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






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






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






4. Selling stock anytime after initial time






5. 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.






6. 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?






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






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






9. Interest compounds four times per year.






10. 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






11. 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.






12. 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






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






14. 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.






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






16. 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.






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






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






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






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






21. 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.






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






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






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






25. 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.






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






27. 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)






28. Type of bonds representing property put up as collateral






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






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






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






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






33. When interest is credited twice a year.






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






35. Ownership in a Corporation (stock)






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






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






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






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






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






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






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


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






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






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






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






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






48. Periodic payments of profit to the shareholders






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






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