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






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






3. 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.






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






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






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






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






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






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

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10. 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)






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






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

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13. 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.






14. When interest is credited twice a year.






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






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






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






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






19. Selling stock anytime after initial time






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






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






22. High-risk - high-interest bonds






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






24. Ownership in a Corporation (stock)






25. 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?






26. 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






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






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






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






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






31. 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.






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






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






34. Type of bonds representing property put up as collateral






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






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






37. Periodic payments of profit to the shareholders






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






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






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






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






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






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






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






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. Inflation - opportunity cost - risk






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






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






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






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







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