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Test your basic knowledge |
Managerial Finance
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Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
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.
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. Periodic payments of profit to the shareholders
dividends
quarterly compounding
annuity due
compound interest
2. 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.
required return
corporate bond
Angel Capitalists
authorized shares
3. Create wealth for the shareholders through maximizing the value of the firm by making financial decisions that will increase the price of common stock.
constant growth model
the Goal of a Corporation
proxy statement
prospectus
4. The actual rate of interest charged by the supplier of funds and paid by the demander
annuity due
capital structure
nominal rate of interest
negotiated purchase
5. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.
annuity due
'dutch-auction'
Angel Capitalists
bond indenture
6. Allows common stockholders to maintain their proportionate ownership in the corporation when new shares are issued - thus protecting them from dilution of their ownership.
preemptive right
p/e multiples
'dutch-auction'
venture capitalist
7. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')
default risk
p/e multiples
private placement
common stock
8. 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
treasury stock
default risk
authorized shares
9. Is interest that is earned on a given deposit and has become part of the principal at the end of a specified period.
compound interest
underwriting
negotiated purchase
semi-annual compounding
10. Investment bank underwrites issuance - risk is on the investment bank
negotiated purchase
the Goal of a Corporation
corporate bond
capital budgeting
11. When interest is credited twice a year.
public offering IPO
'dutch-auction'
Par-value preferred stock
semi-annual compounding
12. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position
time Value of money
efficient markets
'best-efforts'
prospectus
13. Inflation - opportunity cost - risk
constant growth model
present value
discount
time Value of money
14. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock
'best-efforts'
compound interest
issued shares
outstanding shares
15. The process of finding present values; the inverse of compounding interest
corporate bond
discounting cash flows
real rate of interest
quarterly compounding
16. 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.
interest rate
venture capital
par value
public offering seasoned
17. 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
trustee
agency problems
cumulative
annuity due
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.
required return
compound interest
treasury stock
p/e multiples
19. 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.
dividends
the Goal of a Corporation
principles of finance
time Value of money
20. Investors bid to buy shares - risk is on corporation
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21. A statement transferring the votes of a stockholder to another party
bond rating agencies
issued shares
discounting cash flows
proxy statement
22. 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
p/e multiples
bond indenture
non-cumulative
trustee
23. Planning the long-term investments - $ coming in > $ going out
zero growth model
Par-value preferred stock
capital budgeting
issued shares
24. Shares of ownership in a public corporation. The shareholder has voting rights in the corporation.
future value
common stock
underwriting
default risk
25. A potential conflict of interest between outside shareholders (owners) and managers who make decisions about how to operate the firm.
compound interest
outstanding shares
agency problems
equity
26. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.
income bonds
venture capital
real rate of interest
bond rating agencies
27. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.
public offering IPO
agency problems
annuity
default risk
28. Providers of venture capital; typically - formal businesses that maintain strong oversight over the firms they invest in and that have clearly defined exit strategies.
working capital management
underwriting
capital structure
venture capitalist
29. High-risk - high-interest bonds
public offering IPO
junk bonds
equity
cumulative
30. Issued shares of common stock held by investors - this includes private and public investors.
efficient markets
default risk
outstanding shares
equity
31. Investment bank does not underwrite - risk is on corporation
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32. Type of bonds representing property put up as collateral
dividends
'best-efforts'
mortgage bonds
authorized shares
33. 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?
working capital management
income bonds
default risk
issued shares
34. The percentage of a bond's par value that will be paid annually - typically in two equal semiannual payments - as interest.
coupon interest rate
income bonds
real rate of interest
p/e multiples
35. Mixture of debt and equity to finance long-term investments
capital structure
the Goal of a Corporation
annuity
principles of finance
36. 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.
bond indenture
future value
annuity due
par value
37. An unsecured type of bond that pays interest only when the debtor company has positive earnings.
mortgage bonds
authorized shares
income bonds
annuity
38. Is preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend.
working capital management
'best-efforts'
Par-value preferred stock
preemptive right
39. Assumes that the stock will pay the same dividend each year - year after year
venture capital
zero growth model
preemptive right
principles of finance
40. 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.
constant growth model
issued shares
Par-value preferred stock
annuity
41. First time selling stock - indirectly with financial intermediary - indirectly with investment bank
zero growth model
Par-value preferred stock
equity
public offering IPO
42. Selling stock anytime after initial time
preemptive right
authorized shares
nominal rate of interest
public offering seasoned
43. 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
prospectus
real rate of interest
default risk
future value
44. Privately raised external equity capital used to fund early-stage firms with attractive growth prospects.
Par-value preferred stock
underwriting
venture capital
par value
45. Is an annuity for which the cash flow occurs at the beginning of each period.
prospectus
restrictive covenants
Par-value preferred stock
annuity due
46. A rising trend in the prices of most goods and services
inflation
quarterly compounding
annuity due
future value
47. 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.
annuity
quarterly compounding
proxy statement
capital budgeting
48. Preferred stock is preferred stock for which passed (unpaid) dividends do not accumulate.
maturity risk
non-cumulative
proxy statement
'best-efforts'
49. Ownership in a Corporation (stock)
call feature
equity
issued shares
proxy statement
50. Is included in nearly all corporate bond issues - gives the issuer the opportunity to repurchase bonds at a stated call price prior to maturity.
call feature
par value
authorized shares
principles of finance
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