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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. Ownership in a Corporation (stock)






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






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






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






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






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






7. 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






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






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






10. Periodic payments of profit to the shareholders






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






12. 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.






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






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






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






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






17. Interest compounds four times per year.






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






19. Inflation - opportunity cost - risk






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






21. 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?






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. When interest is credited twice a year.






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






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






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






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






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






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






31. 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.






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






33. 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.






34. 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.






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






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






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






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






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

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

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






42. 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)






43. 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






44. High-risk - high-interest bonds






45. 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






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






47. 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.






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






49. 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.






50. 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.







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