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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. Type of bonds representing property put up as collateral






2. 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.






3. Ownership in a Corporation (stock)






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






5. 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.






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






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






8. 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.






9. Interest compounds four times per year.






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






11. When interest is credited twice a year.






12. 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.






13. 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)






14. 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.






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






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






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






18. 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.






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






20. 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.






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






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

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23. 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






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






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






26. Periodic payments of profit to the shareholders






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






28. High-risk - high-interest bonds






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






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






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






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






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






34. 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?






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






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






37. 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






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






39. 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.






40. Selling stock anytime after initial time






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






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






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






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






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






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

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






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






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






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







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