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






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






3. 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.






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






5. 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.






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






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

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






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






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






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






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






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






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






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






17. 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.






18. When interest is credited twice a year.






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






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






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






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






23. 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.






24. 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.






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






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






27. Ownership in a Corporation (stock)






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

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






30. 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)






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






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






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






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






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






36. 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.






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






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






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






40. 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.






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






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






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






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






46. Periodic payments of profit to the shareholders






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






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






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. Type of bonds representing property put up as collateral