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. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.






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






3. 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.






4. 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.






5. 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






6. 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.






7. 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.






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






9. When interest is credited twice a year.






10. Selling stock anytime after initial time






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






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






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






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






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






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






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






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






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






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






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






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






23. Type of bonds representing property put up as collateral






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


25. 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






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






27. High-risk - high-interest bonds






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






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.






30. 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.






31. 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)






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






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


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






35. 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.






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






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






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






39. 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






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






41. 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?






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






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






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






45. Periodic payments of profit to the shareholders






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






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






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






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






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