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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. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.
bond indenture
preferred stock
'dutch-auction'
restrictive covenants
2. The actual rate of interest charged by the supplier of funds and paid by the demander
mortgage bonds
nominal rate of interest
discounting cash flows
future value
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.
capital budgeting
equity
default risk
constant growth model
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.
p/e multiples
non-cumulative
discount
'dutch-auction'
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.
nominal rate of interest
quarterly compounding
Angel Capitalists
principles of finance
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.
junk bonds
time Value of money
venture capitalist
prospectus
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.
discounting cash flows
equity
'best-efforts'
compound interest
9. A statement transferring the votes of a stockholder to another party
required return
public offering seasoned
proxy statement
negotiated purchase
10. Is preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend.
preemptive right
Par-value preferred stock
trustee
corporate bond
11. Authorized shares are the shares of common stock that a firm's corporate charter allows it to issue.
par value
authorized shares
future value
agency problems
12. An unsecured type of bond that pays interest only when the debtor company has positive earnings.
prospectus
income bonds
venture capital
'best-efforts'
13. Investment bank underwrites issuance - risk is on the investment bank
preemptive right
negotiated purchase
proxy statement
venture capitalist
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.
proxy statement
discount
agency problems
principles of finance
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.
preemptive right
call feature
corporate bond
p/e multiples
16. Issued shares of common stock held by the firm; often these shares have been repurchased by the firm.
conversion feature
junk bonds
treasury stock
outstanding shares
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.
coupon interest rate
annuity
agency problems
restrictive covenants
18. When interest is credited twice a year.
authorized shares
mortgage bonds
semi-annual compounding
compound interest
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.
conversion feature
treasury stock
trustee
the Goal of a Corporation
20. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.
bond rating agencies
non-cumulative
No-par preferred stock
restrictive covenants
21. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position
semi-annual compounding
public offering seasoned
prospectus
required return
22. Investment bank underwrites issuance - risk is on the investment bank - bid on shares
trustee
competitive bid
semi-annual compounding
capital structure
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.
present value
restrictive covenants
outstanding shares
annuity due
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.
annuity
required return
mortgage bonds
future value
25. Is preferred stock with no stated face value but with a stated annual dollar dividend
authorized shares
No-par preferred stock
bond indenture
working capital management
26. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock
present value
agency problems
venture capitalist
issued shares
27. Ownership in a Corporation (stock)
the Goal of a Corporation
equity
conversion feature
'dutch-auction'
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
'dutch-auction'
public offering IPO
coupon interest rate
capital structure
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)
the Goal of a Corporation
income bonds
capital budgeting
preferred stock
31. A potential conflict of interest between outside shareholders (owners) and managers who make decisions about how to operate the firm.
agency problems
inflation
discount
income bonds
32. Allows bondholders to change each bond into a stated number of shares of common stock
conversion feature
Angel Capitalists
venture capital
efficient markets
33. A rising trend in the prices of most goods and services
maturity risk
capital budgeting
future value
inflation
34. Preferred stock is preferred stock for which passed (unpaid) dividends do not accumulate.
non-cumulative
'dutch-auction'
income bonds
real rate of interest
35. The process of finding present values; the inverse of compounding interest
discounting cash flows
dividends
equity
competitive bid
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.
preferred stock
interest rate
corporate bond
cumulative
37. A bond that a corporation issues to raise money to expand its business
cumulative
treasury stock
real rate of interest
corporate bond
38. Interest on an annual basis deducted in advance on a loan
discount
real rate of interest
compound interest
underwriting
39. The percentage of a bond's par value that will be paid annually - typically in two equal semiannual payments - as interest.
cumulative
coupon interest rate
common stock
prospectus
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.
underwriting
restrictive covenants
compound interest
cumulative
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?
prospectus
working capital management
outstanding shares
treasury stock
42. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.
time Value of money
proxy statement
non-cumulative
default risk
43. Are provisions in a bond indenture that place operating and financial constraints on the borrower
restrictive covenants
agency problems
dividends
authorized shares
44. All else equal - the longer the time to maturity - the greater the interest rate risk to the investor
authorized shares
real rate of interest
maturity risk
restrictive covenants
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.
call feature
venture capital
authorized shares
No-par preferred stock
46. Periodic payments of profit to the shareholders
competitive bid
dividends
treasury stock
income bonds
47. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')
quarterly compounding
trustee
private placement
venture capital
48. Assumes that the stock will pay the same dividend each year - year after year
call feature
venture capitalist
zero growth model
conversion feature
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
mortgage bonds
cumulative
quarterly compounding
required return
50. Type of bonds representing property put up as collateral
real rate of interest
mortgage bonds
authorized shares
call feature