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. 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.






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






3. 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






4. 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.






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






6. Interest compounds four times per year.






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






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






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






10. Ownership in a Corporation (stock)






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






12. 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.






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






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






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






16. When interest is credited twice a year.






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






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






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






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






21. Type of bonds representing property put up as collateral






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


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






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






25. High-risk - high-interest bonds






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






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






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


29. 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






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






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






32. 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?






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






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






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






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






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






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






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






40. Inflation - opportunity cost - risk






41. 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.






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






43. 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.






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






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






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






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






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






49. Selling stock anytime after initial time






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