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






2. 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






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






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






5. 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.






6. Ownership in a Corporation (stock)






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






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






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






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






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






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






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






14. 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.






15. Periodic payments of profit to the shareholders






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






17. 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.






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






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






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






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






22. Interest compounds four times per year.






23. 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.






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


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






26. 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






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






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






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






30. When interest is credited twice a year.






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






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






33. 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.






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






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






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






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






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






39. Type of bonds representing property put up as collateral






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






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






42. High-risk - high-interest bonds






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






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






45. 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.






46. 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.






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






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






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






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