CTP Practice Exam Questions with Answers Certified Treasury Professional Certification

A corporation has a $500 million revolving line of credit whose interest rate is based on LIBOR. The board authorized the treasurer to initiate a swap transaction which has the company paying a fixed rate of interest rather than a floating rate. The treasurer entered into a swap with a notional value equal to the prior year's average outstanding balance of the revolver. The swap is also initiated for the same period as the revolver's remaining time to maturity. The counterparty for the swap transaction is, however, not a bank participating in the syndicate which had issued the revolver. The corporation's accounting team is now trying to determine the proper income recognition principals to apply to gains or losses on the swap. This is an example of what kind of hedge?

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

The “agency problem” refers to:

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?

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

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

With respect to the Sarbanes-Oxley Act, a company may avoid additional reporting requirements by:

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?

For a defined benefit plan,

A company enters into a cash flow hedge to offset fluctuations in the value of foreign currency transactions occurring in two years. How should the company record the gains and/or losses on the cash flow hedge in the current year?

A buyer receives an invoice from a supplier that offers discount terms of 3/10, net 60. What is the effective cost of discount?

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

Which of the following statements is true about threshold concentration?

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 invests all of its short-term excess cash in T-bills on a daily basis. To prevent delays in processing its outgoing wire transfers, the company may ask its cash management bank to establish a:

A lender is evaluating the creditworthiness of a company that has high levels of operating leverage. In determining the debt capacity of the company, the bank would MOST LIKELY prefer a:

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?

When estimating the cost of capital, which of the following financial resources would probably NOT be included in the cost of capital calculation?

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

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.

What step can a cash manager take to validate a cash flow forecast?

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?

Which of the following will directly increase a company's cost in a fee-only bank relationship?

Financial risk management requires monitoring changes in which of the following?

I. Interest rates

II. Foreign exchange rates

III. Commodity prices

IV. Cost of insurance

Under a loan agreement, which of the following could be an event of default?

I. Nonpayment of interest when due

II. A material adverse change in the condition of the borrower

III. A debt-to-equity ratio above the limit specified

IV. Shortening the cure period by half

Which of the following is an important component of corporate governance?

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?

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

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?

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?

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?

"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 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.

A new retail chain has decided to offer 3 payment methods: cash, cards and checks. It was determined that card payments would be the biggest sales driver and projects have been scheduled accordingly. To be in line with this strategy, which of the following should be the priority?

In a private label financing arrangement, the seller does which of the following?

All of the following are advantages of using traditional financial ratios for analysis EXCEPT:

Which of the following types of payments would NOT be included in cash flow forecasting?

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 supplier can improve invoicing float by:

According to the Capital Asset Pricing Model, which of the following would increase the required rate of return, given a beta of 1?

What is the premium (price) for an oil contract, if the following conditions are present?

LIBOR rate of 5%

Out of the money cost of $3

Strike price is $4

In the money price of $1

Speculative premium of $2

What does a company with a restrictive current asset investment strategy typically have?

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

Which of the following cash concentration transfers is MOST LIKELY to result in a bank ledger overdraft?

A company determines that no combination of risk control or financing techniques will produce an adequate, risk-adjusted rate of return on manufacturing a new product. It decides to discontinue the product line. This is an example of:

In an organization with personnel limitations, which of the following strategies should be considered to mitigate cash management system risk?

Today’s modern cash management systems would include which of the following?

A company is concerned that investor dissatisfaction could lead to a rapid change in its board membership. To prevent this, which of the following strategies should the company employ?

As a result of the Sarbanes-Oxley Act, what new entity was established to sanction firms and individuals for audit violations?

Under Section 404 of the Sarbanes-Oxley Act, management must state its responsibility for which of the following?

A construction company just received a notification from its bank advising it of an altered dollar amount on a check. This notification is MOST LIKELY the result of:

A company has negotiated a credit facility with the following terms:

$5,000,000 line of credit

$3,000,000 average borrowing

30 basis point commitment fee on the unused portion of the line

Interest rate on advances is 1-month LIBOR plus 4%

1-month LIBOR is currently 2%

What is the annual interest rate on the line of credit?

Which of the following statements is typically true about a net settlement system?

Company X, a US based multi-national, is exploring the option of locating a subsidiary in another country where there has been some historical risk of expropriation of local assets of foreign corporations. Therefore, as part of the risk assessment process the company must specifically quantify the:

Components of a field banking system include which of the following?

I. Local bank

II. Concentration bank

III. Lockbox bank

A treasury project manager is tasked with improving day’s sales outstanding. The company, a major retailer, sells 70% of its products to businesses. The project manager has convinced the Treasurer to proceed with purchasing $500,000 worth of equipment to convert the checks they receive to electronic form. What did the project manager overlook in making the decision?

Which statement is typically true about cash dividends?

The role of the depository bank in the check-clearing process is typically 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

Companies implement EDI in order to realize which of the following benefits?

I. Decreased error rates

II. Decreased order lead time

III. Improved productivity

IV. Improved cash forecasting

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.

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:

A United States company must remit a dollar royalty payment to its Japanese subsidiary. Cash settlement of the payment would typically be made by which of the following?

A convenience store chain would typically use which of the following types of collection systems?

When a paper check is converted to an electronic form:

Advantages of writing checks locally on a centralized disbursing bank include all of the following EXCEPT which statement?

Operational risk is defined as the risk of direct or indirect losses resulting from external events or failure of internal resources. As treasury departments maintain legacy systems that must be integrated into more complex technology, one would expect that:

An auto manufacturer experienced a decline in sales, an increase in inventory, and an increase in labor costs over the past two months. With all else being equal, what is the MOST LIKELY impact to the company's balance sheet?

A company which experiences increased business volumes but a minimal increase in profitability MOST LIKELY has:

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?

I. Banker’s acceptances

II. Commercial paper

III. U.S. Treasury bills

IV. Federal agency securities

Which of the following is the MOST usual ranking, from lowest to highest risk, of the investments listed above?

Three college roommates open a fast-food restaurant chain after graduation. They decide to offer a 401(k) plan to all of their 700+ employees and a defined benefit retirement plan for themselves and their six Group Vice Presidents. If the company initially funds the defined benefit plan with $10 million and is in the 32% tax bracket, what is the after-tax cost of the funding?

A company can dispute any check alterations within how many days after the bank statement has been sent?

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

XYZ Company has a well established commercial paper (CP) program that they use to fund operations. The company is expanding by purchasing a new factory. The CFO is worried about the time and expense needed to issue long-term debt and decides to use the funds they raise in the CP market to pay for the purchase of the factory. This strategy will be successful if:

In an international banking system, what role is commonly carried out by a large group of clearing banks?

ABC Company is a net borrower with a weighted average cost of capital of 11.5%. What kind of bank fee arrangement is it likely to prefer?

Which of the following are treasury management objectives?

I. To meet obligations in a timely manner

II. To minimize holdings in non-earning cash balances

III. To monitor and assist in the control of financial risk

IV. To evaluate costs and benefits of capital projects

A company has average monthly sales of $2,700, of which 5 percent is on a cash basis, with the remaining sold on open account. The company's accounts receivable aging schedule at the end of March is as follows:

What is the company's DSO?

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

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

A good credit rating has which of the following effects on debt?

I. Improved marketability

II. Decreased cost of funds

III. Decreased maturity

IV. Increased dealer fees

The time between the payor's mailing of a check and the payee's receipt of usable funds is known as:

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

The credit risk in the settlement of a Fedwire is borne by the:

On a company’s financial statements, an increase in accounts receivable is reflected as a(n):

Included in the CAMELS rating system for financial institutions are all of the following EXCEPT:

A French company conducts business strictly within the euro zone (the EMU). Which type of risk is of LEAST concern?

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 cash manager has determined that the break-even amount for justifying a wire transfer over an ACH for concentration of funds is $145,000. Using a wire instead of an ACH gives the company use of the funds two days earlier to make overnight investments. Based on a wire transfer cost of $10.00 and an ACH transaction cost of $0.70, what is the company’s overnight investment interest rate on a 365-day year basis?

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 bank's reserve requirement on demand deposits is 10%, and its earnings credit rate is 6%. If a company uses bank services amounting to $2,600 and has an excess of $550 in earnings credit, what is the average collected balance in the account based on a 30-day month?

A telecommunications company has decided to sell its call center hosting division. This is an example of what type of financial decision?

T-bill discount rate = 5.85%

T-bill face value = $100,000

Initial term = 90 days

What is the bond equivalent yield on this T-bill?

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?

Which of the following contributes MOST to the marketability of a security?

Economists are forecasting a rise in gas prices within the next 3 months. Charged with the task of establishing a risk mitigation approach for the company, the CRO has determined that the company has considerable exposure to fluctuations in gas prices. In coming to this conclusion, the CRO:

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 customer buys a laptop for $850 and a CD for $13. Only items with sale price of $15 and greater are subject to value added tax (VAT). Assuming VAT of 8.5%, how much tax does the customer incur at the point of sale?

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

When a short-term loan is paid with a lump sum payment and the payment includes both interest and principal, the loan is often referred to as a:

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?

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%?

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 banker's acceptance can be described as all of the following EXCEPT:

A company sells products to customers on credit, generating accounts receivable. The company uses the accrual accounting method. Once the company collects good funds from its customers, what is the impact on the financial statements of the company?

An equity management company’s Chief Financial Officer and Treasurer are evaluating their corporate investments and decide that they need to diversify their stock holdings to include personal care products companies. Based on their analysis, publicly-traded companies A and B stand out as choices. Company A has a beta value of 0.65 while company B has a beta value of 1.10. They decide to invest in Company A. What objective of their investment policy did they use to make their decision?

A public corporation may value a defined contribution plan highly because it:

XYZ Company is a publicly held manufacturing company that has decided to branch out into the international market. Five million dollars is needed to set up management and hire the factory workers, $2 million for various government certifications in order to begin business in Poland, and $1 million for miscellaneous expenses. While looking for funding, XYZ found that local banks in Poland were not willing to provide financing without which of the following?

A daily short-term forecast and variance analysis for LMN, Inc. is updated with relevant trends and actual data every Monday. Upon review, the Treasurer assessed that sales were higher than forecasted, inventory was up and yields being earned on excess cash were lower. The MOST important reason for this cash forecast process is:

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

While revising the investment policy, the CFO performs a sensitivity analysis for the company’s cash flow from investments, and identifies that increasing the maximum dollar value for bond purchases will improve returns by 10% on average, all other variables being equal. What issue will the CFO now need to address in the investment policy?

Customers of an electronic trading firm are experiencing problems with the online trading platform. The company IT department discovered that although display of market data is in the proper place, there are no tags being used to populate specific information in the necessary fields. The company is MOST LIKELY experiencing a problem with:

QRT Corporation uses exponential smoothing in its cash flow forecasting model. Five days are used to calculate the moving average forecast.

If the value of the smoothing constant is .60, what is the exponential smoothing forecast for day 7?

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 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?

XYZ Bank would like to conduct some foreign exchange transactions with JKL Bank. JKL isn’t the most liquid and could have some credit risk. XYZ Bank should suggest which of the following in order to eliminate risk?

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 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?

The School of Cash Management is dealing with a large bank that has been highly rated by Moody’s and S&P. The School has a purchasing card program in place and is not using a highly secure student registration data base. Both the School and the bank have highly automated payment processes. Based on the automation factor, the School should be MOST concerned about which of the following types of fraud exposure?

An intern was hired by the Vice President of Accounts Payables to process the electronic payments that come through the bank. The intern is responsible for manually entering payee information into the system at each step of the process. The VP directed the intern to enter the information as fast as possible without mistakes to optimize the number of transactions that could be processed. Instead of manually entering information the VP should have utilized:

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

CT Check Cashing routinely cashes payroll checks from JD Software. Someone presents a fraudulent check from JD Software to CT Check Cashing. The fraudulent item looks virtually identical to JD Software's regular payroll checks. CT Check Cashing pays the person cashing the check the amount for which it is issued. CT Check Cashing later discovers that the check was fraudulent and wants JD Software to reimburse them for the amount of the check. Which of the following statements is correct?

A company’s Chief Financial Officer assigns a team reporting to the Treasurer to restructure the company’s complex debt instruments and equipment leasing arrangements. The team executes the required settlement transactions using wire payments to facilitate the new debt structure, and in the process violates the lending requirements of the company’s bank. What should the Treasurer have done to prevent the violation?

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?

Company ABC is experiencing an increase in bank fees due to its new international customers paying by check. Nearly 15% of all deposited items are international checks. Twenty percent of the company’s checks have 1 day of float. Sixty-five percent of the company’s checks are on-us items. The company has $300,000 of deposits each day. The company’s deposits consist of both cash and checks, split evenly. On a typical day, how much of the deposit will be available immediately?

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?

Due to a loss of proprietary information held for clients, ABC Company has been named in a billion dollar lawsuit. It was determined that the loss of information was due to a breach in its computer system firewalls by outside parties. When the lawsuit became public, the company experienced a steep drop in its stock price. This scenario is an example of what kind of risk?

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

An individual has just inherited several million dollars and has decided to purchase the stock of a telecommunications company to diversify his portfolio. Before purchasing shares, he would like to do some company-specific research to determine which company to select. Examples of the information the individual wishes to obtain are financial statements and disclosures, company organizational structure, code of conduct, pending litigation, and profiles of the board of directors. Who would be the BEST person to contact to obtain all this information?

The regional offices of ABC Company implemented a system that would allow the employees to pass information between regions in a secure fashion. This system requires that all offices have the same key in order to read messages sent electronically. Which e-commence security type is MOST LIKELY being used?

A treasury manager has $5 million that is not needed for 6 months. The treasury manager has decided to invest the funds in a liquid instrument, using the current portion of a 5-year AA rated corporate bond that is subject to U.S. Securities and Exchange Commission (SEC) regulations. In what market would the treasury manager purchase this investment?

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?

West Coast Retail Shop has experienced reduced cash availability in its bank account since a new store manager was hired. The manager is responsible for manually preparing daily bank deposits, which generally include a large number of checks, for processing at a bank branch in the same shopping mall as the store. Which of the following should West Coast Retail Shop implement to improve the available balance in its bank account?

Which of the following is an example of a Eurobond?

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?

What must be measured and monitored to ensure that a company has adequate liquidity?

Company XYZ sends an ACH debit file valued at $300,000 with an average item value of $1,000. The file settlement date is March 10. The file contains no duplicate items and items are split equally between corporate and consumer items. One percent of consumer items and 2% of corporate items were returned. What would be the final net settlement value for Company XYZ?

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

The renegotiation of trade payment terms in an e-commerce environment should include which of the following?

A large mature company with limited growth opportunities (positive NPV projects) achieved abnormally high profits this year. After paying mandatory principal, interest, and taxes, the company has $200 million in surplus cash on hand. Assuming its investor base is most concerned with capital appreciation, which of the following is the BEST option for the company?

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

ABC Company is a national retail company and uses XYZ Bank for its collections and payroll services. XYZ has recently experienced financial problems; what is the greatest risk to ABC Company?

Company XYZ has determined that its weighted average cost of capital is 12.5%. The capital structure of the company is made up of 75% equity and 25% debt. The before-tax cost of debt is 10%. Given a tax rate of 34%, what is XYZ's cost of common stock?

An optimal concentration system minimizes all of the following EXCEPT:

Company RST is a seasonal retailer who has just completed its holiday season and is temporarily flush with cash. The treasurer has identified approximately $15 million of excess balances and is trying to determine what to do with the surplus cash. Cash forecasts show that the funds will be needed in approximately 30 days to replenish inventory. Which of the following plans should the treasurer implement immediately?

A sinking fund is primarily used for which of the following purposes?

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?

A company has a beginning cash balance of $50,000. Its weekly cash flow forecast shows the following information for the next three weeks.

Which of the following statements is true?

A company may choose to use a derivative to reduce risk on which of the following types of exposure?

I. Currency

II. Interest rate

III. Commodity price

If a corporation pays 70% of its current earnings to its stockholders in the form of cash dividends, the remaining 30% kept by the company will cause a(n):

An evaluated receipts settlement would be MOST commonly used in an environment where:

Which of the following statements BEST applies when evaluating fees in an RFP for bank services?

If the Federal Reserve Board increased the discount rate, you would expect:

A call option is said to be “in-the-money” when the market price of the underlying security is:

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 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 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?

A company is considering expanding to a three-site lockbox system from its current two-site system and has collected the following data:

The average collection float in the current system is:

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?

Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT:

A foreign company could raise capital in the United States using an:

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

In which of the following international cash management methods is title for goods transferred for intercompany sales?

Netting is used by which of the following as a cross-border payment technique?

A merchant presents 2 different batches of credit card transactions for processing, each batch has the same dollar value and number of transactions, but the fees are different. Which of the following explains why?

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

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?

The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY:

In most countries other than the United States, which of the following is used to compensate banks for services provided?

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?

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?

Convertible securities consist of preferred stock anD.

In terms of capital structure, lease financing normally has the same effect as:

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?

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?

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

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

Recent improvements in the effectiveness of corporate governance are mostly due to the:

Which one of the following is NOT a method used by a company to repurchase stock?

An internal auditor discovers that employees can enter and approve their own wire transfers. This practice violates what internal control?

Which of the following options would be BEST suited for a firm that wishes to pay no premium?

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

Which of the following would be considered insurance risk management services?

XYZ Inc. has limited cash flow, total liabilities to total assets greater than 52%, and a high WACC. To help meet the goal of lowering their WACC, the company plans to issue several million dollars of private equity to the chairman of the board. If the company proceeds with this plan, the company may:

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?

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

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?

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

The board of directors announces an increase in its dividend from $0.11/share to $0.15/share. Over the next two quarters, management notices that its investor base has shifted to include a large percentage of pension funds and endowment funds. This is the result of:

Which of the following is a true statement about operating leverage?

A company is experiencing the following long-term trend on a month-over-month basis:

With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company?

An asset-based lender has decided to provide a loan to a company. In order to perfect its security interest in the assets used as collateral with the potential borrower, the lender will be MOST interested in reviewing which of the following?

Which of the following is NOT an operational risk?

Which of the following is MOST LIKELY to have a significant impact on the financial condition of an organization?

Which of the following short-term instruments is used to finance the import or export of goods?

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

Which of the following actions would the CFO of a Canadian multinational conglomerate MOST LIKELY take to repatriate profits from its international subsidiaries?

Company XYZ is conservative when investing in their short-term portfolio. XYZ is looking to add the following money market instruments in their own country: a reverse re-purchase agreement, a floating-rate note, and a negotiable certificate of deposit. What types of investment risks are associated with these instruments?

JMW Company processes its consumer payments using a lockbox provider. On average 35% of its remittance advices contain encoding errors. JMW Company’s cost for the lockbox provider to process these payments will be least impacted if it uses:

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:

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

All of the following would encourage a company operating nationwide to develop multiple banking relationships EXCEPT:

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

T-bill discount rate = 5.85%

T-bill face value = $100,000

Initial term = 90 days

If the U.S. Treasury was considering issuing a 91-day T-bill at the same time as this T-bill, what discount rate would cause both instruments to have the same purchase price?

The lockbox receipt records for one 30-day month are provided below. The opportunity costs are 10%.

What is the annual cost of float rounded to the nearest dollar?

ACCOUNTS RECEIVABLE AT THE END OF MARCH

On the basis of the accounts receivable balance pattern above and April sales of $600, the cash flow forecast for April is:

Which of the following should be considered in the design of a collection system for a supermarket or retail store that does not offer proprietary credit cards?

I. Coin and currency handling

II. Debit card acceptance

III. Retail lockbox

IV. Third-party credit cards

A trader of ABC Bank executed and audited his own trades. Assigning these two functions to the same person introduced which one of the following risks to the bank?

If a company’s pension plan offered its executives the right to contribute a greater percentage of their salary to the plan than the percentage offered to other employees, it would be at risk of violating the ERISA nondiscrimination rule related to what?

Which of the following credit terms would be MOST appropriate for a seasonal product that a manufacturer wants to sell to a retailer during the product's off-season?

MICR encoding errors may be detected by all of the following TMS modules EXCEPT:

A company is based in the United States and has an operating subsidiary in Germany. With a stable U.S. dollar and a depreciating euro, the company's cash manager may elect to:

An inverted yield curve occurs when which of the following is true?

A company receives proceeds of $1,119,274 from the sale of $1,150,000 worth of commercial paper. The paper is outstanding for 95 days. If a 360-day year is used, the company's annual interest rate is closest to 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 retail chain with 500 locations throughout the United States would use which of the following systems?

All of the following statements are true about adjustable-rate preferred stocks EXCEPT:

Which of the following investment instruments is a discount instrument?

Which of the following instruments is sold at multiple price bid auctions?

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

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

U.S. dollar-denominated instruments issued by foreign banks through their domestic branches are known as:

Measurement of a company's liquidity includes the calculation of all of the following EXCEPT:

Which of the following items would be classified as a source of cash on a company's statement of cash flow?

I. Selling, general, and administrative expense

II. Increase in accounts payable

III. Increase in inventory

IV. Depreciation expense

The time from the deposit of a check in a bank account until the funds can be used by the payee is known as:

The time between receipt of a mailed payment and the deposit of the payment in the payee's account is known as:

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

A grocery store chain would be likely to use all of the following services EXCEPT:

A KEY feature of municipal bonds is that they are:

XYZ Company's cash manager is evaluating cash concentration transfer options. The company has an 8% cost of funds and $50,000 in average daily field cash receipts. The wire transfer results in the transfer of funds one day faster. Which of the following options correctly ranks the transfer choices from most cost-effective to least cost-effective?

1. Electronic depository transfer costing $1.00

2. Electronic depository transfer costing $2.50

3. Wire transfer costing $8.00

4. Wire transfer costing $15.00

A company has a robust cash forecast process that has a 98% accuracy rate. Because of the high level of accuracy in the cash forecast, the company uses the buy-and-hold-to-maturity strategy for short-term investments. Which of the following is an advantage of using the buy-and-hold-to-maturity strategy?

Companies following an aggressive strategy for financing working capital and other assets have higher risk due to which of the following?

Which of the following is an example of an intangible asset?

Which of the following fundamental factors involved in determining an operational risk management strategy is most affected by the new corporate governance standards and “whistle-blower” laws?

A company is evaluating its long-range plan and determined free cash flow is tight in years one and two, while more favorable in years three through five. Its financial institution has offered an attractive interest rate on a term loan with a maturity option for both two and five years. What is a good financing option for this company?

What government legislation holds the CEO of a public company personally liable for the information in financial reports?

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

What determines if the currencies of two countries will trade at a discount, at par, or at a premium in the forward market?

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?

Image technology can improve a company's disbursement and remittance processing functions by:

A CFO is concerned about cash flow and the risk of defaulting on the debt covenants due to the ongoing recession. The company is a net borrower with a syndicated credit agreement consisting of:

-an operating loan available in USD and CAD

-a commitment of an $80.0 million USD long-term loan with a quarterly repayment of $1.5 million

What asset financing strategy should the CFO utilize to reduce overall financial risk?

As a result of expanding into Canada, a U.S. company expects to receive Canadian dollar revenues on a regular basis. It decides to set up a production facility in Canada to better serve its new customer base. What could the company do to create a natural hedge to offset the exposure?

A positive pay service is one where the bank:

The issue of corporate governance in publicly traded companies arises from:

An investor is willing to participate in the initial bond issue of a trading company. The investor wants to be assured of his return although at the same time the company requires flexibility to adjust its balance sheet to future developments. What would the investor seek to have included in the indenture?

An investment firm wants to add a new commercial paper issuer to its program for one of its money market funds. The investment policy states that an analysis to evaluate and assess the probability that the issuer might default needs to be performed on an annual basis. This policy was established to mitigate which risk?

Transmission of a file of items presented for payment by the payor bank to the issuing company is known as:

An electronics firm realizes that due to adverse events projected over the next 18 months there is a 5% chance that its profits will decrease by $100,000. The company's beta is .08 and its cost of capital is 9%. What approach is the company MOST LIKELY using to determine its level of financial risk?

BF Company, a manufacturer of food products, reported financial information shown in the table below for the end of the year.

BF Company is subject to covenants under its revolving credit facility. It is in compliance with which of the following?

A company is looking for a way to finance their inventory. What is the BEST funding match?

A long-term treasury department employee notices that the director of internal audit has the authority to process payment proposals. The employee notices that a $1,000 transfer was made to a vendor with the director's log in. What laws will ensure that the treasury department employee will not suffer retribution if management is notified of this transaction?

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?

The assistant treasurer for ABC Inc. has been transferred to the headquarters in another country. While conducting a treasury review, the assistant treasurer noticed that a single associate was responsible for maintaining the company's complicated international transfer pricing schedules on a series of inter-linked computer spreadsheets. These spreadsheets were saved on the associate's computer versus the company's mainframe. The associate did not have a backup cross-trained in the function. Which critical types of risk management require the assistant treasurer's immediate attention?

Which of the following is an advantage of cryptocurrencies?

After several internal discussions about treasury management systems (TMSes), ABC Company has determined that it has no need for customization but that it does want a backup for high priority capabilities. The company wants to reduce its IT costs and resources but still have IT support with in-depth knowledge of the solutions available. These parameters will MOST LIKELY result in what kind of TMS?

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 company is filing for bankruptcy protection and is concerned about the welfare of its sizeable retiree population. Under ERISA, it is obligated to perform which of the following actions regarding its defined benefit plan?

Company XYZ is in its first year of operations. The company culture is conservative, and it has $500 million to invest in short-term investments. The company has a growth rate of 25% and is looking to issue an IPO in the near future. The investment manager is in the process of creating a short-term investment policy which must be approved by the board of directors. An item that should be included in the policy is:

A portfolio manager wishes to make a short-term investment. His investment policy requires that short-term investments be low risk and secured, have a fixed interest rate and be highly liquid/redeemable prior to maturity. Which of the following should the manager choose?

A nationwide discount retailer is re-evaluating financing methods since the most-popular and most-expensive electronics “must-have” item for this year is set to ship from factories in China. Which of the following credit facilities would be MOST effective for the retailer to use?

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?

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

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 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:

After receiving responses to its bank services request for proposal (RFP), a company with simple accounts payable (A/P) and accounts receivable (A/R) needs narrows the selection to two banks, but their pricing methodologies are different. Assume that each financial institution offers identical payment services, uses a 30 day month and a 12 month year for calculations and disregard any tax implications. Using the information in the data set, what would be the bank and cost of the optimal option?

An evolving technology to aid in eliminating the need to rekey data is:

Subtracting dividends from net income available to common shareholders is reflected as a change to which of the following balance sheet items?

Company ABC wants to consolidate bank balance reporting, do daily cash positioning, and make payments from a centralized platform for multiple banks. What vehicle should the company use?

BEA Company has determined its breakeven dollar amount for concentrating remote funds is $550.00. BEA Company has a daily earnings rate of 6% and gains one day of accelerated funds. If a wire costs BEA $35.00 dollars, what is the cost of an electronic funds transfer for BEA Company?

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 treasury employee of Company XYZ is privy to financial reporting information yet to be released to the public. He knows that year-end earnings exceed last year’s and would be viewed as positive to the investment community. He casually mentions to a relative that now would be a good time to buy the stock of Company XYZ. Which section of the treasury code of ethics would typically be violated by such a disclosure?

Company ABC needs external capital to finance a new product line. Its operating leverage is high, and its revolving credit agreement contains a ratings trigger. What will Company ABC MOST LIKELY do to finance its new product line?

An employee earning $80,000 per year decides to begin contributing to his company’s 401(k) plan effective January 1st. Assuming he is in the 25% tax bracket, contributes 15% of his pay into the plan each month and receives a company match of $0.50 for every dollar he contributes, what is his taxable compensation that year?

Which of the following is a tool that companies use to obtain a quantitative rating of a financial institution’s level of service?

A company has experienced significant growth through acquisition. The treasury group would like to improve operations by bringing together the various financial services from previously separate businesses. The treasury group has identified the company's needs and service requirements for a customized solution. What should be the next step in this process?

A company using open account terms with buyers has experienced the following in its last fiscal year:

* Gross sales increased from $10,000,000 to $11,000,000

* Net revenue decreased from $5,000,000 to $4,000,000

* DSO increased from 45 days to 60 days

What has the company MOST LIKELY discovered?

Which scenario provides the BEST example of an agency problem?

The Federal Financial Institutions Examination Council (FFIEC) publishes a report on which entity?

A company recently implemented a treasury code of conduct, which defined appropriate actions and business behaviors. The company developed policies and procedures that assigned duties to managers, and distributed the code to all treasury employees. The treasury group could have improved upon this implementation by doing which one of the following?

The board of directors of ABC Corporation has asked the CFO to consider adopting the direct method in preparing cash flow statements instead of the indirect method currently in use. Why would the board of directors promote this shift?

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 wholesale lockbox system does which of the following?

Which of the following is NOT a component of the operating cycle?

An L/C in favor of a U.S. exporter is issued by a bank in an emerging-market country, and it is confirmed by the exporter’s bank. What risk is reduced for the U.S. exporter?

A firm’s air conditioning unit breaks down unexpectedly and must be replaced immediately. What type of liquidity requirement is this an example of?

In this situation, the net earnings credit amount for the month would show:

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

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

Traditionally the primary source of operating risk in the area of external theft or malfeasance has been related to:

One reason for charging management fees to subsidiaries is to:

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

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

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?

In order to reduce the premiums paid to insurance companies, a company should consider retaining or self insuring for:

At the time of the initial debt contract, the only way debt holders can protect their interests effectively is to establish certain provisions or covenants designed to:

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

If the Federal Reserve wanted to stimulate a sluggish economy, it could do so by:

A cash manager is responsible for a small subsidiary that has significant funds but only writes one check per month. Which of the following types of accounts would the cash manager use for this subsidiary?

A company wants to implement more control over its cash management system. Which aspect of the system is the most susceptible to external fraud?

What type of tax does a multinational auto manufacturer commonly pay in foreign countries at each stage of a vehicle’s production?

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

Evaluating the liquidity needs of an organization is a function of:

When a foreign subsidiary pays a dividend to its parent company the transfer of funds may be subject to:

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:

The term "factoring" refers to a:

Multinational corporations repatriate funds from foreign operations through which of the following?