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  • Exam Name: Certified Treasury Professional
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CTP Practice Exam Questions with Answers Certified Treasury Professional Certification

Question # 6

A North American service company has autonomous offices in different geographic regions each handling their own sales and accounts receivables deposits to local banks which primarily consist of checks. By implementing a lockbox collection system, what objective in its collection policy would it have met?

A.

Payment float

B.

Cost efficiency

C.

Segregation of duties

D.

Customer satisfaction

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Question # 7

From a consumer's perspective, all of the following are true of both debit cards and credit cards EXCEPT:

A.

transactions are posted to bank accounts as withdrawals.

B.

transactions may require authorization from the card issuer.

C.

transactions can be conducted at automated teller machines.

D.

merchants receive availability within three business days.

Full Access
Question # 8

An assistant treasurer discovers that the CFO has been allowing other executives to exercise stock options during blackout periods. What will prevent the assistant treasurer from losing his/her job if he/she reports this discovery?

A.

Investor Relations Policy

B.

Code of ethics

C.

Sarbanes-Oxley Act

D.

Whistle-blower law

Full Access
Question # 9

Which of the following would be expected to happen on the ex-dividend date?

A.

The stock is sold with the dividend attached.

B.

The stock price drops.

C.

The stock’s volume increases.

D.

The stock’s dividend is paid.

Full Access
Question # 10

During the 1970s, many companies instituted dividend reinvestment plans (DRIPS). There are many benefits of this plan. What is the one negative aspect?

A.

Reduces the expense of shareholder relations

B.

Leads to an increase in the number of small shareholders

C.

Does not allow automatic reinvestment of dividends

D.

Leads to a reduction in the number of small shareholders

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Question # 11

An analyst at XYZ United is in charge of setting up the bank accounts. Fraud is a major concern due to the analyst’s past experience with previous employers. The analyst has estimated that the company will earn 3.7% on surplus cash. Surplus cash must be invested in short-term investment grade investments. The company’s closest competitor earned 4.1% for its surplus cash in its latest fiscal year. What bank service should the analyst use to maximize the company's surplus cash?

A.

Payable Through Draft

B.

Reverse Positive Pay

C.

Zero Balance Account

D.

Controlled Disbursement

Full Access
Question # 12

A U.S. financial institution expects to grow at an exponential rate to become one of the largest companies in the country. It wants to hire the best talent in the industry and is willing to pay excessive compensation. In order to achieve the high growth, it is planning on charging hidden fees on mortgages, credit cards etc. Further, it wants to engage in risky practices pertaining to over-the-counter derivatives, asset-backed securities and hedge funds. The financial institution has hired an outside law firm to determine if it is feasible to escape unwanted regulation and oversight from various government entities. Which of the following regulations prohibits the financial institution from engaging in the described practices?

A.

Gramm-Leach-Bliley Act

B.

The Dodd-Frank Act

C.

Sarbanes-Oxley Act

D.

USA Patriot Act

Full Access
Question # 13

Which of the following business practices does NOT comply with the Uniform Commercial Code?

A.

A company reconciles its bank statements within 30 days of receipt.

B.

A company receives a check marked "paid in full" and disputes it 120 days later.

C.

A bank exercises ordinary care when it examines signatures on checks received.

D.

A bank elects to return stale-dated items.

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Question # 14

This question is based on the following data describing a company's actual deposits.

CTP question answer

If a five-day moving average is used, what was the deposit forecast for day six?

A.

$75

B.

$85

C.

$90

D.

$110

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Question # 15

The year-end income statement and balance sheet accounts for a company as of December 31, Year 1 are shown in the Exhibit.

If no changes occurred in the current asset and current liability account balances from the beginning of the period, except for cash, what was the net cash flow from operations for Year 1?

A.

$350,000

B.

$365,000

C.

$390,000

D.

$400,000

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Question # 16

XYZ Company is a net borrower. Its cost of funds is 5.0%, its earnings credit rate is 3.0%, and the reserve requirement is 10%. Average service fees are $50,000 per month. Its average ledger balance is $2,000,000, and its average collected balance is $1,000,000. What are the collected balances required to pay for services during a 30-day month?

A.

$12,166,667

B.

$13,518,519

C.

$20,277,778

D.

$22,530,864

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Question # 17

Which method of financing would a company use to establish a wholly owned subsidiary to perform credit operations and obtain accounts receivable financing for the sale of products?

A.

Third party financing

B.

Captive finance company

C.

Factoring department

D.

Securitization

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Question # 18

An accounts receivable manager has been asked to accelerate cash into her company by offering trade discount terms to its customers. Her company's cost of capital is 11%. If she offers terms of 2/10, net 30 on a $50,000 invoice, what is the present value to the company if the customer accepts the discount and pays early?

A.

$48,852

B.

$48,366

C.

$48,121

D.

$47,996

Full Access
Question # 19

A company’s overall cost of capital depends on the:

A.

mix of long term debt and equity, and the cost of each.

B.

weighted average cost of interest expense and dividends.

C.

cost associated with debt and expected dividend returns.

D.

WACC of the industry of which the company is part.

Full Access
Question # 20

Which of the following capital budgeting methods ignores the time value of money?

A.

Payback period

B.

Profitability Index

C.

Net Present Value

D.

Internal Rate of Return

Full Access
Question # 21

Which of the following is a component of a company’s operating budget?

A.

Shareholders equity

B.

Accounts receivable

C.

Long-term debt

D.

Capital investments

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Question # 22

A manufacturing company's long-term capital structure is 30% debt and 70% equity, its cost of equity is 10%, its average cost of debt is 8%, and the marginal tax rate is 34%. If the company has invested total capital of $567,865 in its production unit and the unit's operating profit is $79,856, what is the economic value added (EVA) of the unit?

A.

($674.35)

B.

$3,982.14

C.

$5,412.56

D.

$6,571.78

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Question # 23

An investor is interested in acquiring ownership in a firm while ensuring predictable timing and amount of cash flow. Which instrument should the investor choose?

A.

Bonds

B.

Commercial paper

C.

Common stock

D.

Preferred stock

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Question # 24

ABC Company offers a discount of 2/10, net 30 to its customers. ABC factored its accounts receivables with an outside vendor, under a “with recourse” arrangement. What impact might this have on the company?

A.

Increase days sales outstanding.

B.

Improve cash conversion cycle.

C.

Reduce bad debt expense.

D.

More customers may take the discount.

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Question # 25

When a buyer receives goods, but payment is not due to the supplier until some later date, this is defined as:

A.

factoring.

B.

bank credit.

C.

trade credit.

D.

intercompany loan.

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Question # 26

ASC Topic 815 (FAS 133) is applicable when accounting for which of the following?

A.

Gain on an equity investment

B.

Purchase of a bond investment

C.

Market value of collateral

D.

Purchase of a forward

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Question # 27

XYZ Corporation’s current ledger balance of the controlled disbursement account is $1,286,500. Based on the information in the table,

CTP question answer

what will the corporation's available balance be at the end of today?

A.

$(251,527)

B.

$126,744

C.

$434,706

D.

$1,748,473

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Question # 28

Which of the following would be MOST suitable for a risk-averse electronics manufacturer that uses copper in many of its components?

A.

A put option on copper futures

B.

A short position in copper futures

C.

A floor option on copper futures

D.

A costless collar using options on copper futures

Full Access
Question # 29

A company plans to issue additional equity within the next 12 months but needs to issue debt at a low interest rate now. Which of the following instruments would BEST meet this objective?

A.

Convertible bonds

B.

Private placement issue

C.

Preferred stock

D.

Subordinated debentures

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Question # 30

Which of the following is an example of a typical passive investment strategy?

A.

Riding the yield curve

B.

Using a dividend capture program

C.

Investing in overnight repos

D.

Executing a securities swap

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Question # 31

Company A has operated a Pension Plan since 1985. Despite a recent surge in asset values, the plan remains significantly underfunded. With the passage of the Pension Protection Act of 2006, Company A will be need to:

A.

increase long-term investments.

B.

liquidate long-term investments.

C.

pay higher PBGC premiums.

D.

take no action.

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Question # 32

A treasurer is evaluating a project that will cost $1,000 but will return cash flows of $225, $225, $300, $750, and $750 in years 1 through 5, respectively. The company’s interest rate on its debt is 10% and its marginal cost of capital is 15%. What is the Net Present Value (NPV) of this project?

A.

$364.74

B.

$459.48

C.

$593.84

D.

$643.47

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Question # 33

Controlled disbursement notification times can be improved by which of the following?

A.

Increasing the use of multiple transit routing numbers

B.

Implementing a 2 P.M. presentment

C.

Implementing a high dollar group sort program

D.

Using Payor bank services

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Question # 34

A company has a high value for its current ratio. What does this suggest in terms of liquidity and risk?

A.

Weak liquidity position and relatively high risk

B.

Strong liquidity position and relatively low risk

C.

Weak liquidity position and relatively low risk

D.

Strong liquidity position and relatively high risk

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Question # 35

The Treasurer of PJB Company is in charge of implementing new treasury management software. Without issuing any RFPs, the Treasurer hires a consulting company to install the software and program it to suit the company’s needs. The Treasurer is responsible for approving the consultant’s invoices for payment. Through conversation, the CFO discovered that the Treasurer’s relative is one of the partners at the consulting company. The Treasurer was immediately terminated. What did the Treasurer MOST LIKELY violate?

A.

The corporate code of conduct

B.

Sarbanes-Oxley controls

C.

The Uniform Commercial Code

D.

Treasury operations procedures

Full Access
Question # 36

XYZ Holdco has multiple credit facilities with a bank under a borrowing agreement that includes certain covenants. A fire has destroyed the manufacturing plant owned by ABC, one of the XYZ subsidiaries that is part of the credit facilities. All loans, including the ABC loan, are up to date and being repaid as required. However, after the fire, the bank notified XYZ that it was in default. Which one of the following covenants is MOST LIKELY a term of the borrowing agreement?

A.

Technical default

B.

Cross-default provisions

C.

Material adverse change

D.

Total liabilities to assets ratio default

Full Access
Question # 37

For a defined benefit plan,

A.

plan assets equal plan liabilities.

B.

plan assets can be less than plan liabilities.

C.

plan assets are greater than plan equity.

D.

plan assets always equal plan equity.

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Question # 38

The Treasury Manager is forecasting sales based on historical data. It was observed that sales decreased sharply in December last year, normally a high sales volume period. Further investigation indicated that a severe winter storm was experienced across the Southeastern United States. How should this event be classified in the forecast when considering the sales trends?

A.

Random movement

B.

Stationary series

C.

Cyclical pattern

D.

Seasonal pattern

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Question # 39

A small import/export company, XYZ Company, has recently set up an account with a German firm. The contract between the companies states that XYZ is to be paid as soon as all documents are in order showing that the transaction terms have been met. Which of the following forms of payment drafts would be MOST appropriate for XYZ?

A.

Payable through

B.

Sight

C.

Time

D.

Preauthorized

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Question # 40

A company has multiple wholly-owned subsidiaries that issue their own checks which are signed by head office staff. The company decides to move to electronic payments using their bank’s internet-based payment systems to reduce costs. Payments are now initiated by the subsidiaries. What element of the payment policy should be considered if the company still wants to maintain head office control over payments?

A.

Risk mitigation

B.

Objectives and scope

C.

Roles and responsibilities

D.

Performance measurement and reporting

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Question # 41

Which of the following is subject to translation exposure?

A.

A German company with a subsidiary in Spain

B.

A Spanish company with revenues in euros

C.

A Japanese subsidiary in the United States with U.S. dollar liabilities

D.

A U.K. company that exports goods to the United States

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Question # 42

Company XYZ offers a retirement plan wherein the value of the plan’s assets and liabilities is measured separately. The plan’s funding and valuation can have a significant impact on the financial condition of the company. Company ABC offers a retirement plan wherein the amount owed to the participants at retirement is based solely on the account balance at the time of withdrawal with participants often bearing the responsibility for managing the investments in their account. Which of the following BEST describes the above two retirement plans and which act governs them?

A.

403(b) and defined contribution plan; ERISA

B.

Defined benefit plan and defined contribution plan; ERISA

C.

Qualified and non-qualified plan; Pension Protection Act

D.

Defined benefit plan and defined contribution plan; Pension Protection Act

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Question # 43

Which two of the following are necessary to calculate average collected balances?

I. Deposit float

II. Reserve requirements

III. Ledger balance

IV. Earnings credit rate

A.

I and II

B.

I and III

C.

II and IV

D.

III and IV

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Question # 44

The PRIMARY objective of a corporation is to:

A.

maximize value to shareholders.

B.

maximize cash inflows.

C.

minimize the cost of capital.

D.

maintain adequate liquidity.

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Question # 45

The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted?

A.

Regulatory

B.

Transaction

C.

Opportunistic

D.

Precautionary

Full Access
Question # 46

A company's investment guidelines typically restrict all of the following EXCEPT:

A.

maturities of instruments that may be purchased.

B.

proportion of the portfolio invested in specific types of instruments.

C.

purchase of unrated securities.

D.

issuance of commercial paper.

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Question # 47

XYZ Corporation uses ABC Bank for their lending and treasury management. In addition, the bank serves as bond trustee for XYZ Corp. If XYZ Corp. becomes distressed, this relationship could create a conflict of interest for the financial institution. What barrier prevents a financial institution from sharing confidential information between divisions?

A.

Chinese wall

B.

Counterparty risk

C.

Non-disclosure agreement

D.

Sarbanes-Oxley controls

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Question # 48

What is the MOST appropriate rate used as the discount rate in calculating NPV?

A.

Marginal cost of capital

B.

IRR

C.

Cost of debt

D.

Internal transfer rate

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Question # 49

The Treasurer for XYZ Manufacturing, Inc. recently exchanged a portion of its euro holdings into U.S. dollars to purchase gas futures contracts. This was done in anticipation of an assumed rise in gas prices due to the continued weakening of the U.S. dollar. Which of the following types of risk is being mitigated?

A.

Sovereign

B.

Operational

C.

Commodity price

D.

Foreign exchange

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Question # 50

PFA Corporation has used regression analysis based on historical data to determine the estimated portion of dollars of checks issued that will clear on any given business day.

CTP question answer

If PFA issued $150,000 in checks and $7,500 worth of checks cleared on day 5, what value of checks will be estimated to clear on day 4?

A.

$7,500

B.

$15,000

C.

$22,500

D.

$30,000

Full Access
Question # 51

XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments. What type of bond should XYZ Company issue?

A.

Zero-coupon bond

B.

Municipal bond

C.

Tender option bond

D.

High-yield bond

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Question # 52

A U.S. corporation has annual revenues of $500 million and a corporate tax rate of 15%. It has subsidiaries in Country A and Country B. Subsidiary A has annual revenues of $50 million. Subsidiary B has annual revenues of $20 million. The parent company has asked the Subsidiary A to transfer the equivalent of $10 million to Subsidiary B. There is a 5% withholding tax in Country A and a 3% withholding tax in Country B. How much withholding tax will the company owe as a result of this transaction?

A.

$200,000

B.

$300,000

C.

$500,000

D.

$800,000

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Question # 53

ABL Corporation is currently receiving a return of 10% on its investments. The bank is offering them an ECR of 15%. In order to get more value for their money ABL Corp. has decided to take advantage of the higher ECR and use funds from its Money Market Accounts to cover bank service charges.

CTP question answer

If ABL already has an average ledger balance of $750,000, how much more do they need to deposit on their account to cover all $10,000 of monthly service charges?

A.

$136,111.11

B.

$736,111.11

C.

$811,111.11

D.

$886,111.11

Full Access
Question # 54

XYZ Company is a U.S. based company that has just issued some euro-denominated bonds in London. The bonds have a duration of 10 years at a rate of 3.5% with a par value of EUR 50 million. An FX swap contract was created on the date of the issuance in EUR/USD, with a spot rate of 1.2908 and a forward rate of 1.1102. This bond is subject to what type of risk?

A.

Interest rate

B.

Currency

C.

Floating rate

D.

Duration

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Question # 55

At the end of the year, ABC Company’s actual revenue is $85,000,000 versus budget revenue of $90,000,000. Actual operating expenses are $20,000,000 versus budget operating expenses of $22,000,000. Budget variance analysis would indicate a(n):

A.

favorable revenue variance and an unfavorable operating expenses variance.

B.

favorable revenue variance and a favorable operating expenses variance.

C.

unfavorable revenue variance and a favorable operating expenses variance.

D.

unfavorable revenue variance and an unfavorable operating expenses variance.

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Question # 56

Senior management at ABC Company plans to make a large capital expenditure to bolster its infrastructure exactly one year from now. Their primary concern is to preserve the current capital position until the expected cash outlay. The majority of the cash at ABC Company is held in treasury notes, but management would like to also invest some of the money into corporate bonds and money market funds. Which investment objective BEST suits the needs of ABC Company?

A.

Exposure Horizon

B.

Diversification

C.

Liquidity

D.

Safety

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Question # 57

To arrive at the closing cash position, a cash manager must add the expected settlements in the collection and concentration accounts and deduct the projected disbursement totals from the:

A.

opening available balance.

B.

closing ledger balance.

C.

opening ledger balance.

D.

closing investment account balance.

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Question # 58

Which of the following is NOT a key area to consider when establishing treasury policies?

A.

Equity method investments accounting

B.

Medium-term financing

C.

Management reporting

D.

Foreign currency management

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Question # 59

Treasury policies and procedures should outline roles and responsibilities for which of the following activities?

A.

Monitoring compliance with trade payment terms

B.

Initiating and approving internal and external transfers

C.

Establishing and communicating a company’s credit policies

D.

Determining how much earnings are to be paid out in dividends

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Question # 60

A multinational corporation with many FSPs requires a TMS that can display extensive and complex information in an effective manner. The corporation will be looking for a TMS with what functionality?

A.

Bank administration

B.

Dashboards

C.

Data integration

D.

Modularity

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Question # 61

Which of the following is one of the PRIMARY considerations when establishing treasury policies and procedures?

A.

Compliance

B.

Personnel management

C.

Consequential damages

D.

Cost avoidance

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Question # 62

A U.S. company has a secured committed line of credit of $5.5 million and has an available balance of $4 million. The company successfully transmitted a $5.5 million wire transfer instruction out to the bank via SWIFT. The bank contacted the company and informed it that the wire transfer would not be processed. What is the MOST LIKELY reason the bank gave the company?

A.

Wires exceeding $5 million cannot be transmitted using SWIFT.

B.

The bank imposed a guidance line of credit on the account.

C.

The company exceeded its compensating balance requirement.

D.

The bank refused funding on the company’s discretionary line of credit.

Full Access
Question # 63

Which of the following is an intangible asset?

A.

Prepaid supplies expense

B.

Patent on manufacturing equipment

C.

Paid-in-capital

D.

Cash value of life insurance

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Question # 64

Company A purchases materials on cash-before-delivery terms, while Company B uses paid-on-production terms. Both companies are diligent with the protection of assets, but Company B has concerns with respect to transfer of title of the materials. Company B is MOST LIKELY what type of business?

A.

Manufacturer

B.

Retailer

C.

Supplier

D.

Wholesaler

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Question # 65

Kahuna Boards Co. has just experienced a very profitable year and wants to share the success with its shareholders. In order to pay dividends, a sequence of events must occur. Which of the following chronological sequence of events is correct?

1. Stock is sold without the upcoming dividend attached.

2. Dividend is paid.

3. Board of directors announces the dividend.

4. Holders of record are specified.

A.

3, 4, 1, 2

B.

3, 4, 2, 1

C.

4, 3, 2, 1

D.

4, 3, 1, 2

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Question # 66

A Euro denominated payment can be settled through all of the following EXCEPT:

A.

TARGET (Trans-European Automated Real-Time Gross Settlement Express Transfer System).

B.

EBA (Euro Bankers Association).

C.

ACSS (Automated Clearing Settlement System).

D.

Correspondent Banking.

Full Access
Question # 67

Because of the growing demand in China for oil, a transportation company decides to assume a long position on oil in hopes of generating short-term investment income. Which of the following describes the firm’s strategy?

A.

Speculation

B.

Arbitrage

C.

Hedging

D.

Risk management

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Question # 68

A financially sound company sends wires to investors in the morning but does not receive replacement funds until the afternoon. Which facility will the company MOST LIKELY arrange with its bank to facilitate the company’s wire payment activities on any given day?

A.

A ledger overdraft

B.

A daylight overdraft

C.

A standby letter of credit

D.

A short-term line of credit

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Question # 69

The Public Company Accounting Oversight Board (PCAOB):

A.

establishes standards for state and local governments.

B.

sets and publishes International Financial Reporting Standards.

C.

sets guidelines used by auditors when performing audits of private companies.

D.

oversees the auditors of public companies and protects investors’ interests.

Full Access
Question # 70

Contingency plans often focus on the business supply chain, ensuring that customer service is maintained. The financial supply chain, which is equally critical to the plan, should address:

A.

supplier linkages.

B.

purchasing systems.

C.

working capital management.

D.

production resources.

Full Access
Question # 71

Which scenario provides the BEST example of an agency problem?

A.

A CFO hires an independent auditor to review the company’s balance sheet.

B.

A Treasurer accepts a free round of golf from a banker.

C.

An account manager approves a risky loan in order to meet a salary incentive.

D.

A CEO is close friends with a competitor’s CEO.

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Question # 72

A multidivisional domestic company with centralized treasury decision-making can potentially utilize intra-company lending to:

A.

reduce the overall liquidity of the company.

B.

establish individual subsidiary borrowing facilities.

C.

source debt in different currencies.

D.

lower the overall cost of short term funds.

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Question # 73

A manufacturing company has no liquidity and needs to purchase additional inventory in 60 days. Which of the following would have helped the company plan for this situation?

A.

A capital budget

B.

A short term forecast

C.

A medium term forecast

D.

A long term forecast

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Question # 74

Which of the following is an opportunity cost of maintaining excess liquidity?

A.

Loss of time in securing credit

B.

Increase in interest earnings

C.

Decreased commitment fees

D.

Interest paid on outstanding debt

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Question # 75

Improvements to the cash flow timeline from a selling company’s perspective would include:

A.

decreasing disbursement float.

B.

decreasing collection float.

C.

increasing mail float.

D.

increasing invoice float.

Full Access
Question # 76

Which two of the following are methods for concentrating weekend deposits in a field deposit system?

1. Using a wire transfer for the funds on Monday

2. Anticipating deposits and initiating an ACH on Friday

3. Initiating an ACH cash concentration transaction on Thursday

4. Using a multibank lockbox network

A.

1 and 2

B.

1 and 3

C.

2 and 3

D.

2 and 4

Full Access
Question # 77

If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?

A.

The currency is at a discount to par.

B.

The currency is at a premium to par.

C.

There is an interest rate differential between the two countries equalizing the rates.

D.

The interest rate structure between the two countries is the same.

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Question # 78

A company purchased merchandise that cost C$155,000 from a Canadian supplier and then resold the merchandise for US$135,000. What rate of exchange must the company have obtained to realize a gross profit of US$44,000 on this transaction?

A.

0.3259 US$/C$

B.

1.1500 US$/C$

C.

0.5871 C$/US$

D.

1.7033 C$/US$

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Question # 79

Which of the following factors would the cash manager consider when deciding whether to make a payment via Fedwire or ACH?

1. Cost of the payment

2. Payment due date

3. Availability of customer's funds

4. Loss of float

A.

1

B.

1 and 2

C.

3 and 4

D.

2, 3, and 4

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Question # 80

Which of the following is considered an important factor when selecting a financial service provider?

A.

CAMELS score

B.

Expertise of bank personnel

C.

Country of origin

D.

Timely response to the RFP

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Question # 81

A lockbox provider offers which of the following advantages over a company processing center?

I. It increases the company's operational control.

II. It produces processing economies of scale.

III. It allows for external audit controls.

IV. It reduces collection float.

A.

I only

B.

II and III only

C.

I, II, and III only

D.

II, III, and IV only

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Question # 82

A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the average rate on local government bond investments is 2.5%. What would be the BEST method for the company to repatriate local profits?

A.

The company charges the subsidiary negotiated licensing fees on proprietary software.

B.

The subsidiary sets up a re-invoicing center in another, tax-friendly country to manage a transfer pricing program.

C.

The subsidiary lends funds to the parent. The loan is not repaid and the subsidiary writes it off.

D.

Set up an in-house bank program at the successful subsidiary to make use of the excess liquidity in-country.

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Question # 83

Which of the following would increase if the Fed were to announce a reduction in reserve requirements?

A.

Monthly service charges

B.

Monthly earnings credits

C.

Average collected balances

D.

Fed float

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Question # 84

The term "factoring" refers to a:

A.

mathematical formula used in calculating bond prices.

B.

short-term financing method.

C.

reduction of bank fees related to volume.

D.

Federal Reserve Open Market Committee activity.

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Question # 85

Which section of the statement of cash flows includes items that represent the cash inflows and outflows related to the daily functions of a company?

A.

Cash flow from financing activities

B.

Cash flow from investing activities

C.

Change in cash balance

D.

Cash flow from operating activities

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Question # 86

Companies in the U.S. with a nationwide over-the-counter/field bank collection and concentration system often deal with:

A.

few small financial institutions.

B.

one major banking institution with branch offices at all locations.

C.

many small financial institutions.

D.

one major bank with corresponding relationships.

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Question # 87

In which of the following instances does the clientele effect come into play?

A.

When a company announces its earnings forecast

B.

When a company submits its 10-Q to the SEC

C.

When a company declares a dividend

D.

When a company increases its sales

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Question # 88

Which of the following are important uses of variance analysis in comparing actual cash flows with projected cash flows?

I. Identifying unanticipated changes in inventory

II. Enhancing short-term investment income

III. Validating a capital budget

IV. Identifying delays in accounts receivable collections

A.

I and II only

B.

I and IV only

C.

II and IV only

D.

I, II, III, and IV

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Question # 89

The accounting requirement that a product’s selling costs be recorded in the same period as the product’s revenue is recorded, regardless of when the cash is paid, is an example of the:

A.

full disclosure principle.

B.

historical cost principle.

C.

matching principle.

D.

revenue recognition principle.

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Question # 90

Which one of the following ties a user’s private key to a user’s public key?

A.

A digital signature

B.

A digital certificate

C.

A digitized signature

D.

A digital token

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Question # 91

Regarding dividends, on which of the following dates would a company's current assets be reduced?

A.

Declaration date

B.

Ex-dividend date

C.

Payment date

D.

Record date

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Question # 92

A regional physicians’ group is looking for an alternative to liability insurance to help protect against potential future liability claims. Which method would BEST serve its need to protect against catastrophic losses?

A.

Casualty insurance

B.

A risk retention group

C.

Non-insurance

D.

Self-insurance

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Question # 93

Which of the following is true when a company purchases goods using trade credit from suppliers?

A.

The buyer incurs no added cost if it pays on time.

B.

The supplier will charge interest to the buyer.

C.

The buyer should record this as a long-term liability.

D.

The supplier places a lien on the goods sold until payment.

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Question # 94

A large U.S. company is planning to fund its Canadian subsidiary. Currently, the Canadian dollar is trading at CAD 1.25 per U.S. dollar, and the U.S. dollar is expected to depreciate in the near term. To manage this FX exposure, what technique should the company implement?

A.

Leading

B.

Re-invoicing

C.

Lagging

D.

Multicurrency accounts

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Question # 95

A multinational company (MNC) that operates a shared service center charges its foreign subsidiaries a management fee. This management fee may need to be:

A.

manipulated to locate profits in low-tax countries.

B.

paid through a third-party intermediary.

C.

negotiated with the host government.

D.

significantly taxed by the host government.

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Question # 96

A put option gives the holder the right to:

A.

buy the underlying stock at the strike price.

B.

sell the underlying stock at the strike price.

C.

sell short shares of the underlying stock at the strike price.

D.

buy long shares of the underlying stock at the strike price.

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Question # 97

An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as:

A.

an equity warrant

B.

a put option

C.

a zero coupon bond

D.

a subordinated debenture

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Question # 98

A deck furniture supply company maintains a large inventory during the summer sales season. One of the PRIMARY benefits of this approach is that the company avoids which of the following costs?

A.

Holding

B.

Opportunity

C.

Order

D.

Stock-out

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Question # 99

Company XYZ is not sure which direction interest rates are headed. Which of the following would be MOST suitable?

A.

An interest rate cap

B.

An interest rate floor

C.

An interest rate swap

D.

An interest rate collar

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Question # 100

The main objective of a company's international cash management function is to:

A.

reduce cross-border fund transfers.

B.

collect and disburse cash.

C.

optimize global cash resources.

D.

minimize foreign exchange risk.

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Question # 101

On a daily basis, the cash manager is responsible for all of the following EXCEPT:

A.

initiating funds transfers.

B.

determining the cash position.

C.

reviewing bank service fees.

D.

executing investment and/or borrowing decisions.

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Question # 102

Under an operating lease, possible benefits to the lessee include which of the following?

I. It requires no initial capital outlay.

II. It can be structured as an off-balance-sheet item.

III. It can offer tax advantages.

A.

I only

B.

I and II only

C.

II and III only

D.

I, II, and III

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Question # 103

A distribution business has used several bank loans to finance its expansion plans. After a fire destroyed the company’s facility and inventory, it went out of business due to the loss of revenue during the month it was closed. What type of insurance coverage should the company have had to prevent its demise?

A.

Cost reimbursement

B.

Property

C.

General liability

D.

Business interruption

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Question # 104

All of the following are reasons to use a confirmed irrevocable letter of credit EXCEPT concern about:

A.

the buyer's ability to pay.

B.

the ability to receive cross-border payments.

C.

foreign currency exposure.

D.

the stability of the buyer's bank.

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Question # 105

A diversified industrial company operates multiple remote manufacturing facilities that manage local supplier relationships. The company draws on a single line of credit for all of its working capital needs. Which of the following types of disbursement systems would BEST meet this company's needs?

A.

Centralized check issuance drawn on a central disbursement bank

B.

Decentralized check issuance drawn on a local disbursement bank

C.

Decentralized check issuance drawn on a central disbursement bank

D.

Centralized check issuance drawn on a local disbursement bank

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Question # 106

An option can be exercised in the market at its:

A.

premium.

B.

put price.

C.

call price.

D.

strike price.

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Question # 107

Which of the following is a typical overnight use of excess cash?

A.

Entering into a repurchase agreement

B.

Investing in Dutch auction preferred stock

C.

Purchasing a Treasury bill

D.

Purchasing a certificate of deposit

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Question # 108

If a bank has a 10% reserve requirement, a 31-day month, and an earnings credit rate of 6.5%, which of the following is the approximate level of collected balances required to support $1.00 worth of bank service charges?

A.

$181

B.

$199

C.

$201

D.

$206

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Question # 109

Merchant XYZ has total credit card sales of $20,000 for one day with an average ticket of $200. The merchant’s interchange reimbursement fees are 2% and transactions fees are $0.05. This merchant receives net settlement. Which of the following is the value of the deposit for that day?

A.

$19,595

B.

$19,600

C.

$19,995

D.

$20,000

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Question # 110

A company has a $300,000 credit line of which $200,000 was the average amount outstanding for the year. The terms of the loan include a 1/2 of 1% commitment fee on the unused portion, an interest rate of 10%, and a compensating balance requirement of 2% of the total credit line. The company's compensating balances are funded from credit-line borrowings.

If the company negotiates to eliminate the compensating balance requirement and the average borrowings remain at $200,000, the annual interest rate would be:

A.

10.00%.

B.

10.25%.

C.

10.31%.

D.

10.57%.

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Question # 111

A company agrees to pay ¥10,000,000 for a shipment from Japan. At the time the purchase order is placed the exchange rate is ¥168/US$. At the time of payment the exchange rate is ¥163/US$. What is the net effect on the dollar cost of the shipment if the transaction has NOT been hedged?

A.

An increase of $5,000

B.

An increase of $1,825

C.

A decrease of $5,000

D.

A decrease of $1,825

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Question # 112

Examples of fixed assets include which of the following?

I. Inventory

II. Treasury bills

III. Forklift

IV. Goodwill

A.

III only

B.

I and III only

C.

I, II, and IV only

D.

I, III, and IV only

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Question # 113

A large multinational company recently implemented new processes to automate its treasury operations. If these changes were the direct result of comparing the company's practices with those of other companies, the activities could be considered an example of which of the following?

I. Liquidating

II. Re-engineering

III. Benchmarking

IV. Forecasting

A.

I and III only

B.

II and III only

C.

I, II, and III only

D.

I, II, and IV only

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Question # 114

XYZ Corporation is presently a short-term borrower and uses a revolving line of credit with an interest rate of 7%. The Treasurer would like to reduce interest expense and increase liquidity without renegotiating the line of credit. Which of the following projects should the Treasurer support in order to achieve this objective as quickly as possible?

A.

Store operations believes that an increase in inventory levels will raise sales as the corporation eventually becomes known for its wide selection.

B.

Purchasing is trying to extend terms from net 30 to net 60 with one of their primary vendors. The vendor will agree if XYZ concentrates purchases with them.

C.

Accounts receivable is spending capital to improve its collection system. With the faster collections that will result, it anticipates recovering the outflows over a two-year period.

D.

One large store is being remodeled. When complete, it should generate sufficient additional sales within one year to cover the capital expenditure and produce a positive return on investment.

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Question # 115

An international company would establish a re-invoicing center for which of the following reasons?

A.

To reduce its international balance reporting charges

B.

To manage the foreign exchange exposure of its foreign subsidiaries

C.

To take advantage of interest-bearing demand deposits

D.

To bring transaction exposures more closely in line with economic exposures

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Question # 116

Optimal dividend policy is one that does all of the following EXCEPT:

A.

maintain adequate retained earnings for future growth.

B.

maximize shareholder value.

C.

distribute corporate income to investors.

D.

balance tax shield benefits against agency costs.

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Question # 117

When using the Internet to access auction markets, companies may use certificate authorities to reduce their exposure to which of the following types of risk?

A.

Credit

B.

Valuation

C.

Counterparty

D.

Foreign exchange

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Question # 118

The measurement of the significance of any loss exposure depends on:

A.

loss type and loss prevention.

B.

loss response and loss control.

C.

loss probability and loss history.

D.

loss frequency and loss type.

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Question # 119

A U.S. based multinational company is filing its U.S. tax return and notes that its U.K. subsidiary had pre-tax income equal to $1 million. The U.K. subsidiary paid an effective tax rate on this income of 40%. If the U.S. tax rate is 34%, what will be the amount of the foreign tax credit on the U.S. tax return related to the U.K. income?

A.

$60,000

B.

$280,000

C.

$340,000

D.

$400,000

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Question # 120

Disbursement float includes which of the following three float time intervals?

A.

Mail, processing, and availability float

B.

Mail, invoicing, and availability float

C.

Mail, processing, and clearing float

D.

Mail, invoicing, and clearing float

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Question # 121

Consolidation and specialization in the financial services industry have made financial institution and financial service provider selection a(n):

A.

more important decision process for a treasurer.

B.

less critical decision process for a treasurer.

C.

easier decision process for a treasurer.

D.

unimportant decision process for a treasurer.

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Question # 122

Establishing the authority to open bank accounts is the responsibility of:

A.

the board of directors.

B.

the CFO.

C.

the treasurer.

D.

the board of governors.

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Question # 123

Which of the following is a source of short-term financing?

A.

Bond issuance

B.

Factoring of accounts receivable

C.

Issuance of common stock

D.

Retaining profits

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Question # 124

The key parties involved in a disaster recovery plan are generally classified as internal resources or external counterparties. When evaluating the risks of both parties, which of the following can be assumed?

A.

The review of internal resources takes greater importance.

B.

The infrastructure linking the parties’ systems must be considered.

C.

The disaster recovery sites of both parties must be in the same location.

D.

The systems used by both parties must be compatible.

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Question # 125

Treasury policies and procedures should include responsibilities for:

A.

determining when dividends should be paid.

B.

evaluating alternative capital projects.

C.

approving department salary increases.

D.

key personnel in the treasury organization.

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Question # 126

If a company has $126 million in debt at an average cost of 7% and $234 million in equity at a cost of 11%, what is its weighted average cost of capital, assuming a marginal tax rate of 35% and a risk-adjusted rate of 13%?

A.

8.7%

B.

9.6%

C.

10.0%

D.

10.9%

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Question # 127

The risk of one bank failing and endangering the liquidity of other banks is called:

A.

sender risk.

B.

receiver risk.

C.

daylight overdraft risk.

D.

systemic risk.

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Question # 128

Which of the following prohibits price discrimination among customers where cost differences do NOT exist?

A.

Robinson Patman Act

B.

Truth in Lending Act

C.

Fair Credit Billing Act

D.

Equal Credit Opportunity Act

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Question # 129

Which of the following can be related to a company’s stock price?

A.

Economic Value Added

B.

Residual Income

C.

Return on Investment

D.

Operating Profit

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Question # 130

The telecommunications network used to transmit international payment instructions is called:

A.

the giro system.

B.

SWIFT.

C.

CHIPS.

D.

CHAPS.

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Question # 131

"Fees" in Country Y, which would be considered bribes in the United States, are ingrained in the commercial culture. A U.S. company doing business in Country Y:

A.

may have moral but not legal issues with paying "fees" in Country Y.

B.

is prohibited by U.S. law from paying "fees" in Country Y.

C.

may receive an IRS tax credit for "fees" paid in Country Y.

D.

may pay the "fee" in Country Y but cannot take an IRS tax deduction.

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Question # 132

Which of the following MOST often contributes to the misinterpretation of DSO?

A.

Varying fiscal year-ends

B.

Sales patterns

C.

Size of the payment discount

D.

Weekends and holidays

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Question # 133

Which of the following correctly describes pooling as practiced in the European cash management environment?

A.

It can be facilitated between banks.

B.

The accounts of a parent company and its subsidiaries may be aggregated.

C.

It is accomplished through multicurrency accounts in one country.

D.

A company need not arrange credit facilities for negative balances.

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Question # 134

All of the following are common consumer-to-corporate international payment mechanisms EXCEPT:

A.

giros.

B.

debit cards.

C.

CHIPS.

D.

smart cards.

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Question # 135

Trade terms are renegotiated under e-commerce in order to:

A.

balance the payment.

B.

neutralize the float.

C.

quantify the savings.

D.

improve the seller's availability.

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Question # 136

The CFO asks the Treasurer to create a new collections and concentration policy for their company. Following implementation of the policy, the company finds that reporting of receivables values is taking 10% longer, with no improvement in the company’s cash flow or liquidity. What step in developing the policy could have been executed better?

A.

Drafting the policy

B.

Approval of the policy

C.

Procedure implementation

D.

Identify issues and conduct analysis

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Question # 137

Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company?

A.

Low contribution margin

B.

High financial leverage

C.

Low variable costs

D.

High operating leverage

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Question # 138

Which of the following is an example of a Eurobond?

A.

A bond that is denominated in euros, issued in France by a French company.

B.

A bond that is denominated in euros, issued in the U.S. by a German company.

C.

A bond that is denominated in Japanese Yen, issued in the U.K. by a U.S. company.

D.

A bond that is denominated in U.S. dollars, issued in a European market by a U.S. company.

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Question # 139

MCA, Inc. upgraded the Treasury workstation that had been in place for two years and used data from that 24-month period to develop a new short-term forecast. A trend factor was applied to controlled disbursements of 97% on a month-by-month basis and the variance to actual disbursements is less than 1%. Which of the following model validation techniques was utilized?

A.

In-sample validation

B.

Documentation validation

C.

Ongoing validation

D.

Comparison validation

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Question # 140

Based on the following information, what is the required collected balance to cover all monthly service charges?

Deposit Float$10,000

Reserve Requirement5%

Earnings Credit Rate15%

Monthly Service Charges$6,000

Days in month30

A.

$308,222

B.

$456,000

C.

$486,667

D.

$512,281

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Question # 141

During a company’s cash flow analysis review it discovers that for every 10 new customers it gains, there is an increase of 2% in its float costs associated with the payment methods it offers. If the company pursues faster collection methods for payments, resulting in greater availability of surplus cash with a correlating decrease in the need to issue commercial paper, what risk will the company mitigate?

A.

Settlement

B.

Disbursement

C.

Liquidity

D.

Float

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Question # 142

ABC Company, a publicly held U.S. multinational, owns several manufacturing plants in Latin America as well as several ships to transport its products globally. 60% of its sales are from its euro-based subsidiaries. The company uses various derivative instruments to mitigate exposure to fluctuations in fuel prices and FX rates. The hedging deals are long-term and placed with many counterparties. ABC Company is also a net borrower and has a syndicated credit facility in place. Which of the following actions to mitigate counterparty risk would MOST benefit the company?

A.

Eliminate specific AAA rated counterparties.

B.

Adopt a third-party custodian for investments.

C.

Implement or adjust single counterparty balance limits.

D.

Add to the number of counterparties to increase diversification.

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Question # 143

In developing an operating budget, the first and MOST critical step is?

A.

Get management approval.

B.

Generate a sales budget.

C.

Establish cost allocations.

D.

Determine capital structure.

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Question # 144

An investor concerned about taxes on dividend distributions will MOST LIKELY purchase stock on which of the following dates?

A.

Ex-dividend date

B.

Record date

C.

Declaration date

D.

Payment date

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Question # 145

A pizza restaurant chain maintains separate accounts at bank branches near each of their 1,067 restaurants to handle the deposit of cash received. Early each morning, the company’s point-of-sale system electronically transmits collection totals from the previous day to its main computer. ACH debits are then initiated to concentrate the funds from the local accounts to the concentration account the following day. Recently, several of the ACH debits have been returned for insufficient funds because deposits weren’t being taken to the bank on a timely basis by the local employees. Without increasing staff at the restaurants, what could Treasury do to prevent this from happening and avoid overdrafts at the local banks?

A.

Negotiate better float schedules at its local banks.

B.

Install smart safes at each restaurant location.

C.

Use a courier to deposit to each bank 3 times per week.

D.

Use wire transfers to concentrate the cash instead of ACH.

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Question # 146

A company has made an investment of $30,000, which matures in 180 days and pays $800 in interest. Which of the following is the effective annual yield?

A.

1.31%

B.

1.33%

C.

5.33%

D.

5.40%

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Question # 147

The earnings allowance rate applied to collected balances is usually determined by which of the following rates?

A.

90-day T-bill

B.

LIBOR

C.

Prime

D.

Fed Funds

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Question # 148

A merchant closes its day with a total of 100 credit card transactions of an average ticket value of $100. The interchange reimbursement fees are 2% and transaction fees are $0.05. If this merchant receives gross settlement, what would be the value of deposit to the account for that day?

A.

$9,795

B.

$9,800

C.

$9,995

D.

$10,000

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Question # 149

Company ABC decides to outsource certain activities to an unrelated company and have that company assume the associated loss exposures. What loss control technique is Company ABC using?

A.

Control of isolated losses

B.

Risk retention group

C.

Separation of exposures

D.

Contractual transfer

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Question # 150

Which of the following institutions would be regulated by the Office of the Comptroller of the Currency (OCC)?

A.

Regency Bank Holding Company

B.

Regency Federal Credit Union

C.

Regency National Bank

D.

Regency Savings and Loan

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Question # 151

Owners of a privately-held company have decided to sell the business, but are receiving offers dramatically lower than what the firm is worth (as estimated by the owners). Which of the following options is the BEST way for management to establish the true value of their company?

A.

Issue stock to the public through an IPO.

B.

Increase the dividend payout ratio.

C.

Repurchase shares to elevate stock price.

D.

Alter the capital structure by issuing more debt.

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Question # 152

A small group of investors is purchasing a company using a large amount of debt. This group is intending to sell off pieces of the acquired company to other firms that it believes can take advantage of potential synergies. What is this type of a transaction more specifically known as?

A.

A merger

B.

An acquisition

C.

A leveraged buyout

D.

An asset purchase

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Question # 153

Which of the following is LEAST important when a cash manager determines a company's short-term cash position?

A.

Receipts and disbursements forecasts

B.

Pro forma financial statements

C.

Payments of dividends

D.

Disbursement clearing patterns

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Question # 154

A multinational company that uses “notional pooling” for its euro zone subsidiaries will realize which of the following advantages?

A.

Enhanced accounting for transactions since funds are transferred into one account

B.

Mobilization of cash resources and thus economies of scale in making transfers

C.

Subsidiary cash balances are netted each day to calculate interest, but funds are not transferred

D.

An expanded number of euro zone banks in order to facilitate better service to transfer funds

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Question # 155

ABC Company offers trade terms of 2/10 NET 30. For several reasons, ABC has decided to eliminate the requirement for a letter of credit from one of its customers. If ABC puts the customer on open book credit, what is the MOST LIKELY outcome?

A.

ABC’s credit rating will suffer.

B.

The customer’s working capital has deteriorated.

C.

ABC’s working capital is unchanged.

D.

The customer’s cost of borrowing will increase.

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Question # 156

One reason for charging management fees to subsidiaries is to:

A.

justify to local governments the flow of funds to the parent company.

B.

mitigate shareholder concerns about the large investments needed for overseas ventures.

C.

minimize the impact of call provisions generally associated with overseas investing.

D.

help reduce the variability of parent and subsidiary future cash flow.

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Question # 157

Financial ratios may provide an inaccurate forecast of a company's performance because they are:

A.

difficult to incorporate into statistical forecasting.

B.

economic rather than accounting values.

C.

sensitive to seasonal cash flows.

D.

based on snapshots of the company's activity.

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Question # 158

Financial statement preparation guidelines are provided by:

A.

FOMC.

B.

FDIC.

C.

FASB.

D.

FATF.

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Question # 159

In a maturity matching financing strategy, which of the following is financed using short-term sources?

A.

Buildings

B.

Equipment

C.

Accounts payable

D.

Accounts receivable

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Question # 160

The cash manager for a company is creating a list of transactions that should be considered when determining the daily projected closing cash position. Which of the following transactions should be removed from the list?

A.

Controlled disbursement totals

B.

Estimates of non-controlled disbursement account clearings

C.

Expected settlements in collection (lockbox)

D.

Future-dated wire transfers and disbursements

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Question # 161

The MOST important tool the Federal Reserve Board has for influencing the amount of reserves in the banking system is:

A.

meetings of the Reserve Board of Governors.

B.

open market operations by the New York Federal Reserve.

C.

term limits for the Federal Reserve Governors.

D.

accepting tax payments on behalf of the IRS.

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Question # 162

A company's lockbox bank, which processes 24 hours per day, has a 6:00 P.M. ledger credit cutoff and grants same-day availability on checks drawn on Bank B that are received by 10:00 P.M. Which of the following ledger and collected credit postings would result from a Bank B check received at 11:00 P.M. on Tuesday?

A.

Ledger credit Tuesday, collected credit Wednesday

B.

Ledger credit Tuesday, collected credit Thursday

C.

Ledger credit Wednesday, collected credit Wednesday

D.

Ledger credit Wednesday, collected credit Thursday

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Question # 163

Which of the following objectives of treasury management refers to a company’s ability to meet current and future financial obligations in a timely, efficient, and cost-effective manner?

A.

Establishing access to short-term financing

B.

Maintaining liquidity

C.

Optimizing cash resources

D.

Managing risk

Full Access
Question # 164

To acquire an asset without putting debt on the balance sheet, a company should consider which of the following arrangements?

A.

Financial lease

B.

Operating lease

C.

Capital lease

D.

Triple-net lease

Full Access
Question # 165

Which of the following is the appropriate strategy to use for an active portfolio manager who is faced with an upward sloping yield curve?

A.

Purchase a security and hold to maturity

B.

Purchase a security and sell before maturity

C.

Purchase a security maturing before the funds are needed

D.

Purchase a security maturing when the funds are needed

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Question # 166

A put option is out of the money when the asset price:

A.

is less than the strike price.

B.

exceeds the strike price.

C.

is unchanged relative to the purchase price.

D.

is equal to the strike price.

Full Access
Question # 167

For days’ sales outstanding to be a meaningful method for evaluating the effectiveness of a company's receivable collections, it is usually compared to the:

A.

overall level of past due receivables.

B.

accounts receivable turnover ratio.

C.

stated credit terms.

D.

bad debt reserve.

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Question # 168

The Treasurer of a publicly-traded U.S. company discovers several large payments which were made from the company’s disbursement account without proper approval. These unauthorized payments represent an exposure to penalties imposed by which regulator?

A.

The Office of the Comptroller of the Currency

B.

The Office of Foreign Assets Control

C.

The Public Company Accounting Oversight Board

D.

The Financial Industry Regulatory Authority

Full Access
Question # 169

According to risk management experts, the BEST approach in managing operational risk is to:

A.

maintain a strong business continuity plan that can be used in disaster situations.

B.

document all company policies and procedures to ensure appropriate training for new staff.

C.

create a strong technological infrastructure that can identify security breaches as they occur.

D.

develop a corporate culture that promotes individual responsibility and supports educated risk taking.

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Question # 170

As a result of an employee's intentional actions, an electronic payment to a supplier was misdirected to an unauthorized account. This is an example of which of the following types of risk?

A.

Process and technology risks

B.

Employee and technology risks

C.

Process and valuation risks

D.

Employee and process risks

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Question # 171

A consumer’s personal check written to pay an electronics store charge-account bill is returned three times by the depositor’s bank as NSF. What process is being used?

A.

Check truncation

B.

Re-presented check entries

C.

Point-of-purchase

D.

Back office conversion

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Question # 172

The assistant treasurer of a company uses variance analysis comparing actual cash flows with projected cash flows and finds actual is less than forecasted. Which of the following would cause this variance?

A.

Pro forma income statement

B.

Weighted average cost of capital

C.

Capital budget forecast

D.

Delayed accounts receivable collection

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Question # 173

A real estate development company has excess cash that it would like to invest in one of its properties:

  • Property A has shown an ROI of 40%, a residual income of $25,675, and an EVA of $32,678.
  • Property B has shown an ROI of 45%, a residual income of $27,635, and an EVA of $29,523.
  • Property C has shown an ROI of 55%, a residual income of $22,658, and an EVA of $30,678.
  • Property D has shown an ROI of 52%, a residual income of $19,675, and an EVA of $31,523.

In which property should the company invest?

A.

Property A

B.

Property B

C.

Property C

D.

Property D

Full Access
Question # 174

A company is starting a project to redesign its cash management information systems. What would be an important tool in this effort?

A.

ERP software

B.

Treasury operations manual

C.

Cash application

D.

Treasury workstation

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Question # 175

A U.S. exporter sells goods to a foreign buyer in U.S. dollars and wants to guarantee that payment is made by the buyer. The exporter would MOST LIKELY require a(n):

A.

bankers’ acceptance.

B.

documentary collection.

C.

letter of credit.

D.

open account.

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Question # 176

A put option on a company's stock has an exercise price of $20. On the delivery date, the stock is trading at $24 per share. What should the investor who has paid $2 for the option do?

A.

Not exercise the option and lose $2.

B.

Not exercise the option and lose $6.

C.

Exercise the option and gain $2.

D.

Exercise the option and gain $4.

Full Access
Question # 177

When a project has an initial cash outflow with cash inflows in subsequent years, what decision model is most applicable to use to evaluate the adequacy of the project?

A.

Monte Carlo

B.

Net present value

C.

Payback period

D.

Profitability index

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Question # 178

What is the PRIMARY issue that management needs to consider when determining capital structure?

A.

Maintaining control of ownership

B.

Complying to rating agency and lender restrictions

C.

Using common stock as a source of funds

D.

Determining the mix of debt versus equity

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Question # 179

A treasurer’s role in budgeting is primarily to do which of the following?

A.

Manage short term assets and liabilities.

B.

Monitor foreign exchange risk.

C.

Manage shareholder equity.

D.

Analyze project profitability.

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Question # 180

Which of the following would be used to evaluate only the effects of varying interest rates while holding all other values constant at their expected levels?

A.

Scenario analysis

B.

Sensitivity analysis

C.

Simulation

D.

Break-even

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Question # 181

A measure of the incremental impact of a company's investments on market capitalization is known as:

A.

weighted average cost of capital.

B.

economic value added.

C.

return on equity.

D.

working capital turnover.

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Question # 182

A company has transferred all treasury functions to a new office overseas. When preparing the disaster recovery plan, the treasury manager seeks to identify the mission critical functions and then determine what risks the plan should address. Which of the following risks should be the focus of the Disaster Recovery Plan?

A.

The majority of the company's export is to a country with significant currency fluctuations.

B.

The company's decentralized treasury system operates locally with nightly data back-up to the new treasury office.

C.

The corporate liability insurance policy does not cover the international office.

D.

The company's investment portfolio has significant equity ownership in the international office country.

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Question # 183

The before-tax cost of long-term debt is 10% and the cost of equity is 12%.

CTP question answer

The marginal tax rate is 35%. The company's weighted average cost of capital is:

A.

6.3%.

B.

8.3%.

C.

10.6%.

D.

11.3%.

Full Access
Question # 184

Each of the following statements is true of both defined benefit plans and defined contribution plans EXCEPT:

A.

both of the plans are typically structured as single-employer plans and maintained for employees.

B.

both can be classified as overfunded or underfunded depending on the value of plan assets.

C.

the treasurer is normally responsible for overseeing the performance of the plan fund managers.

D.

the Pension Protection Act of 2006 includes significant changes to the rules governing both types of plans.

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Question # 185

Which cost benefit analysis technique uses the methodology to find where the present value of each project’s cash inflows equals the present value of each project’s outflows?

A.

Profitability index

B.

Payback period

C.

NPV

D.

IRR

Full Access
Question # 186

For newly issued debt, a company’s effective cost of debt is a function of yield to maturity and:

A.

the credit rating of the company.

B.

the marginal tax rate of the company.

C.

the maturity date of the debt instrument.

D.

the price of the debt instrument.

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Question # 187

Company A anticipates the following cash inflows and outflows for the next three months:

CTP question answer

If the company's treasurer is preparing a cash-flow projection for Month 2, and he is focusing purely on items that can be projected with a fair degree of certainty, what will the net projection be?

A.

($119,000)

B.

($104,000)

C.

$131,000

D.

$146,000

Full Access
Question # 188

Which of the following statements are true about the use of different discount rates for different types of projects?

I. Low-risk, short-term projects may be evaluated by using a short-term opportunity cost.

II. High-risk projects may be evaluated by using a discount rate that is greater than the company's normal opportunity cost.

III. A short-term investment (or borrowing) rate may be used as the company's short-term discount rate.

IV. The use of a lower discount rate for riskier projects forces riskier projects to earn higher rates of return.

A.

I and II only

B.

I and IV only

C.

I, II, and III only

D.

II, III, and IV only

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Question # 189

Which of the following statements are true about collected balances?

I. They can be lower than ledger balances.

II. They are influenced by the bank's availability schedule.

III. They exclude negative account balances.

IV. They may generate an earnings credit.

A.

II and III only

B.

I, II, and IV only

C.

I and IV only

D.

II, III, and IV only

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Question # 190

Based on the above information, before making the major acquisition, several large institutional shareholders have asked management to consider all of the following EXCEPT:

CTP question answer

A.

a stock split.

B.

a special dividend.

C.

a stock repurchase.

D.

a stock dividend.

Full Access
Question # 191

A company offers credit terms of net 40, with an opportunity cost of 12% to a customer. What discount would have to be offered for the customer to be indifferent between paying on Day 40 and paying with the discount on Day 10?

A.

1.0%

B.

1.3%

C.

1.6%

D.

2.0%

Full Access
Question # 192

All of the following are objectives of credit management EXCEPT:

A.

evaluating customer creditworthiness.

B.

preparing cash flow forecasts.

C.

maintaining up-to-date records of accounts receivable.

D.

initiating collection procedures.

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Question # 193

A company's accounts receivable balance pattern is shown in the first table. Credit sales are shown in the second table.

CTP question answer

CTP question answer

What is the cash inflow for the month of August?

A.

$213

B.

$238

C.

$300

D.

$633

Full Access
Question # 194

BF Company, a manufacturer of food products, reported financial information shown in the Exhibit for the end of the year. BF Company is subject to covenants in its commercial paper program. It is in compliance with which of the following?

A.

Maximum long-term debt to capital of 52.5%

B.

Minimum working capital of $10,000

C.

Maximum dividends of 50% of net income

D.

Minimum cash flow to total debt of 45%

Full Access
Question # 195

The discount rate for a T-bill with a face value of $200,000, 182 days to maturity, and a selling price of $194,375 would be:

A.

2.80%.

B.

5.56%.

C.

5.63%.

D.

49.18%.

Full Access
Question # 196

In recent years, there has been a sharp increase in the use of technology for certain financial transactions. Which of the following has increased dramatically over recent years?

A.

B2C

B.

C2B

C.

C2C

D.

B2B

Full Access
Question # 197

The amount of the discount required to renegotiate credit terms in EDI depends on which two of the following?

I. Present value impact of the timing change

II. Credit risks involved

III. Revolving credit agreements

IV. Transaction costs savings

A.

I and II

B.

I and IV

C.

II and III

D.

III and IV

Full Access
Question # 198

A digital signature cannot be forged if:

A.

the private key is never shared with anyone.

B.

maintained by a certificate authority.

C.

it has undergone authentication.

D.

it is RSA-encrypted.

Full Access
Question # 199

A bank employee programs an internal payment system to transfer half a cent of each transaction to her personal bank account. What type of risk does this behavior illustrate?

A.

Surety risk

B.

Payment risk

C.

Fiduciary risk

D.

Technology risk

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Question # 200

A portfolio manager’s investment policy states that they are not allowed to hold any investments that have extension risk. Which type of investment should the portfolio manager avoid?

A.

REMICs

B.

Ginnie Mae MBSes

C.

Municipal bonds

D.

Treasury notes

Full Access
Question # 201

One example of increased use of electronic payments for retail businesses to convert customer checks to cash at the counter more quickly is:

A.

BOC.

B.

POP.

C.

ARC.

D.

POD.

Full Access
Question # 202

Usually, corporations receiving dividends from another corporation can exclude 70 percent of dividend payments from income for tax purposes as long as the stock is owned for at least:

A.

30 days.

B.

45 days.

C.

60 days.

D.

90 days.

Full Access
Question # 203

Recently LEW Utilities, a local utility company, began using the company processing center method to process customer payments. Prior to this change, it used its local depository bank’s lockbox to process the payments. The PRIMARY advantage of the new method is to:

A.

decrease mail float as a result of applying payments in-house.

B.

ensure that payments are correctly applied to the customer’s account.

C.

reduce the processing float since payments are mailed directly to the customer.

D.

lower overall costs since in-house processing is cheaper than third-party processing.

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Question # 204

EML Inc., which has $600 million in outstanding debt, is preparing to issue commercial paper in excess of $100 million within the next six months. The new assistant treasurer has recently spent time getting to know the issuing and paying agent, the rating agency analyst, and the legal counsel, and has been following the financial markets. What is this is an example of?

A.

Benchmarking with peers

B.

External collaboration

C.

Decentralized control

D.

Risk transfer

Full Access
Question # 205

Company XYZ has an underfunded defined benefit plan. Company XYZ is required to provide filings for this plan to all of the following EXCEPT:

A.

the Department of Labor.

B.

the Pension Benefit Guaranty Corporation.

C.

the Securities and Exchange Commission.

D.

plan participants.

Full Access
Question # 206

Which of the following is a characteristic of MOST mutual funds?

A.

Shares are primarily held by corporations and pension funds.

B.

The value of shares fluctuates with the performance of underlying securities.

C.

Funds are insured by the FDIC.

D.

Shares may be traded on the NYSE.

Full Access
Question # 207

A company in the market to purchase a treasury management system (TMS) has issued a request for proposal to evaluate various vendors. One of the evaluation factors focuses on the long-term viability of the vendor. The company may have to choose between an untested new vendor with a superior product and an established vendor with an incomplete product suite. This dimension of the RFP is measuring what type of risk?

A.

Reputational risk

B.

Supplier risk

C.

Technology risk

D.

Financial risk

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Question # 208

All of the following are examples of treasury management system transactions for liquidity management EXCEPT:

A.

FX transactions.

B.

loan draw-downs.

C.

investment sales.

D.

loan paydowns.

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Question # 209

Company ABC, with a current debt rating of BBB- from Standard & Poor’s, is negotiating a new revolving credit agreement with its lenders. The company anticipates closing on a small acquisition within a year of executing this new agreement and would like maximum flexibility to determine its capital structure. The company is MOST concerned about the lenders’ inclusion of A.

A.

ratings trigger.

B.

growth rate covenant.

C.

change in control covenant.

D.

limit on internal financing.

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Question # 210

Which of the following is generally NOT a benefit of financial risk management?

A.

The likelihood of financial distress decreases

B.

Greater predictability of future cash flows

C.

The opportunity to take advantage of market inefficiencies

D.

Enhanced borrowing advantage in credit markets

Full Access
Question # 211

Company ABC has a concentrated investor base consisting primarily of large institutional shareholders. It would like to increase its number of smaller shareholders using the most cost effective method of raising capital available. What should Company ABC do to accomplish this goal?

A.

Issue preferred stock.

B.

Implement a dividend reinvestment plan.

C.

Issue warrants.

D.

Implement a stock repurchase plan.

Full Access
Question # 212

What is this firm’s residual income?

Revenues: $110,000

Expenses (including COGS and all taxes): $87,000

Internal rate of return: 8.5%

Capital Investment: $55,000

ROI: 8.0%

Cost of capital: 11%

A.

$16,500

B.

$16,950

C.

$18,325

D.

$18,600

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Question # 213

The treasury manager of an auto-parts manufacturer has noticed that checks were sent to a foreign individual not on the approved vendor list. The payables manager has explained the payments but did not provide an invoice. The treasury manager did no further research and is later disciplined for:

A.

not reporting suspicious activity under the USA Patriot Act.

B.

not purchasing enough surety insurance.

C.

ignoring International Accounting Standards Board regulations.

D.

not implementing “Check 21.”

Full Access
Question # 214

Simplifying upgrades and system restoration, access from multiple remote locations, and interfacing with multiple applications are all reasons to:

A.

replace workstations annually.

B.

use the internet.

C.

use 128-bit encryption.

D.

outsource IT.

Full Access
Question # 215

The controller is developing a financial plan that includes an operating budget and a financial budget. Which of the following statements is true?

A.

The financial budget is used to determine the operating activity level the company can support.

B.

The two budgets do not have any impact on each other.

C.

The operating budget is developed to determine the staffing level needed for operations.

D.

The financial budget is impacted by the company’s sources and uses of cash.

Full Access
Question # 216

A dealer is selling securities to a client. What is the yield/price at which the dealer will sell?

A.

Bid price

B.

After-tax price

C.

Market price

D.

Ask price

Full Access
Question # 217

A company with high operating leverage reduces its average cost per unit by 20% as its sales volume increases by 40% annually. This an example oF.

A.

low fixed costs.

B.

low variable costs.

C.

economies of scale.

D.

equal distribution of fixed and variable costs per item.

Full Access
Question # 218

Sign Company and Paint Company have a twenty-year business relationship, and they work together when sending and receiving payments. Sign Company also does a large amount of business with Brush Company, a subsidiary of Paint Company. Brush Company’s Treasurer recently received a memo from the Treasurer of Paint Company reminding it that when dealing with vendors, extensive information is required when receiving or making ACH payments. What ACH payment format are Sign Company and Paint Company MOST LIKELY to use?

A.

CCD

B.

EBPP

C.

CCD+

D.

CTX

Full Access
Question # 219

A small for-profit, start-up company is designing a retirement plan with the goal of minimizing costs and operating income volatility while providing a qualified retirement savings vehicle. Which of the following would be the BEST choice?

A.

Defined benefit plan

B.

Internal Revenue Code 401(k) plan

C.

Hybrid plan

D.

Internal Revenue Code 403 (b) plan

Full Access
Question # 220

ABC Corporation receives images of paid check exception items from its bank and reviews them daily. What action should be taken on an item where the payee on the image does NOT match the data from ABC Corporation's accounts payable?

A.

Bank alerts payee that check is unmatched.

B.

ABC Company utilizes the holder in due course defense.

C.

Image remains stored on ABC Corporation's network for future customer inquiries.

D.

No-pay decision is communicated to the bank.

Full Access
Question # 221

Which of the following is NOT true for both bankers’ acceptances and trade acceptances?

A.

They are both used to finance the shipment of goods.

B.

They both may be sold to an investor at a discount prior to maturity.

C.

They are both less expensive forms of financing than loans.

D.

They both transfer the buyer’s credit risk to a third party.

Full Access
Question # 222

Private companies usually go public by making an initial public offering. What is the term for offering subsequent shares in the market?

A.

Common

B.

Underwritten

C.

Regulated

D.

Seasoned

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Question # 223

An analyst at XYZ Company was assigned with determining if the company should start to use a lockbox provider for its retail payments. The analyst determined that the company’s annual sales of $324,000,000 were recorded evenly throughout the year. The Company receives 30,000 checks annually. Total dollar-days float without the lockbox is $76,500,000 and the annual opportunity cost is 5.5%; assume 30-day month. The industry’s average opportunity cost is 6.0%. Using the information in the table, what would be the net effect of using the lockbox?

CTP question answer

A.

Net savings of $57,750

B.

Net savings of $63,000

C.

Net savings of $1,732,500

D.

Net savings of $1,890,000

Full Access
Question # 224

A large retailer is preparing to accept credit cards and anticipates monthly credit card sales of $1,000,000. If the terms with the acquiring bank include bundled allocated fees of 6% and the retailer wishes to delay fee payment as long as possible, what should the retailer do?

A.

Accept gross settlement.

B.

Place a hold on consumer credit limits.

C.

Receive net settlement.

D.

Delay funds transfer to card-issuing banks.

Full Access
Question # 225

What document serves as the basic account or service authorization, empowering a representative of a business to enter into agreements for financial services?

A.

Account resolution

B.

Credit agreement

C.

Service agreement

D.

Signature card

Full Access
Question # 226

A company is looking to improve its collection rate of returned checks. If the company implements re-presented check entry (RCK) with its bank, it might see a reduction in what type of returned items?

A.

Consumer payments less than $2,500

B.

Corporate payments less than $2,500

C.

Consumer payments more than $2,500

D.

Corporate payments more than $2,500

Full Access
Question # 227

Company XYZ had the following sales over the last 5 years:

CTP question answer

The company raised funds to invest in its operations. Considering the company’s growth, it is interested in future options that will allow it to maintain its debt level and keep debt costs low. The company is not concerned about changes to the working capital structure. Which security did the company issue?

A.

Unsecured bond

B.

Bond with an equity kicker

C.

Zero-coupon bond

D.

Convertible security

Full Access
Question # 228

A manager has prepared an analysis of five investment alternatives. Prior to selecting which alternative to invest funds in, the manager calculated the anticipated return for all options. The manager is only going to invest in one alternative. The four investments that are not chosen are:

A.

a cost of capital.

B.

a loss of leverage.

C.

an opportunity cost.

D.

a cost benefit.

Full Access
Question # 229

An art history museum has recently finished renovating its new location. Before the move, the treasurer considers purchasing additional insurance to protect the art during transit. What form of additional insurance should the treasurer choose?

A.

Special multi-peril (SMP)

B.

Business interruption

C.

General liability

D.

Difference in conditions (DIC)

Full Access
Question # 230

When a company announces a significant and unexpected dividend increase, it signals to the market that management expects:

A.

earnings in future periods will be higher than in past periods.

B.

earnings in future periods will be lower than in past periods.

C.

earnings in future periods will not change.

D.

to split the stock in future periods.

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Question # 231

A retail lockbox system is characterized by which of the following?

I. An emphasis on processing cost

II. Detailed information on discounts taken

III. Small-dollar amounts per invoice

IV. Multiple invoices per payment

A.

I and II only

B.

I and III only

C.

I, II, and III only

D.

II, III, and IV only

Full Access
Question # 232

Examples of traditional factors used in making a credit decision include which of the following?

I. Capacity

II. Capital

III. Compliance

IV. Character

A.

IV only

B.

I and III only

C.

I, II, and IV only

D.

I, II, III, and IV

Full Access
Question # 233

All of the following are differences between Fedwire and ACH EXCEPT:

A.

ACH per item transaction costs are less.

B.

ACH transactions have delayed settlement.

C.

ACH transactions involve more consumer payments.

D.

ACH items have no credit risk.

Full Access
Question # 234

Which of the following statements is true about a forward foreign exchange contract?

A.

It is a right to buy or sell foreign currency at a specified price within a fixed time period.

B.

It does not require an underlying commercial transaction because the contract trades on its own.

C.

It specifies delivery of currencies at an exchange rate established today for a currency transaction that settles more than two days in the future.

D.

It is an exchange of currencies at the outset of a transaction at a fixed rate determined by the spot markets.

Full Access
Question # 235

True statements about the open account method of trade payment include which of the following?

I. A bank guarantees payment.

II. It is the most common type of trade credit.

III. A periodic credit review of each customer is required.

IV. The customer makes equal monthly payments.

A.

II only

B.

I and IV only

C.

II and III only

D.

I, III, and IV only

Full Access
Question # 236

A company that is issuing a new class of stock would use the services of a(n):

A.

retail brokerage.

B.

portfolio manager.

C.

industrial credit company.

D.

investment brokerage firm.

Full Access
Question # 237

Which of the following investment instruments would provide a company with the greatest liquidity and least risk?

A.

Certificate of deposit

B.

Commercial paper

C.

Certificate of participation

D.

Treasury bill

Full Access
Question # 238

A cash manager invests in Treasury bills for which of the following reasons?

A.

The interest earned is exempt from federal taxes.

B.

There is no price risk.

C.

They are extremely liquid.

D.

They offer the highest yield for overnight investing.

Full Access
Question # 239

Which of the following are basic security issues to be considered in evaluating a treasury management system?

I. Data recovery

II. Anti-virus protection

III. Database access controls

IV. Data integration

A.

I and II

B.

III and IV

C.

I, II, and III

D.

I, III, and IV

Full Access
Question # 240

All of the following statements are true about loan participations EXCEPT:

A.

more than one lender commits to them.

B.

loan advances and payments are divided among the participants.

C.

loan servicing is provided by the lead institution.

D.

they are traded in the secondary market.

Full Access
Question # 241

The process by which a bank or insurance company guarantees the debt obligation of a borrower is referred to as credit:

A.

enhancement.

B.

rating.

C.

scoring.

D.

options.

Full Access
Question # 242

A manufacturing company selling engines and other mechanical equipment, with invoices averaging $15,000, would use which of the following systems?

A.

Over-the-counter collections in numerous locations; deposits to field banks

B.

A company processing center; deposits to nearby bank(s)

C.

A wholesale lockbox with multiple deposit points

D.

A retail lockbox with multiple deposit points

Full Access
Question # 243

Which of the following are interest-bearing instruments?

I. Certificates of deposit

II. Treasury bills

III. Treasury notes

IV. Banker's acceptances

A.

I and III only

B.

I and IV only

C.

I, III, and IV only

D.

II, III, and IV only

Full Access
Question # 244

What is the correct sequence of the following disbursement float events, from first to last step?

1. Check clears back to drawee bank account.

2. Check is encoded and enters the clearing system.

3. Depositor receives ledger credit.

4. Lockbox bank receives check.

A.

3, 2, 1, 4

B.

4, 2, 1, 3

C.

4, 2, 3, 1

D.

4, 3, 2, 1

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Question # 245

A company that has a nationwide workforce may use which of the following methods for disbursing payroll to minimize the number of bank accounts?

I. Payable through draft

II. Multiple drawee checks

III. ACH credit transfers

A.

I only

B.

II only

C.

I and III only

D.

II and III only

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Question # 246

The future value of $60 invested at 8% compounded per year for three years is:

A.

$47.63.

B.

$64.80.

C.

$74.40.

D.

$75.58.

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Question # 247

Treasury management systems help cash managers do which of the following?

I. Reduce borrowing expenses

II. Initiate transfers

III. Determine cash position

IV. Obtain account balances

A.

I and IV

B.

II and III

C.

I, III, and IV

D.

I, II, III, and IV

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Question # 248

All of the following items may be found on an income statement EXCEPT:

A.

cost of goods sold.

B.

prepaid expenses.

C.

interest expense.

D.

taxes.

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Question # 249

A PRIMARY objective of the cash concentration function is to:

A.

move funds to where they can be used most productively.

B.

eliminate service charges at outlying field banks.

C.

minimize the number of disbursement banks required.

D.

improve the predictability of cash outflow.

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Question # 250

Compared to debt, which of the following statements is true about a company issuing equity?

A.

Its shareholders assume less risk than its creditors.

B.

The payment of interest on debt is not tax deductible.

C.

The payment of dividends on common stock is a legal obligation.

D.

It is more expensive.

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Question # 251

Which of the following is a common method for assigning float on a check deposited to a non-US bank account?

A.

Proof of deposit

B.

Company sample

C.

Value dating

D.

Fractional availability

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Question # 252

A lockbox system is characterized by which of the following?

A.

Limited or no deposit information reporting

B.

A large number of cash deposits

C.

Processing of documentary collections

D.

Relatively few collection points

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Question # 253

Which of the following is an advantage of a decentralized disbursement system?

A.

Local manager autonomy

B.

The elimination of idle cash balances at local banks

C.

The ease of obtaining cash position information

D.

Reduced operating costs

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Question # 254

Which of the following factors is NOT used by a cash manager to estimate a target compensating balance?

A.

Per-item service costs

B.

Average volume

C.

Ledger balance

D.

Earnings credit rate

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Question # 255

Which of the following is responsible for examining national banks?

A.

The Federal Reserve

B.

The Federal Deposit Insurance Corporation

C.

The Office of the Comptroller of the Currency

D.

The Securities and Exchange Commission

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Question # 256

An increasing number of multinational companies have adopted formal multilateral netting systems for which of the following reasons?

A.

To facilitate management of foreign exchange exposure

B.

To improve check clearing times

C.

To standardize payment routes and banking channels

D.

To eliminate duplicate payments to vendors

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Question # 257

A retail chain with 500 locations throughout the United States would use which of the following systems?

A.

Over-the-counter collections in numerous locations; deposits to field banks

B.

A company processing center; deposits to nearby bank(s)

C.

A wholesale lockbox with multiple deposit points

D.

A retail lockbox with multiple deposit points

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Question # 258

Which of the following is an example of a company's internal data used for cash management?

A.

Investment schedules

B.

Money market rates

C.

Incoming wire transfers

D.

Returned deposited items

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Question # 259

Which of the following is NOT characteristic of commercial paper with a term of less than 270 days?

A.

It is usually sold through a dealer.

B.

It is considered an unsecured promissory note.

C.

It typically costs less than bank debt.

D.

It must be registered with the SEC.

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Question # 260

A bank uses all of the following to determine whether a company's balances are sufficient to compensate for services EXCEPT:

A.

collected balances.

B.

ledger balances.

C.

earnings credit rates.

D.

reserve requirement.

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Question # 261

A company uses a dividend capture strategy to:

A.

reduce interest expense.

B.

improve yield.

C.

liquidate investments.

D.

reduce default risk.

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Question # 262

The treasurer of a corporation is negotiating with one of his/her suppliers to allow the corporation to have 30 days to pay the supplier’s invoices. The treasurer is arranging:

A.

short-term financing.

B.

revolving credit agreement.

C.

factoring of receivables.

D.

uncommitted line of credit.

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Question # 263

For a retirement plan to be qualified under ERISA, employer and employee contributions must be:

A.

invested to maximize portfolio return.

B.

placed in a separate fund held by a third party.

C.

placed with a professional investment manager.

D.

invested to provide a defined benefit for plan participants.

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Question # 264

The auditors of a private college are examining and auditing the college’s financial statements. The statements are not presented in accordance with GAAP. What should the auditors do?

A.

Issue a standard unqualified opinion.

B.

Not render an opinion.

C.

Base their opinion on GASB standards.

D.

Issue an adverse opinion.

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Question # 265

Which of the following payment types is at the greatest risk for fraud?

A.

Wire transfers

B.

Credit cards

C.

Checks

D.

ACHs

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Question # 266

An airline wants to lock in the price of the jet fuel it needs to purchase to satisfy the peak in-season demand for travel. The airline wants to manage its exposure to fluctuations in fuel prices. What type of exposure is this?

A.

Translation

B.

Delivery

C.

Commodity

D.

Speculative

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Question # 267

One of the KEY risks associated with a company’s use of financial institutions is the possibility that:

A.

frequent account management turnover at an institution will disrupt the company’s operations.

B.

an institution’s operations will put the company in violation of the Gramm-Leach-Bliley Act.

C.

an institution will inadvertently share the company’s confidential data with its competitors.

D.

the institution will fail, which will have a financial impact on the company.

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Question # 268

Banks often control information flow, records and assets, therefore it is critical that banks have:

A.

backup systems and disaster recovery procedures.

B.

controlled disbursement procedures.

C.

standard formats for electronic submission.

D.

timetables for service implementation.

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Question # 269

A U.S.-based electronics company that buys components from one of its foreign subsidiaries at a price above market is likely to:

A.

be paid large dividends by the subsidiary.

B.

be sheltering profits in a low-tax country.

C.

need tax consultants to act as intermediaries.

D.

make payment with an intracompany loan.

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Question # 270

One of the PRIMARY ways the Fed addresses systemic risk is by:

A.

assigning passwords and PINs to identify authorized users of its Fedwire system.

B.

establishing intra-day credit limits for ACH originators.

C.

setting minimum reserve requirements for its member banks.

D.

setting daylight overdraft limits for its member banks.

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Question # 271

When projecting the closing cash position, a cash manager must estimate which of the following?

A.

ACH credits

B.

Lockbox receipts

C.

Checks in the process of collection

D.

Clearings on non-controlled disbursement accounts

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Question # 272

A treasurer is monitoring the yield curve through a service provider (like Reuters) and notices that it is moving from downward sloping to upward sloping. Based on this information, the treasurer should consider:

A.

a commercial paper program.

B.

a short-term borrowing facility.

C.

interest rate collars.

D.

a variable rate long term facility.

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Question # 273

A multinational company may use which of the following to locate profits in subsidiaries in low-tax countries?

A.

Dividends

B.

Transfer pricing

C.

Management fees

D.

Intracompany loans

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Question # 274

Which of the following is NOT a method multinational companies (MNC) use to repatriate capital?

A.

Internal factoring

B.

Dividends

C.

Transfer pricing

D.

Management fees

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Question # 275

A national retailer’s cash management system includes a field deposit system using multiple banks. To limit the impact of a failure of one of these banks, a cash manager should:

A.

consolidate all accounts at one bank.

B.

use wire transfers for concentration.

C.

monitor each bank’s credit policies.

D.

concentrate cash on a regular basis.

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Question # 276

A treasurer overhears several employees talking about selling their company stock before a pending deal impacts the stock negatively. What action should the treasurer take to control this behavior in the future?

A.

Report the employees to the SEC.

B.

Provide training on ethics and code of conduct.

C.

Contact the investor relations department.

D.

Contact the internal and external auditors.

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Question # 277

The MOST effective way to reduce the internal risk of technology as it relates to critical treasury functions is to:

A.

implement an integrated accounts payable module as part of an automated general ledger package.

B.

secure complex spreadsheets with formula protection and multi-level password access.

C.

back up complex spreadsheets from PCs onto a local area network server daily.

D.

replace complex spreadsheets with certified treasury systems.

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Question # 278

The CFO of a growing company has decided that it would be prudent to insure the company against potential loss from dishonest acts of employees. The treasurer has been given the responsibility of selecting and negotiating the type and amount of protection required. After analyzing the overall risk to the company, the treasurer decides that the greatest exposure to this type of risk is within the cash management function of the company. The MOST appropriate type of protection would be:

A.

fidelity.

B.

crime.

C.

blanket.

D.

fiduciary.

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Question # 279

Under the standards of corporate governance adopted in 2002, an independent director must:

A.

meet with management in regular executive sessions.

B.

have been with the organization for at least five years.

C.

have no material relationship with the organization.

D.

be one of three directors on the nominating committee.

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