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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. Is usually applied to equity instruments such as common stock; the cost of funds obtained by selling an ownership interest.






2. Is included in nearly all corporate bond issues - gives the issuer the opportunity to repurchase bonds at a stated call price prior to maturity.






3. 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.






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






5. An unsecured type of bond that pays interest only when the debtor company has positive earnings.






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






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

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8. 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.






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






10. Type of bonds representing property put up as collateral






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






12. 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.






13. 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.






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






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






16. Selling stock anytime after initial time






17. When interest is credited twice a year.






18. Allows common stockholders to maintain their proportionate ownership in the corporation when new shares are issued - thus protecting them from dilution of their ownership.






19. Is interest that is earned on a given deposit and has become part of the principal at the end of a specified period.






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






21. Create wealth for the shareholders through maximizing the value of the firm by making financial decisions that will increase the price of common stock.






22. Day to day operations - how much cash to keep on hand - how much inventory to keep on hand - will we allow to buy on credit?






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






24. Periodic payments of profit to the shareholders






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






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






28. 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.






29. 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.






30. High-risk - high-interest bonds






31. Interest on an annual basis deducted in advance on a loan






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






33. Inflation - opportunity cost - risk






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






35. Preferred stock is preferred stock for which passed (unpaid) dividends do not accumulate.






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






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






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






39. 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






40. Price of assets traded fully reflect all available information - and investors must be rational






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






43. Planning the long-term investments - $ coming in > $ going out






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






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

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46. Ownership in a Corporation (stock)






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






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






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






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







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