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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. 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.
discount
Angel Capitalists
compound interest
'dutch-auction'
2. Interest compounds four times per year.
quarterly compounding
time Value of money
principles of finance
inflation
3. Is included in nearly all corporate bond issues - gives the issuer the opportunity to repurchase bonds at a stated call price prior to maturity.
trustee
competitive bid
future value
call feature
4. When interest is credited twice a year.
'best-efforts'
semi-annual compounding
the Goal of a Corporation
restrictive covenants
5. Create wealth for the shareholders through maximizing the value of the firm by making financial decisions that will increase the price of common stock.
the Goal of a Corporation
issued shares
inflation
common stock
6. Interest on an annual basis deducted in advance on a loan
compound interest
preemptive right
agency problems
discount
7. An unsecured type of bond that pays interest only when the debtor company has positive earnings.
negotiated purchase
income bonds
prospectus
issued shares
8. The actual rate of interest charged by the supplier of funds and paid by the demander
bond indenture
default risk
nominal rate of interest
par value
9. Investors bid to buy shares - risk is on corporation
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10. Selling stock anytime after initial time
proxy statement
issued shares
venture capitalist
public offering seasoned
11. Is preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend.
Par-value preferred stock
coupon interest rate
preferred stock
par value
12. Ownership in a Corporation (stock)
competitive bid
discount
equity
working capital management
13. Allows bondholders to change each bond into a stated number of shares of common stock
conversion feature
par value
nominal rate of interest
interest rate
14. Is usually applied to equity instruments such as common stock; the cost of funds obtained by selling an ownership interest.
required return
negotiated purchase
time Value of money
real rate of interest
15. Are provisions in a bond indenture that place operating and financial constraints on the borrower
default risk
prospectus
restrictive covenants
interest rate
16. 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)
preemptive right
preferred stock
default risk
dividends
17. 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
call feature
real rate of interest
Par-value preferred stock
restrictive covenants
18. 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.
dividends
constant growth model
Par-value preferred stock
cumulative
19. Price of assets traded fully reflect all available information - and investors must be rational
zero growth model
preferred stock
capital budgeting
efficient markets
20. Investment bank does not underwrite - risk is on corporation
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21. Type of bonds representing property put up as collateral
mortgage bonds
future value
the Goal of a Corporation
present value
22. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.
prospectus
constant growth model
bond indenture
private placement
23. Allows common stockholders to maintain their proportionate ownership in the corporation when new shares are issued - thus protecting them from dilution of their ownership.
venture capitalist
non-cumulative
capital budgeting
preemptive right
24. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock
'best-efforts'
issued shares
authorized shares
semi-annual compounding
25. First time selling stock - indirectly with financial intermediary - indirectly with investment bank
public offering IPO
p/e multiples
mortgage bonds
preferred stock
26. 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?
maturity risk
required return
default risk
working capital management
27. Shares of ownership in a public corporation. The shareholder has voting rights in the corporation.
par value
common stock
p/e multiples
preemptive right
28. 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
principles of finance
treasury stock
trustee
non-cumulative
29. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.
bond rating agencies
cumulative
coupon interest rate
public offering seasoned
30. High-risk - high-interest bonds
par value
junk bonds
maturity risk
competitive bid
31. A potential conflict of interest between outside shareholders (owners) and managers who make decisions about how to operate the firm.
agency problems
equity
zero growth model
annuity due
32. Providers of venture capital; typically - formal businesses that maintain strong oversight over the firms they invest in and that have clearly defined exit strategies.
annuity
quarterly compounding
venture capitalist
No-par preferred stock
33. 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
venture capitalist
private placement
required return
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.
Par-value preferred stock
future value
efficient markets
venture capital
35. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position
prospectus
zero growth model
capital structure
working capital management
36. 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
nominal rate of interest
Angel Capitalists
principles of finance
cumulative
37. The process of finding present values; the inverse of compounding interest
preferred stock
cumulative
discounting cash flows
dividends
38. Mixture of debt and equity to finance long-term investments
compound interest
treasury stock
capital structure
discounting cash flows
39. Is preferred stock with no stated face value but with a stated annual dollar dividend
future value
authorized shares
nominal rate of interest
No-par preferred stock
40. Is interest that is earned on a given deposit and has become part of the principal at the end of a specified period.
authorized shares
compound interest
venture capitalist
capital structure
41. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')
private placement
p/e multiples
bond indenture
principles of finance
42. 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.
authorized shares
public offering IPO
public offering seasoned
principles of finance
43. Investment bank underwrites issuance - risk is on the investment bank
corporate bond
public offering seasoned
default risk
negotiated purchase
44. 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.
discount
p/e multiples
present value
call feature
45. A bond that a corporation issues to raise money to expand its business
issued shares
capital structure
the Goal of a Corporation
corporate bond
46. 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.
restrictive covenants
trustee
annuity
real rate of interest
47. A statement transferring the votes of a stockholder to another party
real rate of interest
capital budgeting
capital structure
proxy statement
48. Preferred stock is preferred stock for which passed (unpaid) dividends do not accumulate.
working capital management
public offering seasoned
Par-value preferred stock
non-cumulative
49. 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.
proxy statement
prospectus
equity
par value
50. Issued shares of common stock held by the firm; often these shares have been repurchased by the firm.
treasury stock
discounting cash flows
interest rate
efficient markets