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






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






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






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






5. Inflation - opportunity cost - risk






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






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. 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.






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






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






11. High-risk - high-interest bonds






12. 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)






13. Selling stock anytime after initial time






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






15. 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.






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






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






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






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






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






21. 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






22. 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.






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






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






25. 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






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






27. When interest is credited twice a year.






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






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






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






33. 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.






34. Ownership in a Corporation (stock)






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






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






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






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






39. Periodic payments of profit to the shareholders






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






41. 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






42. Type of bonds representing property put up as collateral






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


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






45. 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.






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






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






48. 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?






49. 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.






50. Interest compounds four times per year.