CTP Practice Exam Questions with Answers Certified Treasury Professional Certification

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?

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

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?

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

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

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 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?

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

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

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

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?

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?

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?

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 company’s overall cost of capital depends on the:

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

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

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?

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?

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?

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

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

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

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

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

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?

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

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 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?

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

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

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?

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?

For a defined benefit plan,

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 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 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?

Which of the following is subject to translation exposure?

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?

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

The PRIMARY objective of a corporation is to:

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

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?

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

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?

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.

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?

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 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?

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.

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?

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?

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):

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?

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:

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

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

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?

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

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?

Which of the following is an intangible asset?

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?

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

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 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?

The Public Company Accounting Oversight Board (PCAOB):

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:

Which scenario provides the BEST example of an agency problem?

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

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?

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

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

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

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 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?

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

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

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 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?

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

The term "factoring" refers to a:

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?

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

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

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

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:

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

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

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?

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

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

A put option gives the holder the right to:

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

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?

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

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

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

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 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?

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

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?

An option can be exercised in the market at its:

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

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?

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 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 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?

Examples of fixed assets include which of the following?

I. Inventory

II. Treasury bills

III. Forklift

IV. Goodwill

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

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?

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

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

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?

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

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?

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

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

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

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

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?

Treasury policies and procedures should include responsibilities for:

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%?

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

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

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

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

"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:

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

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

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

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

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?

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?

Which of the following is an example of a Eurobond?

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?

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

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?

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?

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

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

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 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?

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

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?

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?

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

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 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?

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

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

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?

One reason for charging management fees to subsidiaries is to:

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

Financial statement preparation guidelines are provided by:

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

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?

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

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?

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?

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

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

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:

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?

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

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 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?

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

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 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?

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?

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

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

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

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?

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

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

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

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?

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

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

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?

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.

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.

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

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?

All of the following are objectives of credit management EXCEPT:

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

What is the cash inflow for the month of August?

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?

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:

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?

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 digital signature cannot be forged if:

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 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?

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

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:

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:

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?

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

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

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?

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

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.

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

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?

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%

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:

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

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

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

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.

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 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?

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?

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

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

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?

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?

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

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?

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

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 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:

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?

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

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

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

I. Capacity

II. Capital

III. Compliance

IV. Character

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

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

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

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

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

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

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

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

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

Which of the following are interest-bearing instruments?

I. Certificates of deposit

II. Treasury bills

III. Treasury notes

IV. Banker's acceptances

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 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

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

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

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

A PRIMARY objective of the cash concentration function is to:

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

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

A lockbox system is characterized by which of the following?

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

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

Which of the following is responsible for examining national banks?

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

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

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

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

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

A company uses a dividend capture strategy to:

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:

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

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?

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

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?

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

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

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

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

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

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

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

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 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?

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

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:

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