Test your basic knowledge |

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






2. 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.






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






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






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






6. 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






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






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






9. Periodic payments of profit to the shareholders






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






11. The role of the investment banker in bearing the risk of reselling - at a profit - the securities purchased from an issuing corporation at an agreed-on price.






12. 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.






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






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






15. The actual rate of interest charged by the supplier of funds and paid by the demander






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






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






18. Type of bonds representing property put up as collateral






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






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






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






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






23. 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






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. Selling stock anytime after initial time






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






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






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






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






30. Inflation - opportunity cost - risk






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






32. 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.






33. Ownership in a Corporation (stock)






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






35. 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.






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






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






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






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






40. 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






41. 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.






42. Stock that gives its owners preference in the payment of dividends and an earlier claim on assets than common stockholders if the company is forced out of business and its assets sold.(not voted)






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






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






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






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






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






48. Interest compounds four times per year.






49. 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.






50. 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.