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. 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.






2. 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.






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






4. 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.






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






6. 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






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






8. Interest compounds four times per year.






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






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






11. Type of bonds representing property put up as collateral






12. 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






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






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






15. 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.






16. Selling stock anytime after initial time






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






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






19. Periodic payments of profit to the shareholders






20. 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.






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






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






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






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






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






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






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






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






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






30. High-risk - high-interest bonds






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






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






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






34. 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.






35. Inflation - opportunity cost - risk






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


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






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


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






40. 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?






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






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






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






44. Ownership in a Corporation (stock)






45. 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.






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






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






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






49. 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)






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