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. Inflation - opportunity cost - risk






2. 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.






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






4. 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.






5. Type of bonds representing property put up as collateral






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






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






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






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






10. High-risk - high-interest bonds






11. 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






12. Interest compounds four times per year.






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.






14. Selling stock anytime after initial time






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






16. 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.






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


18. 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






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






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






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






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






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


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. 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.






26. Periodic payments of profit to the shareholders






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






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






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






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






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






33. 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






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






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






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






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






38. 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)






39. 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.






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






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






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






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






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






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






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






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






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






49. 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?






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