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AFP CTP Dumps

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Total 932 questions

Certified Treasury Professional Questions and Answers

Question 1

Which of the following occurs when the U.S. dollar strengthens?

Options:

A.

Foreigners will purchase more U.S. goods.

B.

U.S. exports become more competitive.

C.

Foreign exports become less competitive.

D.

Foreign exports become more competitive.

Question 2

According to risk management experts, the BEST approach in managing operational risk is to:

Options:

A.

maintain a strong business continuity plan that can be used in disaster situations.

B.

document all company policies and procedures to ensure appropriate training for new staff.

C.

create a strong technological infrastructure that can identify security breaches as they occur.

D.

develop a corporate culture that promotes individual responsibility and supports educated risk taking.

Question 3

Without regard to costs, which of the following concentration mechanisms maximizes investment income in a multi-bank environment?

Options:

A.

Wire transfer

B.

Zero balance account

C.

ACH

D.

DTC

Question 4

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:

Options:

A.

$1,605.

B.

$1,886.

C.

$3,491.

D.

$5,886.

Question 5

Because of the growing demand in China for oil, a transportation company decides to assume a long position on oil in hopes of generating short-term investment income. Which of the following describes the firm’s strategy?

Options:

A.

Speculation

B.

Arbitrage

C.

Hedging

D.

Risk management

Question 6

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 7

Which of the following is true about using an RFI in the financial institution and FSP selection process?

Options:

A.

RFI is a formal document that outlines objectives, needs and service requirements.

B.

An RFI can speed up the review process.

C.

A response to an RFI is a formal commitment for services.

D.

A response to an RFI is a binding agreement.

Question 8

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?

Options:

A.

The WACC will be reduced.

B.

The overall value of the company will be increased.

C.

The overall value of the company will be reduced.

D.

The overall value of the company will not be impacted.

Question 9

A publicly-traded U.S. company has a German subsidiary which has accumulated significant cash balances. The company needs to pay its quarterly dividend but lacks the funds to make the payment. What is its BEST alternative for obtaining the funds?

Options:

A.

Sell additional shares through a secondary offering.

B.

Declare a one-time intercompany dividend.

C.

Obtain private equity funding.

D.

Sign a short-term intercompany loan with the subsidiary.

Question 10

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?

Options:

A.

Between ($480) and $480

B.

Between ($840) and $840

C.

Between ($1,080) and $1,080

D.

Between ($1,680) and $1,680

Question 11

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 12

Which of the following forms of payment is covered by Regulation CC?

Options:

A.

Cash

B.

Check

C.

Credit card

D.

Debit card

Question 13

In terms of targeting a company’s capital structure, when is it beneficial to assume a high level of financial risk?

Options:

A.

When the economy is rapidly expanding

B.

When the economy is experiencing slow growth

C.

When the company is experiencing growth

D.

When the rate of return on investments is advantageous

Question 14

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 15

A corporation is considering utilizing ACH transactions for its large value transfers, as opposed to wire transfers. Which of the following would MOST LIKELY deter the corporation from implementing this change?

Options:

A.

ACH transactions are more expensive.

B.

The corporation has a low credit rating.

C.

Trading partners may not accept ACH.

D.

The risk of fraud is greater.

Question 16

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?

Options:

A.

Decreased liquidity for the company’s stock

B.

Decreased reporting and disclosure costs for company

C.

Increased managerial flexibility for owners of the company

D.

Increased ability to determine company value

Question 17

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?

Options:

A.

Financing working capital requirements

B.

Repaying short-term debt

C.

Reducing labor costs

D.

Factoring accounts receivable

Question 18

An analyst is performing a lease versus buy analysis on a corporate jet. In the evaluation, a cost is relevant if it is:

Options:

A.

tied to inflation.

B.

different in each scenario.

C.

considered a sunk cost.

D.

unlikely to be incurred.

Question 19

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 20

On June 1, a manufacturing company experienced a system failure that lasted more than 24 hours. The company did not have any contingency plans in place and as a result the cash manager was unable to process the following payments: $25,000 to the p-card issuer, $125,000 for weekly payroll, $500,000 for a bond interest payment, $260,000 for the weekly vendor payments and $50,000 for the monthly utilities. The receivables were deposited at the bank; however, the cash manager does not have a way to confirm the amounts. The suppliers are threatening to stop shipments due to the delay in payment and the loss of supplier shipments threatens the company’s just-in-time production. What did the manufacturing company trigger as a result of the system failure?

Options:

A.

Supplier risk

B.

Default on the debt

C.

Electronic security risk

D.

Contingency business resumption plan failure

Question 21

A corporate compliance officer is drafting an agenda for an ethics training session. Which of the following would NOT be an appropriate item to include?

Options:

A.

Discussion of recent cases involving unethical behavior

B.

Presentation of hypothetical situations and how to resolve them

C.

Review and analysis of the costs associated with ethics compliance

D.

Monitoring of a hotline to report governance violations

Question 22

Company XYZ had the following sales over the last 5 years:

The company raised funds to invest in its operations. Considering the company’s growth, it is interested in future options that will allow it to maintain its debt level and keep debt costs low. The company is not concerned about changes to the working capital structure. Which security did the company issue?

Options:

A.

Unsecured bond

B.

Bond with an equity kicker

C.

Zero-coupon bond

D.

Convertible security

Question 23

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:

Options:

A.

wholesale lockbox.

B.

hybrid lockbox.

C.

direct lockbox.

D.

retail lockbox.

Question 24

EML Inc., which has $600 million in outstanding debt, is preparing to issue commercial paper in excess of $100 million within the next six months. The new assistant treasurer has recently spent time getting to know the issuing and paying agent, the rating agency analyst, and the legal counsel, and has been following the financial markets. What is this is an example of?

Options:

A.

Benchmarking with peers

B.

External collaboration

C.

Decentralized control

D.

Risk transfer

Question 25

Two months after a government overthrow, the new Minister of Industry and Culture took over the country’s largest steel company and compensated the owners at 50% of book value. What is the government’s action called?

Options:

A.

Consolidation

B.

Deregulation

C.

Expropriation

D.

Nationalization

Question 26

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

Options:

A.

The higher the company’s fixed costs are, the lower its operating leverage.

B.

The higher the company's fixed costs are, the higher its operating leverage.

C.

The lower the company's fixed costs are, the higher its operating leverage.

D.

The higher the company's variable costs are, the higher its operating leverage.

Question 27

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?

Options:

A.

Net savings of $57,750

B.

Net savings of $63,000

C.

Net savings of $1,732,500

D.

Net savings of $1,890,000

Question 28

Simplifying upgrades and system restoration, access from multiple remote locations, and interfacing with multiple applications are all reasons to:

Options:

A.

replace workstations annually.

B.

use the internet.

C.

use 128-bit encryption.

D.

outsource IT.

Question 29

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

Options:

A.

the clientele effect.

B.

the ex-dividend date.

C.

the dividend reinvestment plan.

D.

dividend capture.

Question 30

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 31

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?

Options:

A.

The cooling-off period has not been met.

B.

Section 404 of the Sarbanes-Oxley Act has been violated.

C.

ERISA disclosure requirements have not been met.

D.

No violation has occurred.

Question 32

Which of the following is NOT true for both bankers’ acceptances and trade acceptances?

Options:

A.

They are both used to finance the shipment of goods.

B.

They both may be sold to an investor at a discount prior to maturity.

C.

They are both less expensive forms of financing than loans.

D.

They both transfer the buyer’s credit risk to a third party.

Question 33

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

Options:

A.

Terrorist

B.

Regulatory

C.

Payment

D.

Currency

Question 34

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 35

Convertible securities consist of preferred stock anD.

Options:

A.

treasury stock.

B.

common stock.

C.

bonds.

D.

tracking stock.

Question 36

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

Options:

A.

Pooling

B.

Internal factoring

C.

Multilateral netting

D.

Re-invoicing

Question 37

Which of the following is subject to transaction exposure?

Options:

A.

A U.S. company’s foreign subsidiary in Japan has a receivable denominated in Yen.

B.

A Japanese company’s foreign subsidiary in the U.S. has a receivable denominated in Yen.

C.

A U.S. company’s foreign subsidiary in Japan has a payable denominated in Yen.

D.

A Japanese company’s foreign subsidiary in the U.S. has a payable denominated in dollars.

Question 38

Which of the following is NOT a drawback to using ROI as a performance measure?

Options:

A.

It may be misleading when cash flows are not evenly distributed over time.

B.

It does not consider the profit generated by a project.

C.

It does not include a charge for cost of capital.

D.

It may lead to rejection of a positive NPV project.

Question 39

An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:

Options:

A.

sinking fund

B.

balloon payment

C.

mortgage

D.

zero-coupon bond

Question 40

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?

Options:

A.

Cost reimbursement

B.

Property

C.

General liability

D.

Business interruption

Question 41

Company A regularly modifies its capital structure by repurchasing stock. Which one of the following is a true statement?

Options:

A.

Investors may feel that management is manipulating the stock price.

B.

Stock repurchases are not an attractive alternative to dividend payments.

C.

Partial disclosure to the SEC is required for repurchases.

D.

Stock repurchases do not offer tax deferral advantages over dividends.

Question 42

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 43

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 44

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

Options:

A.

Defined benefit pension plans

B.

Defined contribution pension plans

C.

401(k) plans

D.

Tax-deferred annuities

Question 45

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?

Options:

A.

Hire an investment banker to underwrite the stock on a full underwriting basis.

B.

Hire an investment banker to issue the stock using a master registration statement.

C.

Hire an investment banker to underwrite the stock with no flotation costs.

D.

Hire an investment banker to underwrite the stock on a best efforts basis.

Question 46

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

Options:

A.

Net receivables

B.

Stock price

C.

Short-term borrowing obligations

D.

Net working capital

Question 47

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

Options:

A.

investing.

B.

borrowing.

C.

capitalizing.

D.

lending.

Question 48

A U.S. exporter sells goods to a foreign buyer in U.S. dollars and wants to guarantee that payment is made by the buyer. The exporter would MOST LIKELY require a(n):

Options:

A.

bankers’ acceptance.

B.

documentary collection.

C.

letter of credit.

D.

open account.

Question 49

Company XYZ offers a retirement plan wherein the value of the plan’s assets and liabilities is measured separately. The plan’s funding and valuation can have a significant impact on the financial condition of the company. Company ABC offers a retirement plan wherein the amount owed to the participants at retirement is based solely on the account balance at the time of withdrawal with participants often bearing the responsibility for managing the investments in their account. Which of the following BEST describes the above two retirement plans and which act governs them?

Options:

A.

403(b) and defined contribution plan; ERISA

B.

Defined benefit plan and defined contribution plan; ERISA

C.

Qualified and non-qualified plan; Pension Protection Act

D.

Defined benefit plan and defined contribution plan; Pension Protection Act

Question 50

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

Options:

A.

A Point-of-Purchase check conversion process

B.

An Image Replacement Document conversion process

C.

Transit check clearing

D.

A direct exchange with local banks

Question 51

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 52

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?

Options:

A.

Corporate Treasurer

B.

General Counsel

C.

Enterprise Risk Manager

D.

Investor Relations Manager

Question 53

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

Options:

A.

factoring.

B.

bank credit.

C.

trade credit.

D.

intercompany loan.

Question 54

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

Options:

A.

A Full Guarantee

B.

A Comfort Letter

C.

A Personal Guarantee from the CEO

D.

A Certified Workers Compensation Policy

Question 55

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 56

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:

Options:

A.

assessed financial derivatives.

B.

made a qualitative assessment.

C.

examined basic operating procedures.

D.

made a quantitative assessment.

Question 57

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

Options:

A.

Exception management

B.

Valuation of investments

C.

Internal and external controls

D.

Performance management and reporting

Question 58

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?

Options:

A.

2

B.

3

C.

30

D.

40

Question 59

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 60

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?

Options:

A.

Increase the days’ sales outstanding.

B.

Obtain short-term financing.

C.

Factor the accounts receivable.

D.

Change inventory accounting from FIFO to LIFO.

Question 61

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?

Options:

A.

Access control

B.

Approved uses

C.

Vulnerability management

D.

Definition of responsibilities

Question 62

RAL Industries is a manufacturing company that currently has locations in the United States and Latin America and has just completed an acquisition of a company located in Europe. As a result of the acquisition, they have a large number of financial service providers. In an effort to reduce the number of providers and services used globally, RAL has decided to develop a formal selection process to consolidate its many global banking services. In order to reduce the amount of time the selection process takes, determine which services providers can offer, and the number of providers involved in the process, what should RAL Industries issue?

Options:

A.

Request for Quote

B.

Request for Proposal

C.

Request for Information

D.

Request for Participation

Question 63

ABC Company offers a discount of 2/10, net 30 to its customers. ABC factored its accounts receivables with an outside vendor, under a “with recourse” arrangement. What impact might this have on the company?

Options:

A.

Increase days sales outstanding.

B.

Improve cash conversion cycle.

C.

Reduce bad debt expense.

D.

More customers may take the discount.

Question 64

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?

Options:

A.

Bank Overlay

B.

Notional Pooling

C.

Physical Pooling

D.

Scheduled Transfer

Question 65

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

Options:

A.

Application of the payment to the accounts receivable system

B.

NACHA format chosen for the payments

C.

A bank that will process the payment

D.

Evaluation of payment clearing history

Question 66

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

Options:

A.

I and II

B.

I and IV

C.

I, II, and III

D.

II, III, and IV

Question 67

Which of the following functions is LEAST likely to be part of a cash manager's responsibilities?

Options:

A.

Funds movement

B.

Bank compensation

C.

Forecasting

D.

Long-term financing

Question 68

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

Options:

A.

It is usually sold through a dealer.

B.

It is considered an unsecured promissory note.

C.

It typically costs less than bank debt.

D.

It must be registered with the SEC.

Question 69

Systemic risk can be caused by which of the following?

Options:

A.

Bankruptcy of an industrial company

B.

Bankruptcy of an individual

C.

Failure of a community bank

D.

Failure of a money center bank

Question 70

Which statement is typically true about cash dividends?

Options:

A.

They are an expense to the company.

B.

They are a distribution of profits.

C.

They are based on the value of the company's stock.

D.

They are declared by the chief financial officer.

Question 71

The time between when the payor mails the check and the payee receives available funds is known as:

Options:

A.

mail float.

B.

processing float.

C.

availability float.

D.

collection float.

Question 72

A major toy retailer operates 65 retail stores throughout the Midwest. Which of the following credit terms is MOST LIKELY to be offered to this company by its suppliers?

Options:

A.

Floor planning

B.

Seasonal dating

C.

Factoring

D.

Letter of credit

Question 73

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 74

Which of the following is a common method for assigning float on a check deposited to a non-US bank account?

Options:

A.

Proof of deposit

B.

Company sample

C.

Value dating

D.

Fractional availability

Question 75

Which of the following are primary objectives of cash forecasting?

I. Managing liquidity

II. Optimizing float

III. Enhancing financial control

IV. Minimizing borrowing costs

Options:

A.

I and II only

B.

II and III only

C.

I, III, and IV only

D.

I, II, III, and IV

Question 76

To increase the money supply, the Federal Reserve would increase which of the following?

Options:

A.

The reserve requirement

B.

The discount rate

C.

The purchase of open market securities

D.

The federal funds interest rate

Question 77

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

Options:

A.

Per-item service costs

B.

Average volume

C.

Ledger balance

D.

Earnings credit rate

Question 78

A KEY feature of municipal bonds is that they are:

Options:

A.

exempt from federal income taxes.

B.

issued on a discount basis.

C.

rated by the Comptroller of the Currency.

D.

available through the Treasury Direct Program.

Question 79

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 80

All of the following statements are true about loan participations EXCEPT:

Options:

A.

more than one lender commits to them.

B.

loan advances and payments are divided among the participants.

C.

loan servicing is provided by the lead institution.

D.

they are traded in the secondary market.

Question 81

Which of the following is a source of short-term financing?

Options:

A.

Bond issuance

B.

Factoring of accounts receivable

C.

Issuance of common stock

D.

Retaining profits

Question 82

The combination of difference in condition (DIC) insurance and umbrella insurance:

Options:

A.

transfers risk to a company’s captive insurance subsidiary.

B.

replaces the coverage provided by basic property and liability insurance.

C.

supplements the coverage provided by basic property and liability insurance.

D.

provides payments to a company in the event it is unable to pursue a line of business due to an unforeseen event.

Question 83

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 84

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 unused portion of line
  • Interest rate on advances is 1-month LIBOR plus 4%
  • 1-month LIBOR is currently 2%
  • Compensating balance requirement of 20% on the outstanding borrowings

What is the effective annual borrowing rate for the line of credit?

Options:

A.

6.0%

B.

6.2%

C.

7.8%

D.

9.3%

Question 85

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:

Options:

A.

a U.S. dollar call.

B.

a U.S. dollar put.

C.

a British pound call.

D.

a British pound put.

Question 86

When evaluating candidates who have responded to an RFP for banking services, a highly leveraged company will probably apply a higher weighting to:

Options:

A.

flexible credit terms at competitive rates.

B.

the ability to customize services.

C.

the cost of switching providers.

D.

the adequacy of internal controls.

Question 87

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 88

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):

Options:

A.

decrease in earned surplus.

B.

decrease in stockholders’ equity.

C.

increase in capital surplus.

D.

increase in retained earnings.

Question 89

A multinational company may use which of the following to locate profits in subsidiaries in low-tax countries?

Options:

A.

Dividends

B.

Transfer pricing

C.

Management fees

D.

Intracompany loans

Question 90

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?

Options:

A.

Currency forward

B.

Currency swap

C.

Interest-rate swap

D.

Currency future

Question 91

The goal of investor relations is to:

Options:

A.

ensure that a company’s securities achieve a fair valuation in the marketplace.

B.

ensure equity analysts have all available company information at any point in time.

C.

maintain the company’s stock listing on the NYSE.

D.

make sure all shareholders cast a vote at the annual meeting.

Question 92

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?

Options:

A.

Leading

B.

Re-invoicing

C.

Lagging

D.

Multicurrency accounts

Question 93

In order to be defined as independent, a corporate director:

Options:

A.

cannot have owned preferred stock shares in the company.

B.

cannot have a material relationship with the company.

C.

cannot meet regularly with executive management outside of board meetings.

D.

cannot have been an employee with the company during the past three years.

Question 94

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

Options:

A.

Internal factoring

B.

Dividends

C.

Transfer pricing

D.

Management fees

Question 95

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 96

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

Options:

A.

The Sarbanes-Oxley Review and Assessment Board

B.

The Accounting Controls Advisory Board

C.

The Public Company Accounting Oversight Board

D.

The Auditing Review Board

Question 97

A manufacturing company is working to improve its cash conversion cycle. Factory production has increased over the last year to increase inventory levels. They have an inventory turnover of 3.1 and asset turnover of 5.0. The company has a days’ payable of 30 and a days’ receivable of 60. It has started enforcing its net 30 terms and placed customers with balances outstanding more than 45 days on credit hold. As a result, the company collected receivables quicker but it suffered a 10% loss in sales. What can the company do to reduce its cash conversion cycle?

Options:

A.

Pay vendors in advance.

B.

Decrease the days’ payable.

C.

Extend payables deferral period.

D.

Revise credit policy to be more lenient.

Question 98

"Fees" in Country Y, which would be considered bribes in the United States, are ingrained in the commercial culture. A U.S. company doing business in Country Y:

Options:

A.

may have moral but not legal issues with paying "fees" in Country Y.

B.

is prohibited by U.S. law from paying "fees" in Country Y.

C.

may receive an IRS tax credit for "fees" paid in Country Y.

D.

may pay the "fee" in Country Y but cannot take an IRS tax deduction.

Question 99

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

Options:

A.

It can be facilitated between banks.

B.

The accounts of a parent company and its subsidiaries may be aggregated.

C.

It is accomplished through multicurrency accounts in one country.

D.

A company need not arrange credit facilities for negative balances.

Question 100

If a bank has a 10% reserve requirement, a 31-day month, and an earnings credit rate of 6.5%, which of the following is the approximate level of collected balances required to support $1.00 worth of bank service charges?

Options:

A.

$181

B.

$199

C.

$201

D.

$206

Question 101

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 102

Which of the following factors will allow a company to decrease the amount of collected balances required to compensate its bank for services?

Options:

A.

An increase in the bank's earnings credit rate

B.

An increase in the bank's reserve requirement

C.

An increase in FDIC insurance charges

D.

A carry-over of a prior period's deficient balance

Question 103

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?

Options:

A.

$(225,000)

B.

$(52,000)

C.

$(40,000)

D.

$(25,000)

Question 104

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 105

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 106

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

The average collection float in the current system is:

Options:

A.

3,000,000 dollar-days.

B.

8,000,000 dollar-days.

C.

11,000,000 dollar-days.

D.

13,000,000 dollar-days.

Question 107

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?

Options:

A.

$1 million

B.

$3 million

C.

$6 million

D.

$10 million

Question 108

Which of the following can be exercised only on the expiration date?

Options:

A.

American options

B.

European options

C.

Commodity swaps

D.

Basis swaps

Question 109

Which of the following business practices does NOT comply with the Uniform Commercial Code?

Options:

A.

A company reconciles its bank statements within 30 days of receipt.

B.

A company receives a check marked "paid in full" and disputes it 120 days later.

C.

A bank exercises ordinary care when it examines signatures on checks received.

D.

A bank elects to return stale-dated items.

Question 110

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?

Options:

A.

Negotiate better float schedules at its local banks.

B.

Install smart safes at each restaurant location.

C.

Use a courier to deposit to each bank 3 times per week.

D.

Use wire transfers to concentrate the cash instead of ACH.

Question 111

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

Options:

A.

I and II

B.

I and III

C.

II and IV

D.

III and IV

Question 112

The PRIMARY objective of a corporation is to:

Options:

A.

maximize value to shareholders.

B.

maximize cash inflows.

C.

minimize the cost of capital.

D.

maintain adequate liquidity.

Question 113

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.

Options:

A.

I only

B.

II and III only

C.

I, II, and III only

D.

II, III, and IV only

Question 114

All of the following bank products and services can simplify the preparation of the daily cash position EXCEPT:

Options:

A.

ACH concentration.

B.

balance reporting.

C.

account analysis.

D.

controlled disbursement.

Question 115

If ¥120.14 = U.S.$1.00 and € .7564 = U.S.$1.00, how many ¥ = €1.00?

Options:

A.

¥.00629

B.

¥90.874

C.

¥120.8964

D.

¥158.831

Question 116

A manufacturing company has no liquidity and needs to purchase additional inventory in 60 days. Which of the following would have helped the company plan for this situation?

Options:

A.

A capital budget

B.

A short term forecast

C.

A medium term forecast

D.

A long term forecast

Question 117

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 118

The term "factoring" refers to a:

Options:

A.

mathematical formula used in calculating bond prices.

B.

short-term financing method.

C.

reduction of bank fees related to volume.

D.

Federal Reserve Open Market Committee activity.

Question 119

A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the average rate on local government bond investments is 2.5%. What would be the BEST method for the company to repatriate local profits?

Options:

A.

The company charges the subsidiary negotiated licensing fees on proprietary software.

B.

The subsidiary sets up a re-invoicing center in another, tax-friendly country to manage a transfer pricing program.

C.

The subsidiary lends funds to the parent. The loan is not repaid and the subsidiary writes it off.

D.

Set up an in-house bank program at the successful subsidiary to make use of the excess liquidity in-country.

Question 120

Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?

Options:

A.

Consolidating the cash resources of all divisions and subsidiaries in order to pay down corporate debt

B.

Allocating corporate debt to each division or subsidiary according to its cash needs

C.

Negotiating with suppliers to extend their payment terms for key divisions or subsidiaries

D.

Establishing strict credit standards that are uniform for all divisions or subsidiaries

Question 121

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

Options:

A.

1 and 2

B.

1 and 3

C.

2 and 3

D.

2 and 4

Question 122

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?

Options:

A.

$15,000

B.

$45,000

C.

$90,000

D.

$135,000

Question 123

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?

Options:

A.

Change the payment discount terms for the trading partners.

B.

Allow the trading partners to use the company's e-commerce solution.

C.

Negotiate larger order quantities from the trading partners.

D.

Agree to a uniform data transfer protocol for all trading partners.

Question 124

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 125

A company is considering issuing debt in a market environment in which there is a larger than normal spread between high- and low-risk investments. Among several factors, what are the concerns regarding investor behavior that the treasurer will MOST need to consider?

Options:

A.

Matching maturity

B.

Availability of collateral

C.

Capital structure

D.

Flight to quality

Question 126

A company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?

Options:

A.

Bank cashier's checks

B.

Multiple drawee checks

C.

Controlled disbursements

D.

Staggered funding

Question 127

The MICR encoding on a check provides all of the following information EXCEPT:

Options:

A.

the Fed district of the drawee bank.

B.

the payor's bank account number.

C.

the payee bank's institutional identification number.

D.

the dollar amount of the check.

Question 128

A company that is considering using a central lockbox for collections has conducted an initial study and determined the following:

What will be the annual net dollar benefit to the company if it uses a lockbox?

Options:

A.

$13,800

B.

$17,400

C.

$20,700

D.

$22,800

Question 129

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?

Options:

A.

NACHA rules

B.

Credit card regulations

C.

Point-of-purchase check conversion

D.

Accounts receivable conversion

Question 130

ACCOUNTS RECEIVABLE AT THE END OF MARCH

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

Options:

A.

$440.

B.

$715.

C.

$875.

D.

$925.

Question 131

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

Options:

A.

credit rating.

B.

earnings.

C.

asset quality.

D.

liquidity.

Question 132

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

Options:

A.

2/10, net 30

B.

2/10, prox 30

C.

2/10, net 120

D.

3/15, 2/30, net 45

Question 133

Which of the following are examples of covenants in loan agreements?

I. Financial ratios

II. Corporate resolutions

III. Borrower limitations

IV. Borrower obligations

Options:

A.

I and III

B.

II and III

C.

I, II, and IV

D.

I, III, and IV

Question 134

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 135

A bank employee programs an internal payment system to transfer half a cent of each transaction to her personal bank account. What type of risk does this behavior illustrate?

Options:

A.

Surety risk

B.

Payment risk

C.

Fiduciary risk

D.

Technology risk

Question 136

The PRIMARY difference between defined benefit and defined contribution pension plans is whether the employee or the employer:

Options:

A.

receives the tax reduction benefits of the plan.

B.

decides which mutual funds are included in the plan.

C.

bears risk of a shortfall of the investment results in the plan.

D.

hires investment managers for the plan.

Question 137

The PRIMARY difference between money market instruments and capital market instruments is that capital market instruments are securities that are:

Options:

A.

less than a one-year maturity.

B.

long-term in nature.

C.

generally more liquid.

D.

issued by lenders with credit ratings.

Question 138

Which of the following types of payment transactions requires the authorization of both the initiating and the receiving party?

Options:

A.

A multiple drawee check

B.

A drawdown wire

C.

A depository transfer check

D.

A non-repetitive wire

Question 139

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?

Options:

A.

$364.74

B.

$459.48

C.

$593.84

D.

$643.47

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Total 932 questions