually have
Federal Reserve System
Limited Liability Partnership (LLP)
Perceived Valuation
Stockholders' Equity
26. 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
Expected Stock Price Formula
Depreciation
Operating Income /(EBIT)
Corporation or C Corporation
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
Equilibrium
Market Price
Annual Report
S Corporation
28. 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
Corporation or C Corporation
Asset Funding
Annual Report
Preferred Stock
29. Dividends paid to common shareholders / Common shares outstanding
Dividends Per Share (DPS)
Securities and Exchange Commission (SEC)
Limited Liability Corporation (LLC)
Working Capital
30. An individual who targets a corporation for takeover because it is undervalued
Corporate Raider
Market Analysis
Intrinsic Value
Perceived Valuation
31. SE = Paid-in Capital + Retained Earnings or SE = Total Assets - Total Liabilities
32. 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
Behavioral Finance
Free Cash Flow (FCF)
Stockholders' Equity
Book Value Per Share (BPS)
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
Annual Report
Operating Income /(EBIT)
Preferred Stock
Stock Market
34. 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
35. Sole Proprietorships - Partnerships - Corporations (incl. S Corp. and Non-profits - Limited Liability Companies (LLC) and Limited Liability Partnerships
Legal Structures of Business Organizations
Market Analysis
Marginal Investor
Financial Management/Corporate Finance
36. Usually considered a debt (fixed charge) by stockholders and equity by bondholders. A hybrid between convertible bonds and long-term leases
Preferred Stock
Asset Valuation
Federal Reserve System
Equilibrium
37. An investor whose views determine the actual stock price
Behavioral Finance
Sarbanes-Oxley Act
Depreciation
Marginal Investor
38. Current assets - Current liabilities
Financial Management/Corporate Finance
Net Working Capital (NWC)
Free Cash Flow (FCF)
Convertible Bonds
39. Stock value based on 'perceived' but possibly incorrect information as seen by the marginal investor
Income Statement
Market Price
Limited Liability Partnership (LLP)
Security Analysis
40. Focuses on decisions concerning stocks and bonds and includes a number of activities - 1) Security Analysis - 2) Portfolio Theory - & 3) Market Analysis
Security Analysis
Capital Markets
Retained Earnings
Investments
41. 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
Free Cash Flow (FCF)
3 Reasons to Form a Corporation
Operating Income /(EBIT)
Partnership
42. 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
Marginal Investor
Corporation or C Corporation
Operating Income /(EBIT)
Limited Liability Corporation (LLC)
43. Bears = pessimists - Bulls = optimists
Negative FCF
Stock Market
Depreciation
Stock Valuation
44. Profit a company would generate if it had no debt and held only operating assets - = EBIT x (1-T)
Convertible Bonds
Corporate Raider
Important Business Trends
Net Operating Profit After Taxes (NOPAT)
45. 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
Negative FCF
Market Analysis
Partnership
Important Business Trends
46. Sales revenues - operating costs (including depreciation & amoritizaton)
Federal Reserve System
Operating Income /(EBIT)
Stock Valuation
Corporate Raider
47. Finding the proper values of individual securities
Shareholder Wealth Maximization
Security Analysis
Federal Reserve System
Net Operating Working Capital (NWOC)
48. A company's attitude and conduct toward its employees - customers - community - and stockholders
Operating Income /(EBIT)
Negative FCF
Business Ethics
Equilibrium
49. 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
Book Value Per Share (BPS)
Balance Sheet
Statement of Stockholders' Equity
Asset Valuation
50. 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
Sets of Financial Statements
Dividends Per Share (DPS)
Corporation or C Corporation
Finance Department