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Managerial Finance

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. Shares of ownership in a public corporation. The shareholder has voting rights in the corporation.






2. Ownership in a Corporation (stock)






3. A statement transferring the votes of a stockholder to another party






4. Investors bid to buy shares - risk is on corporation

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5. Is a stream of equal periodic cash flows - over a specified time period. These cash flows can be inflows of returns earned on investments or outflows of funds invested to earn future returns.






6. Interest compounds four times per year.






7. Privately raised external equity capital used to fund early-stage firms with attractive growth prospects.






8. Authorized shares are the shares of common stock that a firm's corporate charter allows it to issue.






9. Stock is an arbitrary value established for legal purposes in the firm's corporate charter - and can be used to find the total number of shares outstanding by dividing it into the book value of common stock.






10. Type of bonds representing property put up as collateral






11. The current dollar value of a future amount - the amount of money that would have to be invested today at a given interest rate over a specified period to equal the future amount.






12. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.






13. First time selling stock - indirectly with financial intermediary - indirectly with investment bank






14. The value at a given future date of an amount placed on deposit today and earning interest at a specified rate. Found by applying compound interest over a specified period of time.






15. A paid individual - corporation - or commercial bank trust department that acts as the third party to a bond indenture and can take specified actions on behalf of the bondholders if the terms of the indenture are violated






16. Inflation - opportunity cost - risk






17. Is usually applied to debt instruments such as bank loans or bonds; the compensation paid by the borrower of funds to the lender; from the borrower's point of view - the cost of borrowing funds.






18. A widely cited dividend valuation approach that assumes that dividends will grow at a constant rate - but a rate that is less than the required return.






19. Mixture of debt and equity to finance long-term investments






20. Investment bank underwrites issuance - risk is on the investment bank






21. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.






22. All else equal - the longer the time to maturity - the greater the interest rate risk to the investor






23. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')






24. Providers of venture capital; typically - formal businesses that maintain strong oversight over the firms they invest in and that have clearly defined exit strategies.






25. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position






26. A rising trend in the prices of most goods and services






27. The percentage of a bond's par value that will be paid annually - typically in two equal semiannual payments - as interest.






28. Issued shares of common stock held by the firm; often these shares have been repurchased by the firm.






29. When interest is credited twice a year.






30. Investment bank underwrites issuance - risk is on the investment bank - bid on shares






31. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock






32. Money has a time value - Risk requires a reward - Cash flow is what matters - Market prices are generally correct - and Conflicts of interest create agency problems.






33. Investment bank does not underwrite - risk is on corporation

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34. Estimates stock value by multiplying the firm's expected earnings per share (EPS) by the average price/earnings (P/E) ratio for the industry.






35. Allows bondholders to change each bond into a stated number of shares of common stock






36. The process of finding present values; the inverse of compounding interest






37. Wealthy individual investors who do not operate as a business but invest in promising early-stage companies in exchange for a portion of the firm's equity.






38. Are provisions in a bond indenture that place operating and financial constraints on the borrower






39. Issued shares of common stock held by investors - this includes private and public investors.






40. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.






41. Preferred stock is preferred stock for which all passed (unpaid) dividends in arrears - along with the current dividend - must be paid before dividends can be paid to common stockholders






42. Assumes that the stock will pay the same dividend each year - year after year






43. Is preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend.






44. The rate that creates equilibrium between the supply of savings and the demand for investment funds in a perfect world - without inflation - where suppliers and demanders of funds have no liquidity preferences and there is no risk






45. A bond that a corporation issues to raise money to expand its business






46. High-risk - high-interest bonds






47. A potential conflict of interest between outside shareholders (owners) and managers who make decisions about how to operate the firm.






48. Periodic payments of profit to the shareholders






49. Is preferred stock with no stated face value but with a stated annual dollar dividend






50. Is an annuity for which the cash flow occurs at the beginning of each period.







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