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






2. 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.






3. Ownership in a Corporation (stock)






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






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






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






7. 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.






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






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






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


11. Periodic payments of profit to the shareholders






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






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






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






15. 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?






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






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






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






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






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






21. 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.






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






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






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






25. 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.






26. 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






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






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






29. 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.






30. High-risk - high-interest bonds






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






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






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


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






35. Type of bonds representing property put up as collateral






36. Interest compounds four times per year.






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






39. 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)






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






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






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






44. 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.






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






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






47. 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.






48. A statement transferring the votes of a stockholder to another party






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






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