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. High-risk - high-interest bonds






2. Periodic payments of profit to the shareholders






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






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






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

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6. 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)






7. Inflation - opportunity cost - risk






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






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






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






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






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






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






14. 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






15. 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.






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






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






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






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






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






21. 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.






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






23. 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.






24. 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.






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






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






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






28. 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






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






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






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






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






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






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






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






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






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






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






40. 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






41. Selling stock anytime after initial time






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






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

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






45. 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.






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






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






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






49. Ownership in a Corporation (stock)






50. 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?