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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. 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






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






3. High-risk - high-interest bonds






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






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






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






8. 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






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






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






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






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






13. 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.






14. 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.






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






16. 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)






17. 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.






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






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

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






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






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






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






24. 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.






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

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






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






28. 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.






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






30. 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.






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






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






33. Agencies that assess the 'credit worthiness' of an organization. The two major rating agencies are Moody's and Standard & Poor.






34. Type of bonds representing property put up as collateral






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






36. Inflation - opportunity cost - risk






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






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






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






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






41. 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.






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






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






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. 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.






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






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






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






49. Ownership in a Corporation (stock)






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







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