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. Inflation - opportunity cost - risk






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






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






4. Selling stock anytime after initial time






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






6. When interest is credited twice a year.






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






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






10. 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)






11. 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.






12. 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






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






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


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






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






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






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






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






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






22. Periodic payments of profit to the shareholders






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






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






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. 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.






27. 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.






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






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






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






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






32. Ownership in a Corporation (stock)






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






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






35. Interest compounds four times per year.






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






37. High-risk - high-interest bonds






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






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






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






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






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






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






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






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






47. 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.






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






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






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