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






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






3. 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.






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






5. Selling stock anytime after initial time






6. Inflation - opportunity cost - risk






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

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






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






10. 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.






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






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






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






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






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






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






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






19. 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.






20. Type of bonds representing property put up as collateral






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






22. Periodic payments of profit to the shareholders






23. 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






24. Ownership in a Corporation (stock)






25. 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.






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






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






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






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






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






31. When interest is credited twice a year.






32. High-risk - high-interest bonds






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






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






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






36. 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






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






38. 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.






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






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






41. 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






42. 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?






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






44. 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.






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






46. Interest compounds four times per year.






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






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






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






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