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






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






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






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






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






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






7. 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.






8. Periodic payments of profit to the shareholders






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

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






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






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






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

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14. 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.






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






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






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






19. 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.






20. When interest is credited twice a year.






21. Interest compounds four times per year.






22. 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)






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






24. Selling stock anytime after initial time






25. Inflation - opportunity cost - risk






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






27. High-risk - high-interest bonds






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






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






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






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






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






34. Type of bonds representing property put up as collateral






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






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






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






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






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






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






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






42. 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.






43. 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






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






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






46. 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.






47. 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






48. Ownership in a Corporation (stock)






49. 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






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