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






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






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






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






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. 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






7. 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.






8. When interest is credited twice a year.






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






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






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






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






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






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






15. 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)






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






17. 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.






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






19. 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?






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






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






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






23. 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.






24. Type of bonds representing property put up as collateral






25. Selling stock anytime after initial time






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






28. Inflation - opportunity cost - risk






29. 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.






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






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






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






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






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

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






36. 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






37. Ownership in a Corporation (stock)






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






39. High-risk - high-interest bonds






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






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






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






43. 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.






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






45. 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






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






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






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






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






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