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