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. 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.






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






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






4. Inflation - opportunity cost - risk






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






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






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






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






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






11. 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.






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






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






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






15. Periodic payments of profit to the shareholders






16. Interest compounds four times per year.






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






18. 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.






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






20. 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.






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






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






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






24. Type of bonds representing property put up as collateral






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






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


27. 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.






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






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






30. High-risk - high-interest bonds






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






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






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






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






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






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






37. Ownership in a Corporation (stock)






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






39. 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?






40. 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.






41. 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






42. 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)






43. Selling stock anytime after initial time






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


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






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






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






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






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






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