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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?
In which of the following international cash management methods is title for goods transferred for intercompany sales?
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?
Which of the following correctly describes pooling as practiced in the European cash management environment?
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?
A U.S. company wants to increase its cash turnover rate. It is finding that customers are not taking the offered discount terms of 3/15, net 35. What action might the company take in order to achieve its goal?
Representations and warranties in a loan agreement refer to which of the following?
The Treasury Analyst at an investment firm has entered the company into a repurchase agreement with a counterparty at the direction of the Treasury Manager. The compliance office has determined that the trade was done in violation of the company investment policy. The Treasury Manager has the power to approve the execution of trades; however, the Treasury Analyst was not a designated trader on behalf of the firm. Which area of the investment policy was violated by the Treasury Analyst?
A company’s capital structure includes $800,000,000 in total capital, of which $200,000,000 comes from debt. The firm’s after-tax cost of debt is 6%, and its cost of equity is 12%. The marginal tax rate is currently 40%. What is the company’s weighted average cost of capital?
Company XYZ uses exponential smoothing to forecast its daily lockbox receipts. With the help of a statistical computer program, the company has determined that the smoothing constant is 0.35.
Using the data in the table, what is the exponential smoothing forecast for Day 7 (rounded to the nearest whole $)?
The following information about a company is 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%. The company's current ratio is:
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 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?
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?
A consumer is presented with payment options from a merchant when making a purchase. The consumer does not wish to share any information that could be later used in identity theft or fraud, while the merchant requires guaranteed payments within 24 hours with no NSFs or declined payments. Which of the following options would suit both the consumer and the merchant?
The MOST common way that companies structure their treasury operations is as a:
Which cost benefit analysis technique uses the methodology to find where the present value of each project’s cash inflows equals the present value of each project’s outflows?
Company XYZ is aggressively expanding globally. It is evaluating four markets: Latin America, Europe, Asia and Middle East.
Latin AmericA. Risk adjusted discount ratE. 15%, Payback period=7 years, IRR=15%
EuropE. Risk adjusted discount ratE. 8%, NPV=$20M
Middle East: Risk adjusted discount ratE. 11%, IRR=12%, NPV=$5M
AsiA. WACC. 9%, Payback=2 yrs, IRR=8%
Based on the information, which two markets will company XYZ MOST LIKELY pursue?
The Cash Manager of XYZ Corporation is trying to determine today’s closing cash position in order to make an investment or borrowing decision. The Cash Manager anticipates wiring $55,000 in tax payments and $63,000 in supplier payments today. Additionally, the Cash Manager is aware that a $15,000 wire was received today into the company’s concentration account from a customer and that XYZ Corp. will have to fund a bond interest payment of $200,000 in three days.
Using this information, as well as the data in the table, what is the closing cash position for XYZ Corporation?
If a company uses accrual accounting, deferred taxes are reported on which financial statement?
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?
When a supplier uses evaluated receipts settlement (ERS), which of the following statements is true?
Which two of the following are necessary to calculate average collected balances?
I. Deposit float
II. Reserve requirements
III. Ledger balance
IV. Earnings credit rate
All of the following are common consumer-to-corporate international payment mechanisms EXCEPT:
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?
XYZ Company has decided to purchase a close competitor. This acquisition would make XYZ Company the 4th largest in its industry allowing it better purchasing power and greater distribution channels. After completing the M&A analysis, it is determined that the combined companies would produce a 40% increase in revenue, reduce manufacturing costs by 30%, but would increase current liabilities by 27%. Which of the following would keep the acquisition from happening?
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 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?
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:
The rate of interest commercial banks charge their best credit rated customers is called the:
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 expects the U.S. dollar to depreciate in value compared to the British pound. The company will have a British pound payment to make in five months. The company would MOST LIKELY buy:
The treasurer of a corporation is negotiating with one of his/her suppliers to allow the corporation to have 30 days to pay the supplier’s invoices. The treasurer is arranging:
The Treasurer at Worldwide Industries is concerned that its retail lockbox provider, Bank A, is not PCI DSS-compliant. Bank A processes 500,000 checks per month for Worldwide Industries. Worldwide Industries uses a third-party provider, Pay Point, for their credit card payments and funds are wired daily to Worldwide’s depository account at Bank A. What should the Treasurer do?
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?
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?
A U.S. financial institution expects to grow at an exponential rate to become one of the largest companies in the country. It wants to hire the best talent in the industry and is willing to pay excessive compensation. In order to achieve the high growth, it is planning on charging hidden fees on mortgages, credit cards etc. Further, it wants to engage in risky practices pertaining to over-the-counter derivatives, asset-backed securities and hedge funds. The financial institution has hired an outside law firm to determine if it is feasible to escape unwanted regulation and oversight from various government entities. Which of the following regulations prohibits the financial institution from engaging in the described practices?
During a company’s cash flow analysis review it discovers that for every 10 new customers it gains, there is an increase of 2% in its float costs associated with the payment methods it offers. If the company pursues faster collection methods for payments, resulting in greater availability of surplus cash with a correlating decrease in the need to issue commercial paper, what risk will the company mitigate?
Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company?
Which of the following is NOT a key area to consider when establishing treasury policies?
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?
Which of the following is NOT a drawback to using ROI as a performance measure?
An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:
With respect to the Sarbanes-Oxley Act, a company may avoid additional reporting requirements by:
Which agency implements monetary policy through purchases and sales of treasury securities?
A cash manager at a U.S. retailer forecasts a positive collected cash position for the end of the current day. The company has an overdraft facility at 10%, a separate investment account earning 8% before taxes, an earnings credit rate of 8% and an outstanding single payment note at 9.5% maturing in 1 week. This month’s bank service fees are expected to exceed the earnings credit. Which of the following options would be the MOST economically positive for the company?
An electronics manufacturer is attempting to protect itself from financial losses due to projected high warranty claims costs for one of its technically complex products. What kind of assessment should the company perform to determine the appropriate external insurance coverage that would protect it from the claims?
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:
The Treasurer at ABC Company currently uses an in-house company-processing lockbox center. The Treasurer has asked for an analysis to determine the major advantage of using a traditional check/mail-based lockbox system. ABC receives 287,000 payments per month and hired seven additional staff members to process the payments in-house. Additionally, $389,000 was invested in the equipment used to process the payments and NSF checks have decreased 7% since using the in-house center. The equipment’s current market value is equal to its book value. What major advantage should the analysis indicate?
A 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?
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?
Company ABC experienced a loss in the past when an employee in the treasury department was able to transfer $1.5 million to a personal account offshore. The company is working with a security agent to prevent this from happening in the future. ABC also accepts a large number of checks as payment. The agent has suggested upgrades to ABC’s payment process. What step should be taken to help mitigate this type of risk in the future?
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:
The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted?
Company XYZ is not sure which direction interest rates are headed. Which of the following would be MOST suitable?
A company hires an investment firm to fully underwrite a new stock issuance. Which of the parties carries the MOST risk?
The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for which of the following?
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 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?
Equity section of Fisher, Inc. Financial Statement
If an investor paid $1,400.00 (excluding fees) for 75 shares of common stock, what was the market value of Fisher, Inc. at the time of purchase?
A dealer is selling securities to a client. What is the yield/price at which the dealer will sell?
Company XYZ is a high technology company. It is planning on acquiring another company in the high technology sector. Company XYZ does not have enough cash to acquire the company and is planning on financing the acquisition through a bond offering. Which of the following measures is company XYZ MOST LIKELY to use in its analysis of operating profits considering it is a high debt transaction?
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?
Company ABC, with a current debt rating of BBB- from Standard & Poor’s, is negotiating a new revolving credit agreement with its lenders. The company anticipates closing on a small acquisition within a year of executing this new agreement and would like maximum flexibility to determine its capital structure. The company is MOST concerned about the lenders’ inclusion of A.
The Treasurer of PJB Company is in charge of implementing new treasury management software. Without issuing any RFPs, the Treasurer hires a consulting company to install the software and program it to suit the company’s needs. The Treasurer is responsible for approving the consultant’s invoices for payment. Through conversation, the CFO discovered that the Treasurer’s relative is one of the partners at the consulting company. The Treasurer was immediately terminated. What did the Treasurer MOST LIKELY violate?
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?
XYZ Company is a U.S. based company that has just issued some euro-denominated bonds in London. The bonds have a duration of 10 years at a rate of 3.5% with a par value of EUR 50 million. An FX swap contract was created on the date of the issuance in EUR/USD, with a spot rate of 1.2908 and a forward rate of 1.1102. This bond is subject to what type of risk?
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?
A company wants to implement more control over its cash management system. Which aspect of the system is the most susceptible to external fraud?
Company ABC decides to outsource certain activities to an unrelated company and have that company assume the associated loss exposures. What loss control technique is Company ABC using?
The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:
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?
If the Federal Reserve wanted to stimulate a sluggish economy, it could do so by:
ABC company has a significant number of customers who are mainly consumers making monthly installment payments. Which one of the following types of lockbox would be the MOST appropriate for ABC to use?
The U.S. government agency that administers and enforces trade sanctions against targeted foreign countries is the:
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:
A small group of investors is purchasing a company using a large amount of debt. This group is intending to sell off pieces of the acquired company to other firms that it believes can take advantage of potential synergies. What is this type of a transaction more specifically known as?
ABC Company has recently moved away from paper-based invoicing systems and has begun implementing e-commerce solutions. Realizing that its e-commerce implementation may have a negative impact on the float of its trading partners, ABC can do which of the following to help address this concern?
A company in the market to purchase a treasury management system (TMS) has issued a request for proposal to evaluate various vendors. One of the evaluation factors focuses on the long-term viability of the vendor. The company may have to choose between an untested new vendor with a superior product and an established vendor with an incomplete product suite. This dimension of the RFP is measuring what type of risk?
Use the financial statement for XYZ Company in the exhibit to answer this question.
What is the cash flow from operating activities for the current year?
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?
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?
ASC Topic 815 (FAS 133) is applicable when accounting for which of the following?
A real estate development company has excess cash that it would like to invest in one of its properties:
In which property should the company invest?
Account analysis statements should be examined for which of the following reasons?
I. To verify volumes processed
II. To determine daily cash shortages
III. To verify the accuracy of bank service charges
IV. To ensure that company-initiated transactions have occurred
XYZ Company is considering selling treasury stock but is concerned about the amount of capital it will raise given the current high volatility of the stock market. What is the BEST strategy a firm can employ to reduce its uncertainty?
Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT:
An investor concerned about taxes on dividend distributions will MOST LIKELY purchase stock on which of the following dates?
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?
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?
An investment is purchased for $10,000.00 that offers compounding of the first year's interest and it matures at the end of year two. If the value at maturity is $11,664.00, what is the rate of return on the investment?
A privately held company is planning to issue an IPO. If the company decides to do so, which of the following will MOST LIKELY result?
Company J is looking to perform an A/R cash analysis based on the following sales information:
60% of sales are collected within two months after sale. After three months, $135,000 of January's sales were collected. What was the dollar amount of January's sales collected in April?
Which two of the following are methods for concentrating weekend deposits in a field deposit system?
1. Using a wire transfer for the funds on Monday
2. Anticipating deposits and initiating an ACH on Friday
3. Initiating an ACH cash concentration transaction on Thursday
4. Using a multibank lockbox network
Which currency will sell at the greatest discount in the forward market against the U.S. dollar?
Since the inception of ABC Company's pension plan, 1,500 employees qualified and were paid pensions of $500 million after retirement, of which 700 employees were those who earned $110,000 or more and received $200 million in pension benefits. When the company filed for bankruptcy in 2010, the IRS claimed back taxes from the company stating that the pension plan was not qualified under ERISA. On what basis was the IRS MOST LIKELY making its claim?
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
Which of the following would be the most efficient method of reducing the number of cross-border payments between two units of a company?
Compared to debt, which of the following statements is true about a company issuing equity?
The renegotiation of trade payment terms in an e-commerce environment should include which of the following?
On the basis of the data above,
what is the forecast for Thursday's cash receipts, under the exponential smoothing method?
Which of the following are primary objectives of cash forecasting?
I. Managing liquidity
II. Optimizing float
III. Enhancing financial control
IV. Minimizing borrowing costs
Measurement of a company's liquidity includes the calculation of all of the following EXCEPT:
Which of the following techniques would MOST accurately predict a company's daily cash position?
Improvements to the cash flow timeline from a selling company’s perspective would include:
Which of the following factors would the cash manager consider when deciding whether to make a payment via Fedwire or ACH?
1. Cost of the payment
2. Payment due date
3. Availability of customer's funds
4. Loss of float
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 globally diversified manufacturing company can manage its liquidity more effectively by:
Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?
The MICR encoding on a check provides all of the following information EXCEPT:
When a foreign subsidiary pays a dividend to its parent company the transfer of funds may be subject to:
A utility company is evaluating whether or not it should build a new plant. The process of reviewing the quantitative and qualitative factors are an example of which finance function?
All of the following bank products and services can simplify the preparation of the daily cash position EXCEPT:
Which of the following is considered an important factor when selecting a financial service provider?
A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?
What is the MOST appropriate financial plan when a corporation wishes to establish its overall goals and objectives over a period of time?
Which of the following is NOT true for both bankers’ acceptances and trade acceptances?
An art history museum has recently finished renovating its new location. Before the move, the treasurer considers purchasing additional insurance to protect the art during transit. What form of additional insurance should the treasurer choose?
Making payments through electronic payments networks can be a part of a treasury management system’s functionality, but it is subject to numerous constraints. Which of the following is a true statement of those constraints?
All of the following are examples of treasury management system transactions for liquidity management EXCEPT:
DGB Inc.’s CEO and founder retired shortly after the company went public two years ago. DGB Inc. has recently struggled, and the founder has agreed to return as an independent director. What violation, if any, has occurred?
One example of increased use of electronic payments for retail businesses to convert customer checks to cash at the counter more quickly is:
A company with high operating leverage reduces its average cost per unit by 20% as its sales volume increases by 40% annually. This an example oF.
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:
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?
Company XYZ has an underfunded defined benefit plan. Company XYZ is required to provide filings for this plan to all of the following EXCEPT:
An 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?
Company ABC has undergone substantial system enhancements in order to take advantage of B2B efficiencies. To encourage its trading partners, ABC has offered a 1.5% discount to those who allow ABC to debit their bank account electronically on the day the product is delivered. The greater number of trading partners who agree to this arrangement, the greater improvement Company ABC will see in its:
Given the above information,
if the risk manager adds a tank at its second facility, what loss control technique is being used?
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?
ABC Company, a leading provider of office supplies, has successfully implemented EDI based on a request from one of its customers. ABC will not only benefit from the strategic alliance that will result, but as more of ABC’s customers adopt the program, ABC will also experience a positive impact on its:
A bank is evaluating the credit risk for a company seeking to optimize costs and originate a high volume of outgoing ACH payments. What is the BEST provision the bank should establish to control its credit exposure?
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?
Treasury management systems and ERP systems allow companies to do all of the following EXCEPT:
A small regional bank is losing market share in fiduciary services and the CEO has decided to scale back the trust department. Which of the following is considered a core service of a trust department?
An international company with multiple divisions has several types of common stock. The company spun off a new division that is growing very quickly and needs additional funding, but the parent does not want additional ownership investment or additional voters. The company would MOST LIKELY issue what kind of stock?
What government legislation holds the CEO of a public company personally liable for the information in financial reports?
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?
Which of the following is true about using an RFI in the financial institution and FSP selection process?
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 selected a specific project for investment. If the weighted average cost of capital (WACC) used to evaluate the project results in a negative net present value (NPV), which of the following will occur?
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:
A Euro denominated payment can be settled through all of the following EXCEPT:
Recent improvements in the effectiveness of corporate governance are mostly due to the:
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?
Exhibit:
If a company had the above activity at a bank for the previous month (a 31-day month), the bank was overcompensated by approximately:
What is the Weighted Average Cost of Capital for XYZ Company, assuming the following:
A company's basic investment objectives should include all of the following EXCEPT:
An investor purchases securities that mature beyond the date when cash is required. The investor intends to sell the investment to meet the cash flow need. This strategy works best when:
Which of the following ASC X12 transactions is used to confirm the receipt and compliance of transmitted sets?
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:
The telecommunications network used to transmit international payment instructions is called:
Transmission of a file of items presented for payment by the payor bank to the issuing company is known as:
Who has responsibility for final approval of treasury policies that have a significant impact on the organization?
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?
The PRIMARY goal of treasury management is to use which of the following efficiently?
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?
To strengthen outside auditor independence with regard to publicly held companies, the Sarbanes-Oxley Act requires that:
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?
For a retirement plan to be qualified under ERISA, employer and employee contributions must be:
Which of the following industries is MOST LIKELY to use a sophisticated cash concentration system with multiple banks as part of its cash management system?
A regional physicians’ group is looking for an alternative to liability insurance to help protect against potential future liability claims. Which method would BEST serve its need to protect against catastrophic losses?
An evaluated receipts settlement would be MOST commonly used in an environment where:
Under Section 404 of the Sarbanes-Oxley Act, management must state its responsibility for which of the following?
Some treasury management systems are capable of initiating investment purchases and loan drawdowns automatically. The automating of these transactions is related to which of the following treasury management functions?
A large U.S. company is planning to fund its Canadian subsidiary. Currently, the Canadian dollar is trading at CAD 1.25 per U.S. dollar, and the U.S. dollar is expected to depreciate in the near term. To manage this FX exposure, what technique should the company implement?
In an organization with personnel limitations, which of the following strategies should be considered to mitigate cash management system risk?
A U.S. firm acquires a large U.K. manufacturer that generates high levels of cash flow in its local currency. The purchase is denominated in British pounds and is financed through the issuance of 10-year, 7.5% U.S. dollar bonds. The U.S. firm will rely entirely on the U.K. manufacturer's cash flows to fund the interest payments on the bonds. What derivative instrument would help the U.S. firm manage its FX exposure?
A main characteristic of a company with regional offices using a centralized treasury function is:
An employer wishing to reduce operating income volatility would MOST LIKELY offer what type of retirement option to its employees?
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:
The combination of difference in condition (DIC) insurance and umbrella insurance:
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?
What does a company with a restrictive current asset investment strategy typically have?
A national retailer’s cash management system includes a field deposit system using multiple banks. To limit the impact of a failure of one of these banks, a cash manager should:
A U.S. based multinational company is filing its U.S. tax return and notes that its U.K. subsidiary had pre-tax income equal to $1 million. The U.K. subsidiary paid an effective tax rate on this income of 40%. If the U.S. tax rate is 34%, what will be the amount of the foreign tax credit on the U.S. tax return related to the U.K. income?
What is one chief advantage of issuing short-term securities in book-entry form?
A large, nation-wide, retailer of plumbing fixtures is considering implementing ACH technology to improve its accounts receivable processing. Which of the following pre-authorized ACH transactions can the company use for this application?
A U.S. government agency issues securities transfers using Fedwire Book-Entry Securities System. The first transfer request of the day in the amount of $1 million is sent at 1:00 p.m. EST, the second one for $2 million at 3:30 p.m. EST, the third one for $3 million at 4:30 p.m. EST and the fourth one for $4 million at 5:00 p.m. EST, all on the same day. Which of the following represents the total value transferred at 5:00 p.m. EST that day?
Which of the following global cash concentration methods would be MOST appropriate for a company with operations in the United States, Germany, Mexico, and Japan?
Merchant XYZ has total credit card sales of $20,000 for one day with an average ticket of $200. The merchant’s interchange reimbursement fees are 2% and transactions fees are $0.05. This merchant receives net settlement. Which of the following is the value of the deposit for that day?
Which of the following 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.
The role of the depository bank in the check-clearing process is typically which of the following?
All of the following are reasons to use a confirmed irrevocable letter of credit EXCEPT concern about:
A company wants to gather daily balance reporting from its international subsidiaries' bank accounts. Which of the following systems would allow the company's bank to gather the balance positions from the local banks?
A merchant, wanting to accept credit cards as payment method, will negotiate its fees with which of the following participants?
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?
All of the following factors influence a company's decision to use electronic commerce EXCEPT:
Upon entering into an interest rate swap with a notional principal of $10,000,000, what is the initial amount of money the counterparties must exchange at the beginning of the swap?
A company has a $300,000 credit line of which $200,000 was the average amount outstanding for the year. The terms of the loan include a 1/2 of 1% commitment fee on the unused portion, an interest rate of 10%, and a compensating balance requirement of 2% of the total credit line. The company's compensating balances are funded from credit-line borrowings.
If the company negotiates to eliminate the compensating balance requirement and the average borrowings remain at $200,000, the annual interest rate would be:
XYZ Company is considering different methods of concentrating cash from its subsidiary accounts to its main operating account. It uses short-term borrowings with a rate of 7% to fund daily operations, and the reserve adjusted earnings credit rate on its subsidiary accounts is 1%. A review of its bank fees shows that wires (same day transfer) cost the XYZ Co. $7.00 each while ACH debits (next day transfer) cost $1.25 each. If the primary objective is to minimize costs, what must the transfer amount be (rounded to the nearest whole $) to justify the use of a wire transfer instead of an ACH to concentrate the funds?
In a large company, the person who normally oversees both the treasury and the accounting functions is the:
Which of the following ways of financing accounts receivable requires a company to relinquish control of the type of customer to which it sells?
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?
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?
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 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?
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?
In recent years, there has been a sharp increase in the use of technology for certain financial transactions. Which of the following has increased dramatically over recent years?
A measure of the incremental impact of a company's investments on market capitalization is known as:
Which of the following is an example of a qualitative factor used in making credit decisions?
Companies that seek out other companies that have successfully redesigned their operations are engaging in a process called:
A treasurer is evaluating a project that will cost $1,000 but will return cash flows of $225, $225, $300, $750, and $750 in years 1 through 5, respectively. The company’s interest rate on its debt is 10% and its marginal cost of capital is 15%. What is the Net Present Value (NPV) of this project?
A company has transferred all treasury functions to a new office overseas. When preparing the disaster recovery plan, the treasury manager seeks to identify the mission critical functions and then determine what risks the plan should address. Which of the following risks should be the focus of the Disaster Recovery Plan?
The before-tax cost of long-term debt is 10% and the cost of equity is 12%.
The marginal tax rate is 35%. The company's weighted average cost of capital is:
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?
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?
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?
Which method of financing would a company use to establish a wholly owned subsidiary to perform credit operations and obtain accounts receivable financing for the sale of products?
Advantages of writing checks locally on a centralized disbursing bank include all of the following EXCEPT which statement?
The year-end income statement and balance sheet accounts for a company as of December 31, Year 1 are shown in the Exhibit.
If no changes occurred in the current asset and current liability account balances from the beginning of the period, except for cash, what was the net cash flow from operations for Year 1?
XYZ Company is a net borrower. Its cost of funds is 5.0%, its earnings credit rate is 3.0%, and the reserve requirement is 10%. Average service fees are $50,000 per month. Its average ledger balance is $2,000,000, and its average collected balance is $1,000,000. What are the collected balances required to pay for services during a 30-day month?
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?
All of the following are basic considerations for balance compensation by a company EXCEPT:
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 of the following would be used to evaluate only the effects of varying interest rates while holding all other values constant at their expected levels?
A telecommunications company has decided to sell its call center hosting division. This is an example of what type of financial decision?
The analysis of a company launching an initial public offering includes disclosure of information that may interest investors. It also includes confirmation that financial statements reflect true value under GAAP and other pertinent areas of a company’s operations. What is this analysis known as?
A 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?
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:
The 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 seller’s net benefit (loss) if the buyer takes the discount and pays by day 10?
Which of the following is an example of a company's internal data used for cash management?
Which of the following can be considered key responsibilities of daily cash management?
I. Overseeing compensation for bank services
II. Management of short-term borrowing and investing
III. Projecting future cash shortages and surpluses
Which of the following is a common method for assigning float on a check deposited to a non-US bank account?
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
When a subsidiary borrows money, the parent, sister subsidiary, or other entity is often used in order to:
Under which of the following circumstances is lengthening the disbursement mail float NOT a benefit to the disbursing company?
Which of the following will exempt commercial paper from SEC registration?
I. A maturity of fewer than 270 days
II. A rating grade of A-1 or P-1
III. Distribution through a licensed dealer
IV. Backing by a U.S. bank letter of credit
The PRIMARY objective of the AFP Account Analysis Standard is to help cash managers in which of the following areas?
Which of the following cash concentration transfers is MOST LIKELY to result in a bank ledger overdraft?
Which of the following short-term instruments is used to finance the import or export of goods?
U.S. dollar-denominated instruments issued by foreign banks through their domestic branches are known as:
A company can use all of the following documents to establish a relationship with a bank EXCEPT:
A manufacturing company selling engines and other mechanical equipment, with invoices averaging $15,000, would use which of the following systems?
An increase in the availability float on a company's collections would cause a reduction in which of the following?
I. Earnings credit
II. Ledger balance
III. Service charges
IV. Collected balance
TESTED 17 May 2024
