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






2. When interest is credited twice a year.






3. 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.






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






5. 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.






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






7. 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






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






9. Selling stock anytime after initial time






10. 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.






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






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






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






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






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






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






17. Inflation - opportunity cost - risk






18. Interest compounds four times per year.






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






20. 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.






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






22. Type of bonds representing property put up as collateral






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


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






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


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






27. 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.






28. Ownership in a Corporation (stock)






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






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






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






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






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






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






36. Periodic payments of profit to the shareholders






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






38. 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.






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






40. 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.






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






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






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






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






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






46. 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.






47. High-risk - high-interest bonds






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






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






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