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. 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.






2. Are provisions in a bond indenture that place operating and financial constraints on the borrower






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






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






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

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6. 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






7. High-risk - high-interest bonds






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






9. 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.






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






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






12. Ownership in a Corporation (stock)






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






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






15. 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.






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






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






18. Periodic payments of profit to the shareholders






19. 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.






20. 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.






21. Is included in nearly all corporate bond issues - gives the issuer the opportunity to repurchase bonds at a stated call price prior to maturity.






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






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






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






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






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






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






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






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






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






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






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






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?






34. When interest is credited twice a year.






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






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






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






38. 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.






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






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






41. Inflation - opportunity cost - risk






42. Interest compounds four times per year.






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






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

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






46. Type of bonds representing property put up as collateral






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






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






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






50. Selling stock anytime after initial time