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






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






3. Ownership in a Corporation (stock)






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






5. 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






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






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






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






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






10. Inflation - opportunity cost - risk






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






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






13. Type of bonds representing property put up as collateral






14. 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.






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






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.






17. Interest compounds four times per year.






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






19. 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)






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






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






23. 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.






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






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






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






27. 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






28. Periodic payments of profit to the shareholders






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






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






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






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

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






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






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






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






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






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






40. 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






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






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






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






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






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






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






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






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






49. High-risk - high-interest bonds






50. 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.






Can you answer 50 questions in 15 minutes?



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