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Managerial Finance

Subject : business-skills
Instructions:
  • Answer 50 questions in 15 minutes.
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  • 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. First time selling stock - indirectly with financial intermediary - indirectly with investment bank






2. 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






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






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






5. 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.






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






7. 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)






8. 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.






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






10. When interest is credited twice a year.






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






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






13. Ownership in a Corporation (stock)






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






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






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

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






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






19. 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.






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






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






22. 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






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






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






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






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






27. 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.






28. 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.






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






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






31. Periodic payments of profit to the shareholders






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






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






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

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






36. Interest compounds four times per year.






37. High-risk - high-interest bonds






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






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






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






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






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






43. 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?






44. Type of bonds representing property put up as collateral






45. 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.






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






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






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






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






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







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