Crack4sure Logo
3 Months Free Update
3 Months Free Update
3 Months Free Update
The process by which a bank or insurance company guarantees the debt obligation of a borrower is referred to as credit:
When investing in commercial paper, the investor's primary consideration should be which of the following?
A prearranged ACH payment normally includes which of the following?
I. A fixed payment amount
II. A provision for immediate availability
III. A predetermined payment date
Cash management services commonly used outside the United States include which of the following?
I. Interest-bearing deposit accounts
II. Controlled disbursement systems
III. Pooling of bank accounts
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 portfolio manager purchases a floating rate mortgage backed security that would currently provide a 4% yield to the company. Since mortgage rates have been fluctuating significantly over the past month, the manager is thinking about entering into an interest rate swap to hedge against the rate movements. Although the manager would remove most of the price sensitivity of the asset by executing the swap, it would also lower the total yield on the investment due to swap costs. What objective in the company investment policy is guiding the portfolio manager’s decision?
Racklyn Paint Company, a new paint and construction company, has vendor payables of $2 million due periodically over the next 3 months; payroll payable to its crews of $500K each month; a mortgage of $4.4 million with a fixed rate of 6.0%; and an equipment loan of $5 million with a bank at a 30-day LIBOR plus 150 bp payment of $100K due monthly. Racklyn receives their first contract valued at $12 million with half of the contract value due at the time of contract and final payment upon completion. Racklyn expects the job to last 6 months. Which option would be the BEST use of Racklyn Paint Company’s cash?
A company is evaluating its employee healthcare expense and payroll applications. If the company wishes to provide maximum convenience to its employees, which payment method is the BEST choice?
An international company with multiple divisions has several types of common stock. The company spun off a new division that is growing very quickly and needs additional funding, but the parent does not want additional ownership investment or additional voters. The company would MOST LIKELY issue what kind of stock?
Which of the following is a ratio that is often used by commercial banks to measure a company’s leverage and does not include the effect of assets that are difficult to value or are NOT easily converted to cash?
Which of the following is an example of a company's internal data used for cash management?
Which of the following contributes MOST to the marketability of a security?
Which of the following trade payment methods virtually eliminates the seller's credit risk?
A call option for a company has an exercise price of $50. The stock is currently trading at $60. At maturity, what should an investor who paid $3 for the option do?
An analyst for a landscaping company wants to adjust her cash-flow forecast to account for the seasonality of outflows. How can this be accomplished?
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?
The historic rate of return in the U.S. stock market is 8%. An investment portfolio has a mix of equity investments consisting of 40% A-Corp stock, 30% K-Corp stock, 10% M-Corp stock and 20% W-Corp stock. The investment portfolio manager tends to buy and hold the equity investment position for 3 years on average. To calculate the required rate of return for this investment portfolio,
what rate from the table would be used as the risk-free rate?
An electronics manufacturer is attempting to protect itself from financial losses due to projected high warranty claims costs for one of its technically complex products. What kind of assessment should the company perform to determine the appropriate external insurance coverage that would protect it from the claims?
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?
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?
A seller’s cost of capital is 12%. The average credit sale is $200,000, and the credit terms are 2/10, net 30. What is the present value of receiving full payment on day 30?
Establishing the authority to open bank accounts is the responsibility of:
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 function involves evaluating alternative projects in relation to one another and in relation to the company's cost structure?
When projecting the closing cash position, a cash manager must estimate which of the following?
A main characteristic of a company with regional offices using a centralized treasury function is:
What does a company with a restrictive current asset investment strategy typically have?
A U.S. firm acquires a large U.K. manufacturer that generates high levels of cash flow in its local currency. The purchase is denominated in British pounds and is financed through the issuance of 10-year, 7.5% U.S. dollar bonds. The U.S. firm will rely entirely on the U.K. manufacturer's cash flows to fund the interest payments on the bonds. What derivative instrument would help the U.S. firm manage its FX exposure?
A buyer receives an invoice from a supplier that offers discount terms of 3/10, net 60. What is the effective cost of discount?
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?
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:
An employer wishing to reduce operating income volatility would MOST LIKELY offer what type of retirement option to its employees?
A treasury manager expects the price of a commodity to be highly volatile between the time of option purchase and exercise. Which option style would provide the greatest flexibility?
Which of the following would be the most efficient method of reducing the number of cross-border payments between two units of a company?
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?
U.S.-based manufacturing Company XYZ is looking to deliver finished goods to ABC Company in a developing nation. The credit department wants to ensure collectability and has asked the treasury department for guidance. The desired solution may impact days sales’ outstanding but will have the lowest credit risk to Company XYZ. What will treasury recommend?
A company wants to implement more control over its cash management system. Which aspect of the system is the most susceptible to external fraud?
Company ABC has recently started to experience a significant reduction in funds availability. Which of the following is MOST LIKELY to reduce funds availability?
What is a KEY reason that both a lessee and a lessor would enter into a lease financing agreement?
A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.
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 multinational company that uses “notional pooling” for its euro zone subsidiaries will realize which of the following advantages?
Company J is looking to perform an A/R cash analysis based on the following sales information:
60% of sales are collected within two months after sale. After three months, $135,000 of January's sales were collected. What was the dollar amount of January's sales collected in April?
The U.S. government agency that administers and enforces trade sanctions against targeted foreign countries is the:
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 company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?
An olive oil producer in Macedonia is arranging for shipment of its product to an international distributor. To support this activity, the company arranges for export financing because:
In a maturity matching financing strategy, which of the following is financed using short-term sources?
A utility company is evaluating whether or not it should build a new plant. The process of reviewing the quantitative and qualitative factors are an example of which finance function?
A cash manager's recommendation to use procurement cards as a way to reduce accounts payable expense is an example of:
Which of the following global cash concentration methods would be MOST appropriate for a company with operations in the United States, Germany, Mexico, and Japan?
Which of the following correctly describes pooling as practiced in the European cash management environment?
A company transfers funds from its remote accounts by ACH with a one-day settlement and is notified of a same-day credit of $100,000 in one of its accounts. A wire transfer costs $27.75 incrementally. Assuming a 360-day year, which of the following is the minimum rate of interest that must be earned on these funds to justify the cost of a wire transfer?
Which of the following statements is (are) true about non-repetitive wires?
I. They may require additional security steps.
II. They are typically used for cash concentration.
III. They may be used for transactions where dates, parties, and/or amounts may be variable.
Merchant MNO’s sales for the day total $20,000. Fifty percent are credit cards, split between Card Red and Card Blue respectively, at 65% and 35% of the card volume. The average ticket is $50. Fees paid are 2% for Card Red and 2.5% for Card Blue and a fee of $0.05 per transaction. What are the fees that MNO will pay to the issuing banks?
The Treasury Department of ABC Corporation has been working hard to prevent external fraud from impacting its operating bank accounts. Recently, they implemented protective services on their disbursement accounts. This morning, the treasury analyst realized that an expected sales tax payment to the state of Maryland had not occurred. The analyst knew that it had been successfully initiated yesterday. Which service used by the corporation may need to be adjusted to pay the state of Maryland?
Which of the following ways of financing accounts receivable requires a company to relinquish control of the type of customer to which it sells?
All of the following are reasons to use a confirmed irrevocable letter of credit EXCEPT concern about:
A company wants to gather daily balance reporting from its international subsidiaries' bank accounts. Which of the following systems would allow the company's bank to gather the balance positions from the local banks?
The company's monthly credit sales are in Table 1 and its receivables collection pattern is in Table 2. If this company wishes to achieve a second quarter (April-June) DSO of 60 days, what would its ending accounts receivable balance need to be?
Assume a 90-day quarter.
The year-end income statement for a company is presented in Table 1. The balance sheet is presented in Table 2.
What is the company's return on equity?
The treasury analyst for XYZ Corporation, a small retailer, is trying to forecast daily cash receipts being swept from the store depository accounts. The analyst has been given the data in the table regarding receipts from the last few days. The analyst chooses to use a seven-day simple moving average forecast methodology.
What is the amount that XYZ Corp. would expect to receive on Day 10 (rounded to the nearest whole $)?
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?
Which of the following is a common approach to negotiating EDI payment terms versus paper payment terms?
The time from the deposit of a check in a bank account until the funds can be used by the payee is known as:
A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company's effective interest rate be reduced?
A U.S. company that is expecting to receive a payment of C$1,000,000 purchased a put option of C$1,000,000 at a strike price of 1.75 C$/US$. Two days before the receipt of the payment, the spot rate is 1.85 C$/US$. To maximize its receipt of dollars, the company should do which of the following?
On a statement of cash flow, which of the following items are considered sources of cash?
I. Increase in short-term investments
II. Net income
III. Increase in accounts payable
IV. Decrease in long-term debt
A Chicago meat processor is concerned about the volatility of pork belly prices. Which of the following derivative products would be used to fix these prices within a given range?
The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for which of the following?
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 public corporation may value a defined contribution plan highly because it:
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 company hires an investment firm to fully underwrite a new stock issuance. Which of the parties carries the MOST risk?
On the basis of the following exchange rates,
which of the following currency amounts has the greatest value in U.S. dollars?
A company is evaluating a project. What is the appropriate discount rate that it should use if its marginal tax rate is 34%, its capital structure is 40% common equity, and 60% debt. Its cost of equity is 10%, and its average cost of debt is 4%?
An employee who became vested in his/her employer's retirement plan upon reaching five years of service decides to resign after working for seven years.
However, he/she will not reach retirement age for another six years. Referring to the employee's annual earnings above, if the plan is structured as a cash balance plan, what is the value of the employee's plan if benefits accrued at 8% per year and future annual salary inflation is 3%?
In a partial reconciliation, a bank provides a company with which of the following?
Recent improvements in the effectiveness of corporate governance are mostly due to the:
Company ABC has expanded its banking relationships due to international growth. ABC cannot figure out why its collection float amongst its international customers is longer than its domestic customers. Additionally, ABC is incurring significant costs related to the receipt and processing of these customer payments. ABC is MOST LIKELY experiencing issues related to:
Company Sales Figures:
Based on the information above, what is the estimate for the company's April cash flows?
A retail company is performing a risk analysis on its accepted payment types. Cash is the primary form of payment for this retailer. What is the PRIMARY issue with cash payment systems?
Liquidity reserves for opportunistic requirements are typically maintained in the form of:
What is the primary weakness of a risk management policy that includes risk control without specifically providing a plan for risk financing?
A privately held company is planning to issue an IPO. If the company decides to do so, which of the following will MOST LIKELY result?
A publicly-traded U.S. company has a German subsidiary which has accumulated significant cash balances. The company needs to pay its quarterly dividend but lacks the funds to make the payment. What is its BEST alternative for obtaining the funds?
Which of the following is a benefit to a company that publicly trades its stock?
The risk that one financial institution’s failure could lead to the failure of other financial institutions is known as:
Which of the following is a PRIMARY responsibility of a company's risk management function?
A company pays its vendors with the following methods:
If the company has a daylight overdraft agreement, which of the above presents the highest single-day credit risk for the bank if the company enters bankruptcy?
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 company with $50 million in foreign assets decides to increase its foreign debt by $40 million for a debt ratio of 80%. This action will reduce which exposure?
For ABC Company in the last fiscal year, the operating profit was $8,500,000, the tax rate was 33%, the total capital was $75,000,000, and the WACC was 9.7%. What was the EVA for ABC?
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?
Using a digital certificate when accessing a financial services provider is one way to reduce what kind of risk?
EDI infrastructure includes which of the following four PRIMARY components?
Which of the following is sought from a typical cash management services Request for Proposals (RFP)?
An institutional investor has purchased an investment that provides a fixed rate of return with some potential for delays in payments. The return is 70% tax deductible for this particular investor. What type of investment was MOST LIKELY purchased?
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 corporate compliance officer is drafting an agenda for an ethics training session. Which of the following would NOT be an appropriate item to include?
Company ABC has undergone substantial system enhancements in order to take advantage of B2B efficiencies. To encourage its trading partners, ABC has offered a 1.5% discount to those who allow ABC to debit their bank account electronically on the day the product is delivered. The greater number of trading partners who agree to this arrangement, the greater improvement Company ABC will see in its:
Company XYZ has an underfunded defined benefit plan. Company XYZ is required to provide filings for this plan to all of the following EXCEPT:
An analyst is performing a lease versus buy analysis on a corporate jet. In the evaluation, a cost is relevant if it is:
A-Plus Company has made arrangements for a new insurance broker to provide products to its employees. Historically, A-Plus Company’s employees made insurance payments via payroll deduction, but the new broker will be collecting payments from employees directly. What will the broker MOST LIKELY use to minimize collection float?
The Treasurer of a company would like to establish an investment policy for the organization. One objective that should be included in the investment policy that would BEST allow the organization to limit its exposure to a particular market sector would be to:
Which of the following capital budgeting methods ignores the time value of money?
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?
Over the past 3 years XYZ Company has expanded into multiple countries and significantly grown its banking relationships. The company now incurs significant expenses related to payment transaction costs and maintaining multiple bank connections. What should the company use to combat these rising costs?
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?
Company ABC is a restaurant chain that has enjoyed a surge in customers’ dining with not much of a profitability increase in the last couple of years. Following a bad restaurant review, customer traffic deteriorated with not much change in profitability. Which of the following BEST describes the cost structure of the company?
The Treasurer at ABC Company currently uses an in-house company-processing lockbox center. The Treasurer has asked for an analysis to determine the major advantage of using a traditional check/mail-based lockbox system. ABC receives 287,000 payments per month and hired seven additional staff members to process the payments in-house. Additionally, $389,000 was invested in the equipment used to process the payments and NSF checks have decreased 7% since using the in-house center. The equipment’s current market value is equal to its book value. What major advantage should the analysis indicate?
A treasurer decides to use notional pooling across wholly-owned multiple legal entities instead of wiring money between entity accounts. What specific section in the company’s policy allowed the treasurer to make this decision?
A company has a high value for its current ratio. What does this suggest in terms of liquidity and risk?
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?
Advantages of writing checks locally on a centralized disbursing bank include all of the following EXCEPT which statement?
The analysis of a company launching an initial public offering includes disclosure of information that may interest investors. It also includes confirmation that financial statements reflect true value under GAAP and other pertinent areas of a company’s operations. What is this analysis known as?
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?
For newly issued debt, a company’s effective cost of debt is a function of yield to maturity and:
An auto manufacturing plant in Michigan has high scheduled demand for its product. If the company does not have a long-term contract for raw materials, what type of exposure could it face?
Which of the following is an example of using cash forecasting for liquidity management?
TESTED 07 May 2024