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AFP CTP Certified Treasury Professional Exam Practice Test

Demo: 139 questions
Total 932 questions

Certified Treasury Professional Questions and Answers

Question 1

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:

Options:

A.

supplier linkages.

B.

purchasing systems.

C.

working capital management.

D.

production resources.

Question 2

On the basis of the information above, what level of net collected balances is necessary to compensate a bank for $1.00 worth of services?

Options:

A.

$126

B.

$154

C.

$157

D.

$159

Question 3

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

Options:

A.

few small financial institutions.

B.

one major banking institution with branch offices at all locations.

C.

many small financial institutions.

D.

one major bank with corresponding relationships.

Question 4

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?

Options:

A.

Ledger credit Tuesday, collected credit Wednesday

B.

Ledger credit Tuesday, collected credit Thursday

C.

Ledger credit Wednesday, collected credit Wednesday

D.

Ledger credit Wednesday, collected credit Thursday

Question 5

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

Options:

A.

difficult to incorporate into statistical forecasting.

B.

economic rather than accounting values.

C.

sensitive to seasonal cash flows.

D.

based on snapshots of the company's activity.

Question 6

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?

Options:

A.

Cash flow from financing activities

B.

Cash flow from investing activities

C.

Change in cash balance

D.

Cash flow from operating activities

Question 7

LLZ Company manufacturers metal detectors in California at a cost of $9 per unit. The most expensive component to make is the sensor which goes in the finished product. The cost is $5 per sensor. Last month LLZ acquired a company in Mexico that makes the sensors for $1 per sensor. LLZ plans to move all sensor manufacturing operations to the factory in Mexico. What is the movement of this cost saving process called?

Options:

A.

Reengineering

B.

Offshoring

C.

Rationalizing

D.

Outsourcing

Question 8

What is the MOST appropriate definition of working capital?

Options:

A.

Current liabilities plus equity

B.

Current assets plus equity

C.

Current assets minus current liabilities

D.

Current assets minus fixed assets

Question 9

An airline has entered into an agreement with its partners to offset receivables and payables for a specified period of time and to transmit or receive the difference via funds transfer at the end of the period. This is an example of:

Options:

A.

a barter agreement.

B.

an inter-company loan.

C.

trade credit.

D.

a net settlement system.

Question 10

When will a depositor receive ledger and collected credit for a western check deposited at 2:00 P.M. Wednesday?

Ledger Credit - Collected Credit

Options:

A.

Wednesday - Thursday

B.

Wednesday - Friday

C.

Thursday - Thursday

D.

Thursday - Friday

Question 11

A company seeking an insured investment would avoid investing surplus cash in a:

Options:

A.

commercial bank.

B.

credit union.

C.

mutual fund.

D.

savings and loan.

Question 12

If a company does not have cash available to make an interest payment on a bond, the company is experiencing difficulty with its:

Options:

A.

profitability.

B.

asset-liability management.

C.

capital structure.

D.

liquidity management.

Question 13

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?

Options:

A.

ABC’s credit rating will suffer.

B.

The customer’s working capital has deteriorated.

C.

ABC’s working capital is unchanged.

D.

The customer’s cost of borrowing will increase.

Question 14

The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:

Options:

A.

chief financial officer and corporate secretary.

B.

chief financial officer and corporate controller.

C.

chief financial officer and chief executive officer.

D.

chief financial officer and chief operating officer.

Question 15

A major toy retailer operates 65 stores throughout the Midwest. Which of the following collection methods is MOST LIKELY to be used by this company?

Options:

A.

Field deposit

B.

Preauthorized debit

C.

Direct deposit

D.

Wholesale lockbox

Question 16

When a company creates future receivables and/or payables that are denominated in a currency other than its home or functional currency it is faced with:

Options:

A.

economic exposure.

B.

transaction exposure.

C.

translation exposure.

D.

futures risk exposure.

Question 17

When evaluating a FSP during the RFP process, a company should place a high value on a FSPs financial strength when the provider:

Options:

A.

is located in a remote location.

B.

holds assets for the company.

C.

processes high dollar value transactions.

D.

processes international transactions.

Question 18

The “agency problem” refers to:

Options:

A.

management’s use of a fiduciary agent for stockholders.

B.

a large and active institutional investor base acting on behalf of individual investors.

C.

stockholders who allow management to take actions that will benefit management.

D.

the internal audit function reporting to the audit committee of the board instead of to management.

Question 19

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

Options:

A.

Flexible credit terms are the most important consideration.

B.

Ability of financial institution to customize services is critical.

C.

A proforma account analysis statement captures all pricing and compensation detail.

D.

Accurate evaluation and comparison of the proforma account analysis statements are critical.

Question 20

A treasurer has been advised that his privately held company has just lost its largest customer, which will have a significant impact on earnings. The treasurer applies an aggressive working capital strategy. Presently, the yield curve is upward sloping. Given this information, the treasurer should ensure that the company has:

Options:

A.

short-term non-committed lines.

B.

short-term committed lines.

C.

long-term non-committed lines.

D.

long-term committed lines.

Question 21

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?

Options:

A.

Issue a standard unqualified opinion.

B.

Not render an opinion.

C.

Base their opinion on GASB standards.

D.

Issue an adverse opinion.

Question 22

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

Options:

A.

lower than the strike price.

B.

same as the strike price plus premium.

C.

higher than the strike price.

D.

same as the strike price minus premium.

Question 23

Unrealized holding gains and losses arise when trading securities are:

Options:

A.

marked-to-market and are reported under current income.

B.

marked-to-market and are reported under retained earnings.

C.

offset by the gains and losses of the item being hedged.

D.

recorded on the anniversary date of the purchase.

Question 24

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?

Options:

A.

$198,019.80

B.

$198,046.66

C.

$199,335.55

D.

$199,344.62

Question 25

A put option gives the holder the right to:

Options:

A.

buy the underlying stock at the strike price.

B.

sell the underlying stock at the strike price.

C.

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

D.

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

Question 26

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:

Options:

A.

daylight overdraft line.

B.

letter of credit.

C.

revolving line of credit.

D.

net debit cap.

Question 27

An accounts payable manager has been mandated to accept all trade discount opportunities with an effective cost of discount above 25%. An invoice has been presented and approved for payment with terms of 3/5, net 30 days. What is the difference between the effective cost of discount offered, and the 25% rate set by the company?

Options:

A.

14%

B.

17%

C.

20%

D.

22%

Question 28

A company with a relatively poor credit rating borrows most of its funds with short maturities. They may want to change its exposure to interest rates to more correctly reflect the long-term nature of the projects it is funding. Or, they may believe that long-term interest rates are going to rise, causing it to seek protection against the impact of higher interest rates on its balance sheet. Which of the following would be a solution?

Options:

A.

Forward contract

B.

Interest rate swap

C.

Currency option

D.

Futures contract

Question 29

A company is interested in lowering its overall banking costs, managing netting, pooling, re-invoicing, and centralizing FX exposure at headquarters. Which of the following options will accomplish this?

Options:

A.

In-house banking

B.

Shared service center

C.

Company processing center

D.

Automated clearing house

Question 30

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?

Options:

A.

6.0%

B.

6.2%

C.

9.0%

D.

9.3%

Question 31

A company’s credit agreements or loan covenants may require:

Options:

A.

minimum ratings for insurance carriers.

B.

high deductible levels and risk retention in order to minimize premium payments.

C.

outsourcing of the claims approval and payment process to an insurance company.

D.

risk management staff to work directly with underwriters to reduce commission payments.

Question 32

The principal roles of corporate finance include which one of the following combination of functions?

Options:

A.

Maintaining liquidity and optimizing cash

B.

Capital budgeting and financial risk management

C.

Establishing credit terms and collection policies

D.

Shareholder relations and dividend decisions

Question 33

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?

Options:

A.

Maximum long-term debt to capital of 52.5%

B.

Minimum working capital of $10,000

C.

Maximum dividends of 50% of net income

D.

Minimum cash flow to total debt of 45%

Question 34

A company wishes to monitor and control office expenses incurred by its employees. Which of the following offers the BEST method of providing the employees freedom to choose different vendors while maximizing spending control?

Options:

A.

Stored value cards

B.

Purchasing cards

C.

Travel cards

D.

Debit cards

Question 35

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?

Options:

A.

$12,166,667

B.

$13,518,519

C.

$20,277,778

D.

$22,530,864

Question 36

The delay between the time a check is deposited and the time the company's account is credited with collected funds is known as:

Options:

A.

collection float.

B.

mail float.

C.

processing float.

D.

availability float.

Question 37

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

Options:

A.

A decrease in the tax rate

B.

An increase in the T-bill rate

C.

A decrease in the expected market return

D.

An increase in the company’s stock price

Question 38

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:

Options:

A.

2.80%.

B.

5.56%.

C.

5.63%.

D.

49.18%.

Question 39

Which of the following should NOT be a consideration when setting an optimal dividend policy?

Options:

A.

Ability to raise other forms of capital

B.

Long-term need for capital expansion

C.

Short-term profit projection

D.

Target capital structure

Question 40

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

Options:

A.

decrease in current assets.

B.

increase in current liabilities.

C.

source of cash on the cash flow statement.

D.

use of cash on the cash flow statement.

Question 41

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?

Options:

A.

$350,000

B.

$365,000

C.

$390,000

D.

$400,000

Question 42

Refer to the following information about a company at the end of its fiscal year.

The before-tax cost of long-term debt is 10% and the cost of equity is 12%. The marginal tax rate is 35%.

What is the company's long-term debt to total capitalization ratio?

Options:

A.

0.44

B.

0.67

C.

0.73

D.

0.78

Question 43

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

Options:

A.

a stock split.

B.

a special dividend.

C.

a stock repurchase.

D.

a stock dividend.

Question 44

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?

Options:

A.

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

B.

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

C.

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

D.

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

Question 45

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 46

A commercial paper issuer who repays investors earlier in the day than it receives funds from new investors often creates which of the following?

Options:

A.

Collected overdraft

B.

Daylight overdraft

C.

Disbursement float

D.

Dual balances

Question 47

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?

Options:

A.

Operational risk

B.

Currency risk

C.

Derivatives risk

D.

Regulatory risk

Question 48

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.

Options:

A.

I and II only

B.

I and IV only

C.

I, II, and III only

D.

II, III, and IV only

Question 49

A major publicly owned U.S. airline announces that it can no longer meet its pension obligations. Which organization will assume control of the airline’s pension plan?

Options:

A.

The PBGC

B.

The FDIC

C.

The CIEBA

D.

The DOL

Question 50

All of the following are discounted instruments EXCEPT:

Options:

A.

preferred stock.

B.

banker's acceptance.

C.

commercial paper.

D.

Treasury bills.

Question 51

The risk that one financial institution’s failure could lead to the failure of other financial institutions is known as:

Options:

A.

settlement risk.

B.

systemic risk.

C.

credit risk.

D.

fraud risk.

Question 52

The USA Patriot Act has added significant amounts of overhead to financial transaction processing organizations to prevent money laundering. If an organization does NOT comply with the terms of this act, what external risk is it exposed to?

Options:

A.

Fraud/theft

B.

Legal/regulatory

C.

Financial/budgetary

D.

Procedure/policy

Question 53

James Corp has a 7.98% WACC and an assumed tax rate of 30%. James Corp employed €70,000,000 of capital (long-term debt and equity) in a project that generated an operating profit of €9,500,000, after depreciation expense of €300,000. EVA in this case would be:

Options:

A.

€764,000.

B.

€1,064,000.

C.

€1,087,940.

D.

€1,274,000.

Question 54

The executive management of a utility company would like to determine if it would be more cost effective to hire a third-party provider to handle its bill processing functions, which are currently internally operated. What formal selection method should the company use to obtain proposed solutions and detailed pricing from potential vendors?

Options:

A.

Request for Information (RFI)

B.

Request for Proposal (RFP)

C.

Public solicitation

D.

Bidder’s conference

Question 55

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

Options:

A.

Riding the yield curve

B.

Using a dividend capture program

C.

Investing in overnight repos

D.

Executing a securities swap

Question 56

A cash manager wants to convert wire payments to ACH. Which of the following would NOT be a good application for ACH?

Options:

A.

Routine loan payments

B.

Lease payments

C.

Same day payments

D.

Future tax payments

Question 57

Which of the following is NOT a consideration for treasury managers when implementing electronic communications with FSPs?

Options:

A.

Cost limitations

B.

Security concerns

C.

Physical location of FSP

D.

Telecommunications infrastructure

Question 58

The Sarbanes-Oxley Act of 2002:

Options:

A.

created the Financial Accounting Standards Board.

B.

created the Public Company Accounting Oversight Board.

C.

created the Public and Private Corporate Governance Board.

D.

created the International Accounting Standards Convergence Board.

Question 59

Corporate governance for publicly traded U.S. companies includes:

Options:

A.

the roles and responsibilities of independent directors.

B.

full compliance with local and state regulations.

C.

the structure and organization of executive management.

D.

timely and complete submission of audited financial statements with the SEC.

Question 60

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?

Options:

A.

Value at Risk

B.

Sensitivity analysis

C.

Scenario analysis

D.

Monte Carlo simulation

Question 61

An accountant is fired after reporting to the SEC that she witnessed the CFO inappropriately reduce expenses ahead of the quarterly earnings announcement. Which of the following would apply?

Options:

A.

The accountant is protected by ‘whistle-blower’ laws.

B.

The CFO is liable for Bank Secrecy Act reporting.

C.

The accountant is in violation of Section 404 of the Sarbanes-Oxley Act.

D.

The CFO is protected by the code of ethics.

Question 62

What is the authoritative accounting standard-setting body for state and local governments, public schools, state universities, and other government-affiliated agencies?

Options:

A.

Financial Accounting Standards Board

B.

Financial Accounting Foundation

C.

Governmental Accounting Standards Board

D.

Governmental Accounting Standards Foundation

Question 63

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?

Options:

A.

Check truncation

B.

Re-presented check entries

C.

Point-of-purchase

D.

Back office conversion

Question 64

Who has responsibility for final approval of treasury policies that have a significant impact on the organization?

Options:

A.

The board of directors

B.

The chief financial officer

C.

The treasurer

D.

The audit committee

Question 65

An analyst at Davis Company uses the tax payment (TXP) banking convention for payment of state taxes. The analyst is preparing to pay $650,000 in taxes to the state where Davis Company is domiciled. What payment method will the analyst use to make the tax payment?

Options:

A.

ACH Credit

B.

Fedwire Credit

C.

Certified Check

D.

Multiple Drawee Check

Question 66

Which institution or accord was approved in 2009 to strengthen the regulatory capital framework for banks by focusing on minimum capital requirements, supervisory review and market discipline?

Options:

A.

FINRA

B.

Basel I

C.

Basel II

D.

CAMELS

Question 67

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?

Options:

A.

$72.25

B.

$73.36

C.

$722.25

D.

$922.25

Question 68

XYZ Company is a fairly new and high growth company funded by venture capital. Which of the following performance measures is it MOST LIKELY to use?

Options:

A.

Economic value added

B.

Net present value

C.

Residual income

D.

Free cash flow

Question 69

XYZ Company experienced a substantial monetary loss due to over exposure to one particular sector of the stock market. The Treasurer had invested in companies tied to five different sectors, but violated the company investment policy by exceeding a 10% limit for any sector. In developing its investment policy, what should XYZ Company have considered to prevent this scenario?

Options:

A.

Segregation of duties

B.

Exception management

C.

Internal and external controls

D.

Diversification of investments

Question 70

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?

Options:

A.

$136,111.11

B.

$736,111.11

C.

$811,111.11

D.

$886,111.11

Question 71

A U.S. company’s pension plan is managed by an investment management firm, headquartered outside the United States. The investment management firm outsources the accounting for the plan to an organization on the Office of Foreign Assets Control (OFAC) sanctions lists and the firm does not advise the U.S. company of this fact. A financial loss in the pension plan is later realized due to the mismanagement of funds. When establishing its contract with the firm to protect itself from losses in the pension plan, the company should have:

Options:

A.

identified the exception management process.

B.

included a limitation of liability clause in the contract.

C.

referred to the Foreign Corrupt Practices Act in the contract.

D.

specified what constitutes other-than-temporary-impairment for the investments.

Question 72

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?

Options:

A.

Eliminate specific AAA rated counterparties.

B.

Adopt a third-party custodian for investments.

C.

Implement or adjust single counterparty balance limits.

D.

Add to the number of counterparties to increase diversification.

Question 73

A U.S. company decides to enter a new geographic market facing some dominant competitors, but projects sales growth of 40% in its first year due to its superior product line. The company decides to only offer electronic payment methods for settlement of its receivables. A year later, the company’s sales volume only increases by 10%, but their average days’ sales outstanding of 32 days is the best in the industry. What should the company have considered in its collection policy objectives?

Options:

A.

Cost efficiency

B.

Customer satisfaction

C.

Performance measurement

D.

Approved collection practices

Question 74

PTC Corporation has determined that the threshold amount for initiating a wire transfer vs. an ACH payment for concentrating funds is $60,225. Wires cost $9.00 and save one day of float. If the opportunity cost is 5%, what is the cost of the ACH payment?

Options:

A.

$0.75

B.

$0.80

C.

$0.90

D.

$1.00

Question 75

What should a company’s senior management consider in their payment policies to eliminate the co-mingling of funds for payables, receivables and foreign exchange transactions?

Options:

A.

Required control points

B.

Bank account structuring

C.

Payment laws and regulations

D.

Participants in the payment process

Question 76

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?

Options:

A.

Prepay a portion of the equipment loan to minimize interest rate risk.

B.

Pay current payables and invest any excess cash in a money market account earning 1.5%.

C.

Pay off the mortgage and invest remaining funds in a 6-month CD at 2.5%.

D.

Invest $4 million in a CD at 2.5% for 3 months.

Question 77

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?

Options:

A.

Internal technology

B.

Compliance

C.

External theft/fraud

D.

Market

Question 78

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?

Options:

A.

Secure sockets layer

B.

Layered authentication

C.

Public key infrastructure

D.

Shared secret key system

Question 79

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?

Options:

A.

Wire fraud

B.

Payroll fraud

C.

ACH kiting fraud

D.

Credit card fraud

Question 80

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?

Options:

A.

IPO Market

B.

Private Market

C.

Primary Market

D.

Secondary Market

Question 81

What kind of budget forecasts the cost for investing activities?

Options:

A.

Operating budget

B.

Sales budget

C.

Maintenance budget

D.

Capital budget

Question 82

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

Options:

A.

maintain adequate retained earnings for future growth.

B.

maximize shareholder value.

C.

distribute corporate income to investors.

D.

balance tax shield benefits against agency costs.

Question 83

One of the advantages of raising capital through public offerings is that:

Options:

A.

it reduces fluctuations in the price of capital.

B.

it reduces the costs of managing reporting and disclosure.

C.

large amounts of debt and equity can be raised at the risk-free rate.

D.

large amounts of debt and equity can be raised at prevailing rates.

Question 84

The stock of a manufacturing company is priced so that its expected rate of return is below its required rate, as calculated by the Capital Asset Pricing Model (CAPM). Which of the following will occur in an efficient capital market?

Options:

A.

Buying pressure for the firm’s stock will drive the price up.

B.

Buying pressure for the firm’s stock will drive the price down.

C.

Selling pressure for the firm’s stock will drive the price up.

D.

Selling pressure for the firm’s stock will drive the price down.

Question 85

In evaluating alternative capital investments, a company should consider qualitative factors such as:

Options:

A.

projected cash flows.

B.

estimated economic returns.

C.

corporate strategy.

D.

estimated costs.

Question 86

Assume the cost of an ACH transaction is $0.80, the charges for a wire transfer are $30.00, the monthly account maintenance fee is $10.00, and the company earns interest at an annual rate of 1.825% on overnight investments. What is the break-even point where the interest earned on overnight investments offsets the incremental wire costs?

Options:

A.

$3,840

B.

$5,840

C.

$284,000

D.

$584,000

Question 87

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

Options:

A.

I and II only

B.

I and IV only

C.

II and IV only

D.

I, II, III, and IV

Question 88

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

Options:

A.

investing.

B.

borrowing.

C.

capitalizing.

D.

lending.

Question 89

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

Options:

A.

Get management approval.

B.

Generate a sales budget.

C.

Establish cost allocations.

D.

Determine capital structure.

Question 90

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

Options:

A.

Gain on an equity investment

B.

Purchase of a bond investment

C.

Market value of collateral

D.

Purchase of a forward

Question 91

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

Options:

A.

Maintaining control of ownership

B.

Complying to rating agency and lender restrictions

C.

Using common stock as a source of funds

D.

Determining the mix of debt versus equity

Question 92

On which exchange is a company’s stock traded on the over-the-counter market?

Options:

A.

AMEX

B.

FINRA

C.

NASDAQ

D.

NYSE

Question 93

The KEY decision in using CCD+ and CTX formats for B2B payments is:

Options:

A.

whether to keep the payment and remittance information together or separate.

B.

whether to use the Internet or an EDI spoke to transmit electronic payments.

C.

whether to use an EDI or a UN/EDIFACT protocol to transfer the value electronically.

D.

whether an evaluated receipts or paid-on-production technique is being used for the transfer.

Question 94

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:

Options:

A.

high total liabilities to total assets ratio.

B.

high debt to tangible net worth ratio.

C.

low long-term debt to capital ratio.

D.

low times interest earned ratio.

Question 95

Company XYZ is now required to make electronic payments by its suppliers. To prevent an increase in costs, the company shoulD.

Options:

A.

negotiate a change in payment timing with its suppliers.

B.

institute a just-in-time inventory system.

C.

negotiate a change in cash disbursement with its concentration bank.

D.

institute a modified RSA system for its inventory.

Question 96

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

Options:

A.

allows the corporation to capture plan investment surpluses.

B.

allows proxy voting in favor of management.

C.

shifts investment shortfall risk to employees.

D.

defines allowed investments within the plan.

Question 97

Which of the following ACH formats is commonly used for consumer payments such as deposits of payroll?

Options:

A.

CCD

B.

CTX

C.

PPD

D.

TXP

Question 98

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

Options:

A.

Varying fiscal year-ends

B.

Sales patterns

C.

Size of the payment discount

D.

Weekends and holidays

Question 99

The use of debt to finance a company is called:

Options:

A.

borrowing cost.

B.

risk-adjusted cost.

C.

cost of debt.

D.

financial leverage.

Question 100

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

Options:

A.

maturities of instruments that may be purchased.

B.

proportion of the portfolio invested in specific types of instruments.

C.

purchase of unrated securities.

D.

issuance of commercial paper.

Question 101

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?

Options:

A.

Use of a different terminal

B.

Goods or services sold

C.

Type of card accepted

D.

Time of batch closure

Question 102

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?

Options:

A.

$19,595

B.

$19,600

C.

$19,995

D.

$20,000

Question 103

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?

Options:

A.

SWIFT

B.

CHIPS

C.

Giros

D.

EDI

Question 104

Which of the following would MOST LIKELY cause a decrease in a company's deposited checks availability?

Options:

A.

The depository bank institutes an earlier deposit deadline.

B.

The Federal Reserve implements same-day presentment.

C.

The company's lockbox bank implements weekend processing.

D.

The company encodes its own checks prior to deposit.

Question 105

Which of the following ways of financing accounts receivable requires a company to relinquish control of the type of customer to which it sells?

Options:

A.

Securitization

B.

Using captive finance subsidiaries

C.

Third-party financing

D.

Unsecured borrowing

Question 106

Which statement is true about private placements compared to public offerings?

Options:

A.

They take more time to complete.

B.

They reduce issuance costs.

C.

They have more restrictive covenants.

D.

They have lower interest rates.

Question 107

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?

Options:

A.

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

B.

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

C.

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

D.

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

Question 108

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?

Options:

A.

$9,795

B.

$9,800

C.

$9,995

D.

$10,000

Question 109

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

Options:

A.

the buyer's ability to pay.

B.

the ability to receive cross-border payments.

C.

foreign currency exposure.

D.

the stability of the buyer's bank.

Question 110

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.

Options:

A.

III

B.

I and II

C.

I and III

D.

I, II, and III

Question 111

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?

Options:

A.

Week 3 ending cash balance is the highest of the three weeks.

B.

Week 2 ending cash balance is the highest of the three weeks.

C.

Week 1 ending cash balance is the highest of the three weeks.

D.

The cash balance at the beginning of the three weeks is the highest of the three weeks.

Question 112

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?

Options:

A.

Leave the funds in RST’s bank account earning an ECR of 1%.

B.

Purchase low-risk, short-term investments yielding 2%.

C.

Prepay a $15 million, 5% loan maturing in 1 year.

D.

Buy a long-term, highly rated investment paying 2.10%.

Question 113

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?

Options:

A.

Let the put option expire.

B.

Exercise its put option.

C.

Purchase a call option at 1.85.

D.

Purchase a spot contract at 1.85.

Question 114

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

Options:

A.

I and II only

B.

I and III only

C.

II and III only

D.

I, II, and III

Question 115

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

Options:

A.

armored car.

B.

cash vault.

C.

retail lockbox.

D.

debit card.

Question 116

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

Options:

A.

collection float.

B.

mail float.

C.

processing float.

D.

availability float.

Question 117

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

Options:

A.

The interest earned is exempt from federal taxes.

B.

There is no price risk.

C.

They are extremely liquid.

D.

They offer the highest yield for overnight investing.

Question 118

A company can use all of the following documents to establish a relationship with a bank EXCEPT:

Options:

A.

account analysis statements.

B.

account resolutions.

C.

service agreements.

D.

signature cards.

Question 119

Which of the following are commonly used for financing accounts receivable?

I. Factoring

II. Issuing credit cards

III. Revolving bank loans

IV. Letters of credit

Options:

A.

I and II only

B.

I and III only

C.

III and IV only

D.

I, II, and III only

Question 120

Which of the following can be used for monitoring accounts receivables?

I. Aging schedule

II. Credit terms

III. Days' sales outstanding

IV. Receivables balance pattern

Options:

A.

I and II only

B.

I and IV only

C.

I, III, and IV only

D.

II, III, and IV only

Question 121

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

I. Local bank

II. Concentration bank

III. Lockbox bank

Options:

A.

I only

B.

I and II only

C.

II and III only

D.

I, II, and III

Question 122

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

Options:

A.

retail brokerage.

B.

portfolio manager.

C.

industrial credit company.

D.

investment brokerage firm.

Question 123

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

Options:

A.

collected balances.

B.

ledger balances.

C.

earnings credit rates.

D.

reserve requirement.

Question 124

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

Options:

A.

I and IV

B.

II and III

C.

I, III, and IV

D.

I, II, III, and IV

Question 125

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

Options:

A.

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

B.

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

C.

A wholesale lockbox with multiple deposit points

D.

A retail lockbox with multiple deposit points

Question 126

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

Options:

A.

cost of goods sold.

B.

prepaid expenses.

C.

interest expense.

D.

taxes.

Question 127

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

Options:

A.

Its shareholders assume less risk than its creditors.

B.

The payment of interest on debt is not tax deductible.

C.

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

D.

It is more expensive.

Question 128

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

Options:

A.

I and II only

B.

I and III only

C.

I, II, and III only

D.

II, III, and IV only

Question 129

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:

Options:

A.

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

B.

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

C.

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

D.

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

Question 130

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

Options:

A.

$3

B.

$5.25

C.

$7

D.

$7.35

Question 131

Based on the above information,

if the company uses the trade-off theory in considering its WACC, how will it finance its growth?

Options:

A.

By using long-term debt

B.

By issuing Class A stock

C.

By using retained earnings

D.

By issuing Class B stock

Question 132

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

Options:

A.

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

B.

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

C.

earnings in future periods will not change.

D.

to split the stock in future periods.

Question 133

Which of the following types of risk would an investor who does NOT receive payments on a security under the original terms be subject to?

Options:

A.

Price

B.

Credit

C.

Asset liquidity

D.

Foreign exchange

Question 134

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?

Options:

A.

Issue preferred stock.

B.

Implement a dividend reinvestment plan.

C.

Issue warrants.

D.

Implement a stock repurchase plan.

Question 135

Which of the following is true of return on investment (ROI)?

Options:

A.

It includes a charge for the cost of capital in a project.

B.

It is commonly used to calculate after-tax profitability.

C.

It may cause management to accept a project with positive NPV.

D.

It is calculated as profit per dollar of invested capital.

Question 136

A company has six fraudulent checks clear its primary disbursement account for a total of $7,652. The bank agrees to split the loss with the company to maintain a good relationship. As a condition of sharing the expense, the bank requires the company to establish positive pay on its disbursement accounts or have the company absorb the losses on future fraudulent payments.

If the company determines that positive pay is too expensive and decides NOT to implement it, what type of risk financing technique is the company using?

Options:

A.

Crime insurance

B.

Self-insurance

C.

Risk avoidance

D.

Risk transfer

Question 137

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:

Options:

A.

not comply with SOX requirements.

B.

violate shareholder pre-emptive rights.

C.

require approval from PCAOB.

D.

need to report the large currency transaction.

Question 138

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?

Options:

A.

Defined benefit plan

B.

Internal Revenue Code 401(k) plan

C.

Hybrid plan

D.

Internal Revenue Code 403 (b) plan

Question 139

Given the above information,

if the risk manager adds a tank at its second facility, what loss control technique is being used?

Options:

A.

Exposure avoidance

B.

Limiting contractual acceptance of risk

C.

Catastrophic loss control

D.

Separation of exposures

Demo: 139 questions
Total 932 questions