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. 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.






2. Interest compounds four times per year.






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






4. When interest is credited twice a year.






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






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






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






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






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

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10. Selling stock anytime after initial time






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






12. Ownership in a Corporation (stock)






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






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






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






16. 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)






17. 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






18. 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.






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






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

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21. Type of bonds representing property put up as collateral






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






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






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






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






26. 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?






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






28. 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






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






30. High-risk - high-interest bonds






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






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






33. 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.






34. 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.






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






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






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






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






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






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






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






42. 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.






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






44. 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.






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






46. 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.






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






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






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