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Test your basic knowledge |
Managerial Finance
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Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
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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. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.
interest rate
'best-efforts'
bond rating agencies
p/e multiples
2. Investors bid to buy shares - risk is on corporation
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3. Investment bank underwrites issuance - risk is on the investment bank
par value
prospectus
preferred stock
negotiated purchase
4. Mixture of debt and equity to finance long-term investments
capital structure
real rate of interest
public offering seasoned
coupon interest rate
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.
future value
outstanding shares
inflation
interest rate
6. 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.
treasury stock
compound interest
quarterly compounding
underwriting
7. When interest is credited twice a year.
efficient markets
required return
semi-annual compounding
public offering IPO
8. An unsecured type of bond that pays interest only when the debtor company has positive earnings.
income bonds
zero growth model
bond indenture
treasury stock
9. Providers of venture capital; typically - formal businesses that maintain strong oversight over the firms they invest in and that have clearly defined exit strategies.
venture capitalist
bond indenture
non-cumulative
compound interest
10. Privately raised external equity capital used to fund early-stage firms with attractive growth prospects.
the Goal of a Corporation
venture capital
authorized shares
preferred stock
11. The process of finding present values; the inverse of compounding interest
inflation
junk bonds
discounting cash flows
venture capital
12. 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?
bond rating agencies
public offering seasoned
working capital management
annuity
13. 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.
inflation
constant growth model
underwriting
cumulative
14. A rising trend in the prices of most goods and services
interest rate
authorized shares
inflation
venture capitalist
15. Type of bonds representing property put up as collateral
zero growth model
public offering seasoned
time Value of money
mortgage bonds
16. The actual rate of interest charged by the supplier of funds and paid by the demander
private placement
bond indenture
nominal rate of interest
venture capitalist
17. Investment bank does not underwrite - risk is on corporation
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18. 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.
present value
authorized shares
dividends
call feature
19. Allows bondholders to change each bond into a stated number of shares of common stock
real rate of interest
preemptive right
conversion feature
venture capital
20. First time selling stock - indirectly with financial intermediary - indirectly with investment bank
zero growth model
public offering IPO
preemptive right
Par-value preferred stock
21. Issued shares of common stock held by investors - this includes private and public investors.
proxy statement
nominal rate of interest
outstanding shares
capital budgeting
22. Money flows directly from investor to corporation - $ flows from investor to corp through an investment bank ('privileged subscription')
future value
private placement
issued shares
underwriting
23. Are provisions in a bond indenture that place operating and financial constraints on the borrower
authorized shares
restrictive covenants
underwriting
p/e multiples
24. Planning the long-term investments - $ coming in > $ going out
maturity risk
bond indenture
capital budgeting
present value
25. Periodic payments of profit to the shareholders
present value
public offering seasoned
inflation
dividends
26. Shares of common stock that have been put into circulation. - = outstanding shares + treasury stock
maturity risk
non-cumulative
working capital management
issued shares
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)
quarterly compounding
bond indenture
time Value of money
preferred stock
28. Is interest that is earned on a given deposit and has become part of the principal at the end of a specified period.
compound interest
working capital management
present value
negotiated purchase
29. Interest compounds four times per year.
equity
quarterly compounding
bond indenture
present value
30. Is preferred stock with no stated face value but with a stated annual dollar dividend
discount
par value
No-par preferred stock
cumulative
31. Investment bank underwrites issuance - risk is on the investment bank - bid on shares
trustee
public offering IPO
Angel Capitalists
competitive bid
32. 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.
private placement
Angel Capitalists
discounting cash flows
conversion feature
33. A statement transferring the votes of a stockholder to another party
proxy statement
interest rate
authorized shares
outstanding shares
34. A portion of a security registration statement that describes the key aspects of the issue - the issuer - and its management and financial position
prospectus
'best-efforts'
issued shares
common stock
35. Is preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend.
time Value of money
Par-value preferred stock
capital structure
public offering seasoned
36. All else equal - the longer the time to maturity - the greater the interest rate risk to the investor
maturity risk
required return
call feature
conversion feature
37. Create wealth for the shareholders through maximizing the value of the firm by making financial decisions that will increase the price of common stock.
the Goal of a Corporation
preferred stock
non-cumulative
nominal rate of interest
38. Price of assets traded fully reflect all available information - and investors must be rational
competitive bid
interest rate
private placement
efficient markets
39. Selling stock anytime after initial time
non-cumulative
authorized shares
compound interest
public offering seasoned
40. 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
junk bonds
real rate of interest
semi-annual compounding
call feature
41. Authorized shares are the shares of common stock that a firm's corporate charter allows it to issue.
treasury stock
p/e multiples
authorized shares
inflation
42. 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
competitive bid
treasury stock
authorized shares
cumulative
43. Ownership in a Corporation (stock)
zero growth model
equity
prospectus
negotiated purchase
44. The percentage of a bond's par value that will be paid annually - typically in two equal semiannual payments - as interest.
annuity
coupon interest rate
equity
public offering IPO
45. Is a complex and lengthy legal document stating the conditions under which a bond has been issued.
bond indenture
future value
dividends
corporate bond
46. Shares of ownership in a public corporation. The shareholder has voting rights in the corporation.
common stock
annuity
prospectus
venture capitalist
47. Assumes that the stock will pay the same dividend each year - year after year
zero growth model
non-cumulative
common stock
quarterly compounding
48. The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.
default risk
outstanding shares
present value
discounting cash flows
49. 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.
compound interest
coupon interest rate
equity
future value
50. A potential conflict of interest between outside shareholders (owners) and managers who make decisions about how to operate the firm.
compound interest
principles of finance
agency problems
competitive bid
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