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Test your basic knowledge |
Managerial Finance
Start Test
Study First
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. Create wealth for the shareholders through maximizing the value of the firm by making financial decisions that will increase the price of common stock.
zero growth model
the Goal of a Corporation
discounting cash flows
treasury stock
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
real rate of interest
non-cumulative
negotiated purchase
private placement
3. Investment bank does not underwrite - risk is on corporation
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4. Price of assets traded fully reflect all available information - and investors must be rational
'dutch-auction'
capital budgeting
coupon interest rate
efficient markets
5. A statement transferring the votes of a stockholder to another party
default risk
outstanding shares
proxy statement
annuity
6. All else equal - the longer the time to maturity - the greater the interest rate risk to the investor
interest rate
maturity risk
agency problems
private placement
7. 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
venture capitalist
prospectus
trustee
coupon interest rate
8. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.
public offering IPO
discount
inflation
default risk
9. Allows common stockholders to maintain their proportionate ownership in the corporation when new shares are issued - thus protecting them from dilution of their ownership.
real rate of interest
public offering IPO
working capital management
preemptive right
10. Issued shares of common stock held by investors - this includes private and public investors.
inflation
annuity
agency problems
outstanding shares
11. 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
compound interest
'dutch-auction'
interest rate
cumulative
12. Is an annuity for which the cash flow occurs at the beginning of each period.
venture capital
zero growth model
dividends
annuity due
13. Investment bank underwrites issuance - risk is on the investment bank - bid on shares
nominal rate of interest
required return
discounting cash flows
competitive bid
14. A bond that a corporation issues to raise money to expand its business
common stock
bond indenture
Angel Capitalists
corporate bond
15. 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.
trustee
No-par preferred stock
principles of finance
underwriting
16. An unsecured type of bond that pays interest only when the debtor company has positive earnings.
underwriting
discounting cash flows
cumulative
income bonds
17. Is preferred stock with no stated face value but with a stated annual dollar dividend
public offering IPO
issued shares
No-par preferred stock
authorized shares
18. Investment bank underwrites issuance - risk is on the investment bank
negotiated purchase
junk bonds
issued shares
p/e multiples
19. Are provisions in a bond indenture that place operating and financial constraints on the borrower
annuity due
interest rate
restrictive covenants
treasury stock
20. 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.
bond rating agencies
private placement
corporate bond
par value
21. Interest on an annual basis deducted in advance on a loan
discount
the Goal of a Corporation
principles of finance
coupon interest rate
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)
p/e multiples
preferred stock
quarterly compounding
interest rate
23. Mixture of debt and equity to finance long-term investments
No-par preferred stock
Angel Capitalists
p/e multiples
capital structure
24. 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.
agency problems
annuity
coupon interest rate
discounting cash flows
25. 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.
present value
nominal rate of interest
trustee
authorized shares
26. Shares of ownership in a public corporation. The shareholder has voting rights in the corporation.
common stock
p/e multiples
constant growth model
proxy statement
27. Periodic payments of profit to the shareholders
dividends
No-par preferred stock
mortgage bonds
equity
28. Is preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend.
Par-value preferred stock
nominal rate of interest
preferred stock
private placement
29. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock
future value
issued shares
annuity
real rate of interest
30. 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.
preferred stock
future value
private placement
treasury stock
31. The percentage of a bond's par value that will be paid annually - typically in two equal semiannual payments - as interest.
p/e multiples
coupon interest rate
present value
outstanding shares
32. A rising trend in the prices of most goods and services
inflation
dividends
'dutch-auction'
principles of finance
33. The process of finding present values; the inverse of compounding interest
present value
discounting cash flows
preferred stock
coupon interest rate
34. 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.
equity
constant growth model
p/e multiples
default risk
35. High-risk - high-interest bonds
treasury stock
principles of finance
junk bonds
preferred stock
36. First time selling stock - indirectly with financial intermediary - indirectly with investment bank
restrictive covenants
public offering IPO
'best-efforts'
compound interest
37. Estimates stock value by multiplying the firm's expected earnings per share (EPS) by the average price/earnings (P/E) ratio for the industry.
capital budgeting
zero growth model
private placement
p/e multiples
38. 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?
efficient markets
issued shares
compound interest
working capital management
39. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')
coupon interest rate
private placement
outstanding shares
inflation
40. Planning the long-term investments - $ coming in > $ going out
competitive bid
agency problems
capital budgeting
discounting cash flows
41. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position
prospectus
capital structure
bond indenture
semi-annual compounding
42. Interest compounds four times per year.
nominal rate of interest
quarterly compounding
coupon interest rate
public offering IPO
43. Assumes that the stock will pay the same dividend each year - year after year
underwriting
nominal rate of interest
public offering seasoned
zero growth model
44. Inflation - opportunity cost - risk
equity
time Value of money
income bonds
preemptive right
45. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.
interest rate
bond indenture
'dutch-auction'
semi-annual compounding
46. Is usually applied to equity instruments such as common stock; the cost of funds obtained by selling an ownership interest.
public offering seasoned
principles of finance
proxy statement
required return
47. Is interest that is earned on a given deposit and has become part of the principal at the end of a specified period.
outstanding shares
compound interest
default risk
discount
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.
Par-value preferred stock
future value
interest rate
prospectus
49. Type of bonds representing property put up as collateral
competitive bid
outstanding shares
real rate of interest
mortgage bonds
50. 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.
annuity due
Angel Capitalists
public offering IPO
compound interest