18 Questions
What is the Holding Period Return?
The return over the entire period that an investor owns a financial security.
What is the purpose of Insurance Companies?
To charge premiums to invest in bonds and stocks to pay claims.
What is the Hurdle Rate?
The required rate of return that a company expects to earn in order to consider a project.
What is the Gordon Growth Model used for?
To value common stock based on the assumptions that dividends are paid every year and grow at a constant rate forever.
What is Idiosyncratic Risk?
Risk that results from factors at a particular firm and can be reduced through diversification.
What is the purpose of the Fixed Asset Turnover ratio?
To measure a company's asset utilization.
What category of ratios measures a firm's ability to meet short-term obligations?
Liquidity Ratios
What is the term for the probability that changes in interest rates will impact the value of a bond?
Interest Rate Risk
What is the rate of return that a firm earns on its capital projects?
Internal Rate of Return (IRR)
What type of financial institution offers complex financial transactions such as underwriting and facilitating mergers?
Investment Bank
What is the term for the ability to turn financial securities into cash easily without losing significant value?
Liquidity
What category of ratios is used to evaluate the current share price of a public firm's stock?
Market Ratios
What is the primary objective of a firm's capital structure?
To maximize owner wealth
What is the purpose of a cash budget?
To control cash inflows and outflows
What is the primary function of central banks?
To control the amount of money circulating in the economy
What is the purpose of compounding?
To find a future value given a present value
What is the coupon rate of a bond?
The stated interest rate of a bond
What is cross-sectional analysis used for?
To compare a firm's financial ratios to other firms' ratios or industry averages
Test your understanding of key financial management terms, including Fixed Asset Turnover, Fixed-income Securities, Future Value, and more. Evaluate your knowledge of financial concepts and formulas.
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