Which of the following would be used to evaluate only the effects of varying interest rates while holding all other values constant at their expected levels?
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:
A measure of the incremental impact of a company's investments on market capitalization is known as:
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 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 telecommunications company has decided to sell its call center hosting division. This is an example of what type of financial decision?
In developing treasury policies and procedures, which activity requires key controls to be in place?
Which of the following is an example of using cash forecasting for liquidity management?
Under the strict cash basis of accounting, revenue is recorded when:
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?
All of the following staff would be involved in the evaluation of an outsourced accounts payable solution 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?
Which of the following is NOT one of the three goals of a disbursement system?
A company employs several short-term credit facilities at any one time to meet its liquidity needs and has consistently demonstrated the ability to service this debt as required. However, because of a temporary breach of a financial covenant of one agreement, all of the company’s credit facilities were declared in default. All the credit agreements must have had which of the following types of clause?
When a company must determine the optimal mix of long-term borrowings versus common equity, it is making which of the following types of corporate financial decisions?
Which two of the following are optimal uses for short-term excess cash?
I. Pay down credit lines.
II. Make overnight investments.
III. Repurchase stock.
IV. Make capital expenditures.
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?
Multinational corporations repatriate funds from foreign operations through which of the following?
A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?
Which of the following is a regulation that is having a major impact on the treasury profession?
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:
If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?
When a foreign subsidiary pays a dividend to its parent company the transfer of funds may be subject to:
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?
What is a KEY reason that both a lessee and a lessor would enter into a lease financing agreement?
All of the following bank products and services can simplify the preparation of the daily cash position EXCEPT:
If a company does not have cash available to make an interest payment on a bond, the company is experiencing difficulty with its:
Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?
Which of the following would increase if the Fed were to announce a reduction in reserve requirements?
An analysis of variances from expected cash flows is used to:
In a large company, the financial planning function typically falls directly under the responsibility of the:
A lockbox provider offers which of the following advantages over a company processing center?
I. It increases the company's operational control.
II. It produces processing economies of scale.
III. It allows for external audit controls.
IV. It reduces collection float.
Which of the following is NOT a short-term cash forecasting technique?
Which of the following is NOT a drawback to using ROI as a performance measure?
A company hires an investment firm to fully underwrite a new stock issuance. Which of the parties carries the MOST risk?
Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?
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?
One reason for using a sale and lease-back arrangement in lease financing is to:
An optimal concentration system minimizes all of the following EXCEPT:
With respect to the Sarbanes-Oxley Act, a company may avoid additional reporting requirements by:
For a defined benefit plan,
In which of the following international cash management methods is title for goods transferred for intercompany sales?
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:
What must be measured and monitored to ensure that a company has adequate liquidity?
Company XYZ is not sure which direction interest rates are headed. Which of the following would be MOST suitable?
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?
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as:
The assistant treasurer of a company uses variance analysis comparing actual cash flows with projected cash flows and finds actual is less than forecasted. Which of the following would cause this variance?
Bank A is to pay Bank B $6,000,000 for 10 transactions that occurred throughout the day. Bank B is to pay Bank C $8,000,000 for 13 transactions that occurred throughout the day. Bank B is to pay Bank A $5,000,000 for 17 transactions that occurred throughout the same day. These banks operate using a gross settlement system. How many transactions will occur between these banks to settle the payments?
A U.S. bank is actively trying to establish its operations in an emerging market country, but is not experiencing much success due to differences in the business culture. To gain some market share, an executive of the bank decides to give the son of a local dignitary a highly paid position in the organization. Furthermore, the dignitary is a person of interest on various terror watch lists. Sanctions can be placed on the bank because the executive did NOT establish compliance with which of the following?
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 has grown quickly in the euro zone market. It wants to maximize its excess cash. Which would be the BEST method of concentrating funds?
RAL Capital, a lean global financial service provider with revenues of $8 billion, has 10 regional offices located around the world. The RAL global trading groups are structured as profit centers with each center having its own profitability targets. The group’s clients consist of large multinational corporations and financial institutions that require the buying and selling of large amounts of currency. The Treasurer is considering reorganizing his department into a profit center. The group processes millions of transactions every year. What is a downside of this scenario?
A North American service company has autonomous offices in different geographic regions each handling their own sales and accounts receivables deposits to local banks which primarily consist of checks. By implementing a lockbox collection system, what objective in its collection policy would it have met?
A 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?
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?
A hamburger patty supplier receives an order from ABC Burgers located in Minnesota. The supplier’s policy is to bill upon fulfillment of the order and not at delivery. ABC Burgers pays upon receipt of goods. A blizzard has closed the manufacturing facility and roads; delivery will be delayed by two days. Which type of float occurs between the receipt of an invoice by ABC Burgers, including the credit period, and the time ABC Burgers’ account is debited?
Why would a company establish a short-term credit facility?
A company converts the expense processing for its sales team from reimbursement by check to providing the team with travel and entertainment cards. Immediately, the company’s expenses for the sales force increase by 10%, with no concurrent increase in sales volumes. What aspect should the company have covered in their policies for card use to prevent the increased expenses?
The Treasury Manager of a privately held company is looking to finance new equipment that has a useful life of 5 years. What type of financing would the Treasury Manager MOST LIKELY employ to finance the equipment?
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:
Which of the following is a component of a company’s operating budget?
Over the past 3 years XYZ Company has expanded into multiple countries and significantly grown its banking relationships. The company now incurs significant expenses related to payment transaction costs and maintaining multiple bank connections. What should the company use to combat these rising costs?
Company ABC has expanded its banking relationships due to international growth. ABC cannot figure out why its collection float amongst its international customers is longer than its domestic customers. Additionally, ABC is incurring significant costs related to the receipt and processing of these customer payments. ABC is MOST LIKELY experiencing issues related to:
The main objective of a company's international cash management function is to:
ABC Company is an energy-holding company which owns a number of regulated power utilities that have monopolies in different regions. The majority of the holding company’s income is realized from investment portfolios. The company has done well and is going to report its overall performance to the public. What performance evaluation processes should management use to measure portfolio performance?
Who has responsibility for final approval of treasury policies that have a significant impact on the organization?
Which of the following situations is the best example of transaction exposure?
The Public Company Accounting Oversight Board (PCAOB):
An organization must maintain adequate liquidity to meet:
When a company decides to discontinue a product line or divest of a subsidiary, it has made what type of corporate financial decision?
Without regard to costs, which of the following concentration mechanisms maximizes investment income in a multi-bank environment?
A retail company is performing a risk analysis on its accepted payment types. Cash is the primary form of payment for this retailer. What is the PRIMARY issue with cash payment systems?
Company M operates a grocery distribution business on Main Street. As part of its business continuity plan, Company M intends to purchase insurance to cover the facility lease for its Main Street warehouse in the event it cannot operate for a period of time. What type of coverage should Company M purchase?
Which of the following is NOT a consideration for treasury managers when implementing electronic communications with FSPs?
A financially sound company sends wires to investors in the morning but does not receive replacement funds until the afternoon. Which facility will the company MOST LIKELY arrange with its bank to facilitate the company’s wire payment activities on any given day?
A Treasury Management System (TMS) is used to:
Whether through an active or passive decision by management, a risk management policy of control without financing results in:
An employee is considering two investment strategies for his 401(k) plan:
Strategy #1: Invest all contributions in a money market fund that has returned 5% annually
Strategy #2: Invest all contributions in a stock fund that has returned 9% on average, although annual returns have varied between (2%) and 12%
Assuming that the employee makes a one-time investment of $12,000 and that both strategies continue to perform as they have historically, how much more or less could the stock fund be worth after one year compared to the money market fund?
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?
The first step in the financial institution and financial services provider (FSP) selection process should be:
A multinational company owns a United Kingdom subsidiary that has total assets equal to £1 million and intercompany loans due to the parent company equal to $1 million. It would like to undertake a balance sheet hedge of the U.K. subsidiary’s GBP liability because it expects a depreciation of the pound. Given these circumstances, which of the following actions would be appropriate?
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:
One of the KEY risks associated with a company’s use of financial institutions is the possibility that:
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?
A company has negotiated a credit facility with the following terms:
What is the annual interest rate on the line of credit?
When projecting the closing cash position, a cash manager must estimate which of the following?
Which of the following must be considered when designing the basic framework for a cash management system?
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?
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):
Two critical factors in determining an operational risk management strategy for a company are:
A U.S.-based electronics company that buys components from one of its foreign subsidiaries at a price above market is likely to:
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 U.S. firm acquires a large U.K. manufacturer that generates high levels of cash flow in its local currency. The purchase is denominated in British pounds and is financed through the issuance of 10-year, 7.5% U.S. dollar bonds. The U.S. firm will rely entirely on the U.K. manufacturer's cash flows to fund the interest payments on the bonds. What derivative instrument would help the U.S. firm manage its FX exposure?
Under the standards of corporate governance adopted in 2002, an independent director must:
A diversified industrial company operates multiple remote manufacturing facilities that manage local supplier relationships. The company draws on a single line of credit for all of its working capital needs. Which of the following types of disbursement systems would BEST meet this company's needs?
ABC Company is considering investing in new production technology. ABC has projected that the investment would add $5,000,000 in additional operating profit and that the resulting balance sheet would show $7,000,000 in long-term debt and $11,000,000 in total equity. ABC has a 34% tax rate and a 10% WACC. Which of the following is the investment's EVA?
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?
There are 31 calendar days in the month, and the opportunity cost of funds is 9%.
What is the annual cost of float for the batches listed?
The treasury analyst at RST Corporation has been asked to forecast cash levels for the company’s year-end balance sheet. The analyst has been given the following information:
What should the analyst project as the upcoming year-end cash balance?
On a daily basis, the cash manager is responsible for all of the following EXCEPT:
Which of the following can be exercised only on the expiration date?
The role of the depository bank in the check-clearing process is typically which of the following?
When considering Fedwire, ACH and CHIPS as 3 different payment systems, which of the following applies only to Fedwire?
Which of the following is a typical overnight use of excess cash?
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?
A sinking fund is primarily used for which of the following purposes?
A pizza restaurant chain maintains separate accounts at bank branches near each of their 1,067 restaurants to handle the deposit of cash received. Early each morning, the company’s point-of-sale system electronically transmits collection totals from the previous day to its main computer. ACH debits are then initiated to concentrate the funds from the local accounts to the concentration account the following day. Recently, several of the ACH debits have been returned for insufficient funds because deposits weren’t being taken to the bank on a timely basis by the local employees. Without increasing staff at the restaurants, what could Treasury do to prevent this from happening and avoid overdrafts at the local banks?
A company's investment guidelines typically restrict all of the following EXCEPT:
Following the latest round of cost-cutting measures at ABC Corporation, the Treasury Department retained a headcount of 2 individuals. While the analyst was out sick, she gave her password to her Manager so that payments could be released via the bank’s wire transfer system. The Manager sent 3 wires out with incorrect banking instructions. The problem was not identified until the angry suppliers called several weeks later demanding payment. The corporation has not yet recovered the $130,000 sent to erroneous accounts. In this instance, which control failed for ABC Corp.?
Major Manufacturing Inc. (MMI) is a manufacturer of customized restaurant equipment. MMI's supplier relations policy is to take advantage of trade discounts, when available. All suppliers offer payment terms of 1/10, net 30. MMI invoices customers at the end of its 30-day manufacturing cycle. Which of the following is the correct chronological sequence of the events listed?
1. Customer invoice is sent.
2. Supplier payment is sent.
3. Customer payment is received.
4. Order is shipped.
5. Customer order is received.
6. Supplier order is placed.
A retail brokerage firm is MOST like which one of the following types of financial institutions?
Securities sold by companies in an initial public offering (IPO) arE.
A manager has prepared an analysis of five investment alternatives. Prior to selecting which alternative to invest funds in, the manager calculated the anticipated return for all options. The manager is only going to invest in one alternative. The four investments that are not chosen are:
An analyst at XYZ Company was assigned with determining if the company should start to use a lockbox provider for its retail payments. The analyst determined that the company’s annual sales of $324,000,000 were recorded evenly throughout the year. The Company receives 30,000 checks annually. Total dollar-days float without the lockbox is $76,500,000 and the annual opportunity cost is 5.5%; assume 30-day month. The industry’s average opportunity cost is 6.0%. Using the information in the table, what would be the net effect of using the lockbox?
A company is looking to improve its collection rate of returned checks. If the company implements re-presented check entry (RCK) with its bank, it might see a reduction in what type of returned items?
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:
The yield on any short-term investment instrument is a function of the maturity or holding period, the amount paid and:
A treasury manager at a multinational manufacturing corporation assigned a team of analysts to re-engineer the company’s FX exposure management program. Which of the following alternatives would BEST accomplish this objective?
Which of the following is generally NOT a benefit of financial risk management?
A company which experiences increased business volumes but a minimal increase in profitability MOST LIKELY has:
Based on the above information,
if the company uses the trade-off theory in considering its WACC, how will it finance its growth?
A nationwide retailer has been making EFT payments to its suppliers for several years. It will expand its processes to include consumer payments in its EFT initiative. Which of the following will support this initiative at the point-of-sale?
When a company announces a significant and unexpected dividend increase, it signals to the market that management expects:
Money market funds are able to obtain very competitive trading terms because:
Company XYZ has stable cash flows and sizable assets. The board of directors compared its WACC with its own industry’s averages and determined that it may be at a competitive disadvantage. In order to become more competitive, what action will XYZ MOST LIKELY take?
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:
When a subsidiary borrows money, the parent, sister subsidiary, or other entity is often used in order to:
The future value of $60 invested at 8% compounded per year for three years is:
All of the following are differences between Fedwire and ACH EXCEPT:
On the basis of the data above,
what is the forecast for Thursday's cash receipts, under the exponential smoothing method?
The PRIMARY objective of the AFP Account Analysis Standard is to help cash managers in which of the following areas?
A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company's effective interest rate be reduced?
A retail chain with 500 locations throughout the United States would use which of the following systems?
A grocery store chain would be likely to use all of the following services EXCEPT:
In a private label financing arrangement, the seller does which of the following?
Components of a field banking system include which of the following?
I. Local bank
II. Concentration bank
III. Lockbox bank
Which of the following contributes MOST to the marketability of a security?