Practice Test Geeks(ABC) Accredited Business Communicator Practice Test
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Investment Strategies Flashcards

7 cards from real ABC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A communications director must explain 'asset under management' (AUM) growth in a quarterly update. AUM refers to:

    Answer: The market value of investments a firm manages on behalf of clients

    AUM is the total market value of assets that an investment manager oversees on behalf of investors, often used as a measure of a firm's size.

  2. Which investment vehicle trades on a stock exchange throughout the day like a stock but typically tracks an index like a mutual fund?

    Answer: Exchange-traded fund (ETF)

    ETFs combine the diversification of mutual funds with the intraday tradability of stocks, often at lower costs than actively managed funds.

  3. A business communicator drafting a board memo on capital allocation should understand that 'return on invested capital' (ROIC) measures:

    Answer: How efficiently a company generates profit relative to its total invested capital

    ROIC measures how effectively a company converts invested capital into profit, indicating whether it is creating or destroying shareholder value.

  4. Which term describes an investor's ability to withstand losses without compromising financial goals or emotional stability?

    Answer: Risk tolerance

    Risk tolerance reflects both the financial capacity and psychological willingness to endure investment losses over a given period.

  5. A communications team is preparing messaging for a company IPO. An IPO is best described as:

    Answer: The first time a private company offers shares to the general public

    An initial public offering (IPO) is the process through which a private company raises capital by selling shares to the public for the first time.

  6. When evaluating two investment options with identical expected returns, a rational investor should prefer the one with:

    Answer: Lower standard deviation

    All else equal, investors prefer lower risk (standard deviation) for the same return — this is the principle of mean-variance optimization.

  7. A company issues a press release announcing a stock split. Which statement accurately describes the financial impact of a 2-for-1 stock split?

    Answer: Each share's price halves while the number of shares doubles, leaving market cap unchanged

    In a 2-for-1 stock split, shareholders receive two shares for every one held, the price per share is halved, and total market capitalization remains unchanged.