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






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. 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






4. Selling stock anytime after initial time






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






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






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






8. Periodic payments of profit to the shareholders






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






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






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






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






13. 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.






14. 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)






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






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






17. 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






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






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






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






21. Interest compounds four times per year.






22. Type of bonds representing property put up as collateral






23. 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.






24. 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?






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






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






27. High-risk - high-interest bonds






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






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






30. 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.






31. 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.






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






33. 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






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






35. Inflation - opportunity cost - risk






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

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37. 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.






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






39. When interest is credited twice a year.






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






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






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






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






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






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






46. Ownership in a Corporation (stock)






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






48. 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.






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






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







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