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Test your basic knowledge |
Managerial Finance
Start Test
Study First
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. Allows common stockholders to maintain their proportionate ownership in the corporation when new shares are issued - thus protecting them from dilution of their ownership.
outstanding shares
preemptive right
present value
required return
2. Assumes that the stock will pay the same dividend each year - year after year
zero growth model
public offering seasoned
trustee
bond indenture
3. A rising trend in the prices of most goods and services
compound interest
'dutch-auction'
future value
inflation
4. Is preferred stock with no stated face value but with a stated annual dollar dividend
No-par preferred stock
proxy statement
compound interest
discounting cash flows
5. 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.
annuity
Par-value preferred stock
future value
cumulative
6. 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
'dutch-auction'
trustee
principles of finance
prospectus
7. 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.
constant growth model
equity
bond rating agencies
coupon interest rate
8. When interest is credited twice a year.
semi-annual compounding
p/e multiples
capital budgeting
present value
9. Create wealth for the shareholders through maximizing the value of the firm by making financial decisions that will increase the price of common stock.
the Goal of a Corporation
present value
par value
'dutch-auction'
10. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')
discounting cash flows
required return
negotiated purchase
private placement
11. First time selling stock - indirectly with financial intermediary - indirectly with investment bank
public offering IPO
No-par preferred stock
annuity
nominal rate of interest
12. Is interest that is earned on a given deposit and has become part of the principal at the end of a specified period.
compound interest
junk bonds
public offering IPO
bond rating agencies
13. A statement transferring the votes of a stockholder to another party
common stock
inflation
proxy statement
dividends
14. Privately raised external equity capital used to fund early-stage firms with attractive growth prospects.
'dutch-auction'
future value
venture capital
conversion feature
15. 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)
preferred stock
trustee
the Goal of a Corporation
bond rating agencies
16. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock
junk bonds
working capital management
efficient markets
issued shares
17. 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.
principles of finance
interest rate
outstanding shares
competitive bid
18. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.
coupon interest rate
bond indenture
capital structure
restrictive covenants
19. 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?
compound interest
equity
working capital management
issued shares
20. Planning the long-term investments - $ coming in > $ going out
agency problems
capital budgeting
'dutch-auction'
No-par preferred stock
21. Is an annuity for which the cash flow occurs at the beginning of each period.
principles of finance
venture capitalist
proxy statement
annuity due
22. Investment bank underwrites issuance - risk is on the investment bank
cumulative
negotiated purchase
time Value of money
semi-annual compounding
23. 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.
real rate of interest
nominal rate of interest
future value
call feature
24. Type of bonds representing property put up as collateral
venture capitalist
mortgage bonds
nominal rate of interest
competitive bid
25. Selling stock anytime after initial time
public offering seasoned
No-par preferred stock
par value
conversion feature
26. 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.
annuity due
venture capital
underwriting
maturity risk
27. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.
Par-value preferred stock
bond rating agencies
'best-efforts'
efficient markets
28. Inflation - opportunity cost - risk
time Value of money
future value
trustee
quarterly compounding
29. 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.
par value
the Goal of a Corporation
present value
trustee
30. Interest on an annual basis deducted in advance on a loan
default risk
discount
preferred stock
principles of finance
31. Providers of venture capital; typically - formal businesses that maintain strong oversight over the firms they invest in and that have clearly defined exit strategies.
mortgage bonds
negotiated purchase
prospectus
venture capitalist
32. The process of finding present values; the inverse of compounding interest
discounting cash flows
public offering IPO
Par-value preferred stock
authorized shares
33. Estimates stock value by multiplying the firm's expected earnings per share (EPS) by the average price/earnings (P/E) ratio for the industry.
compound interest
p/e multiples
public offering IPO
constant growth model
34. Investment bank does not underwrite - risk is on corporation
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35. Investment bank underwrites issuance - risk is on the investment bank - bid on shares
competitive bid
time Value of money
'best-efforts'
equity
36. 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
corporate bond
cumulative
default risk
inflation
37. Ownership in a Corporation (stock)
equity
Angel Capitalists
agency problems
quarterly compounding
38. A bond that a corporation issues to raise money to expand its business
p/e multiples
cumulative
principles of finance
corporate bond
39. High-risk - high-interest bonds
future value
issued shares
principles of finance
junk bonds
40. Is usually applied to equity instruments such as common stock; the cost of funds obtained by selling an ownership interest.
equity
required return
par value
'best-efforts'
41. Are provisions in a bond indenture that place operating and financial constraints on the borrower
private placement
Par-value preferred stock
preemptive right
restrictive covenants
42. The percentage of a bond's par value that will be paid annually - typically in two equal semiannual payments - as interest.
coupon interest rate
outstanding shares
'dutch-auction'
underwriting
43. 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.
proxy statement
equity
conversion feature
interest rate
44. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position
trustee
bond rating agencies
prospectus
call feature
45. 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
mortgage bonds
time Value of money
real rate of interest
working capital management
46. Shares of ownership in a public corporation. The shareholder has voting rights in the corporation.
present value
common stock
preferred stock
maturity risk
47. Issued shares of common stock held by the firm; often these shares have been repurchased by the firm.
trustee
treasury stock
coupon interest rate
zero growth model
48. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.
bond indenture
venture capital
dividends
default risk
49. Issued shares of common stock held by investors - this includes private and public investors.
outstanding shares
competitive bid
equity
non-cumulative
50. All else equal - the longer the time to maturity - the greater the interest rate risk to the investor
public offering IPO
maturity risk
constant growth model
public offering seasoned