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






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






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






4. When interest is credited twice a year.






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






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






7. 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.






8. 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.






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






10. Periodic payments of profit to the shareholders






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






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






13. 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.






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






15. Selling stock anytime after initial time






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






17. 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






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. Interest compounds four times per year.






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






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






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






23. 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)






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


25. High-risk - high-interest bonds






26. 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.






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






28. Inflation - opportunity cost - risk






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






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






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






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






33. 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.






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






35. Ownership in a Corporation (stock)






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


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






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






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






40. 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.






41. 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?






42. 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






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






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






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






46. 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.






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






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






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






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