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. 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)






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






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






4. 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






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






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






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






8. 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.






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






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






11. 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.






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






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






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






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






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






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






18. Ownership in a Corporation (stock)






19. 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.






20. Inflation - opportunity cost - risk






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






22. 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.






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






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






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






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






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






28. Type of bonds representing property put up as collateral






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






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






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






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






33. High-risk - high-interest bonds






34. When interest is credited twice a year.






35. 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.






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






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






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






39. 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.






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


41. Interest compounds four times per year.






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






43. 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.






44. 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.






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


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






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






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






49. 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.






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