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. Investment bank does not underwrite - risk is on corporation

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






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






4. 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.






5. 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.






6. 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?






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






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. Type of bonds representing property put up as collateral






10. 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






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






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






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






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






15. 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.






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






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






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






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






20. 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






21. Periodic payments of profit to the shareholders






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






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






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






25. 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






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






27. When interest is credited twice a year.






28. 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.






29. High-risk - high-interest bonds






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






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






32. 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.






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






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






35. 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)






36. 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.






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






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






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






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






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






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






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






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

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






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






47. Selling stock anytime after initial time






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






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






50. Mixture of debt and equity to finance long-term investments