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






2. 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.






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






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






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






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






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






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






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






10. 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






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






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






13. 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






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






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






16. Ownership in a Corporation (stock)






17. 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.






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


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






20. Periodic payments of profit to the shareholders






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






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. 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.






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






25. Inflation - opportunity cost - risk






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






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






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






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






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






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






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






33. Type of bonds representing property put up as collateral






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






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






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






37. 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.






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






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






40. 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.






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






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






43. 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.






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






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






46. 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






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






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






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






50. 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)