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A dealer is selling securities to a client. What is the yield/price at which the dealer will sell?
The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY:
A manager has prepared an analysis of five investment alternatives. Prior to selecting which alternative to invest funds in, the manager calculated the anticipated return for all options. The manager is only going to invest in one alternative. The four investments that are not chosen are:
Which of the following would be considered insurance risk management services?
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?
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?
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:
What document serves as the basic account or service authorization, empowering a representative of a business to enter into agreements for financial services?
When company profits are high, what is the MOST LIKELY way management will prefer to finance growth?
A company has six fraudulent checks clear its primary disbursement account for a total of $7,652. The bank agrees to split the loss with the company to maintain a good relationship. As a condition of sharing the expense, the bank requires the company to establish positive pay on its disbursement accounts or have the company absorb the losses on future fraudulent payments.
If the company determines that positive pay is too expensive and decides NOT to implement it, what type of risk financing technique is the company using?
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?
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?
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 ABC needs external capital to finance a new product line. Its operating leverage is high, and its revolving credit agreement contains a ratings trigger. What will Company ABC MOST LIKELY do to finance its new product line?
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?
A portfolio manager’s investment policy states that they are not allowed to hold any investments that have extension risk. Which type of investment should the portfolio manager avoid?
Which of the following contributes MOST to the marketability of a security?
To increase the money supply, the Federal Reserve would increase which of the following?
What is the correct sequence of the following disbursement float events, from first to last step?
1. Check clears back to drawee bank account.
2. Check is encoded and enters the clearing system.
3. Depositor receives ledger credit.
4. Lockbox bank receives check.
Under which of the following circumstances is lengthening the disbursement mail float NOT a benefit to the disbursing company?
Examples of traditional factors used in making a credit decision include which of the following?
I. Capacity
II. Capital
III. Compliance
IV. Character
Which statement is typically true about cash dividends?
All of the following statements are true about adjustable-rate preferred stocks EXCEPT:
A company can use all of the following documents to establish a relationship with a bank EXCEPT:
Which of the following statements is true about a forward foreign exchange contract?
Which of the following clears international checks?
Which of the following instruments is sold at multiple price bid auctions?
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?
A currency is said to trade at a discount if it is worth:
A cash manager should use which of the following techniques to measure the differences among cash flows with different timings and amounts?
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
A company receives proceeds of $1,119,274 from the sale of $1,150,000 worth of commercial paper. The paper is outstanding for 95 days. If a 360-day year is used, the company's annual interest rate is closest to which of the following?
A company is based in the United States and has an operating subsidiary in Germany. With a stable U.S. dollar and a depreciating euro, the company's cash manager may elect to:
A Chicago meat processor is concerned about the volatility of pork belly prices. Which of the following derivative products would be used to fix these prices within a given range?
A deck furniture supply company maintains a large inventory during the summer sales season. One of the PRIMARY benefits of this approach is that the company avoids which of the following costs?
A call option for a company has an exercise price of $50. The stock is currently trading at $60. At maturity, what should an investor who paid $3 for the option do?
Convertible securities consist of preferred stock anD.
Company XYZ has determined that its weighted average cost of capital is 12.5%. The capital structure of the company is made up of 75% equity and 25% debt. The before-tax cost of debt is 10%. Given a tax rate of 34%, what is XYZ's cost of common stock?
An analyst for a landscaping company wants to adjust her cash-flow forecast to account for the seasonality of outflows. How can this be accomplished?
The goal of a successful investor relations program is to ensure:
An investor concerned about taxes on dividend distributions will MOST LIKELY purchase stock on which of the following dates?
At the end of the year, ABC Company’s actual revenue is $85,000,000 versus budget revenue of $90,000,000. Actual operating expenses are $20,000,000 versus budget operating expenses of $22,000,000. Budget variance analysis would indicate a(n):
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?
Which of the following is subject to transaction exposure?
In which of the following international cash management methods is title for goods transferred for intercompany sales?
With respect to the Sarbanes-Oxley Act, a company may avoid additional reporting requirements by:
The treasury management department of a company hires a consulting firm to provide research on how other companies in the industry have structured their treasury operations. This is an example of which practice?
Which of the following is MOST LIKELY to have a significant impact on the financial condition of an organization?
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?
All of the following are account reconciliation services EXCEPT:
A United States corporation purchases finished products from a German subsidiary and sells raw materials to the subsidiary several times in one month. To minimize foreign exchange transaction costs, the U.S. corporation's cash manager would MOST LIKELY use:
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?
All of the following are common consumer-to-corporate international payment mechanisms EXCEPT:
A company has asked its marketing, payroll and sales teams to collaborate in finding a solution that could augment its customer base, reduce payroll cost and increase sales. The solution has to be market ready. Which of the following will serve all 3 purposes?
An option can be exercised in the market at its:
An international company would establish a re-invoicing center for which of the following reasons?
In capital budgeting, a company might risk adjust which of the following?
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?
On a daily basis, the cash manager is responsible for all of the following EXCEPT:
A large multinational company recently implemented new processes to automate its treasury operations. If these changes were the direct result of comparing the company's practices with those of other companies, the activities could be considered an example of which of the following?
I. Liquidating
II. Re-engineering
III. Benchmarking
IV. Forecasting
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 $)?
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?
The earnings allowance rate applied to collected balances is usually determined by which of the following rates?
A merchant presents 2 different batches of credit card transactions for processing, each batch has the same dollar value and number of transactions, but the fees are different. Which of the following explains why?
When a buyer receives goods, but payment is not due to the supplier until some later date, this is defined as:
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?
QRT Corporation uses exponential smoothing in its cash flow forecasting model. Five days are used to calculate the moving average forecast.
If the value of the smoothing constant is .60, what is the exponential smoothing forecast for day 7?
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:
XYZ Corporation’s current ledger balance of the controlled disbursement account is $1,286,500. Based on the information in the table,
what will the corporation's available balance be at the end of today?
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?
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?
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?
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?
Which of the following capital budgeting methods ignores the time value of money?
XYZ Holdco has multiple credit facilities with a bank under a borrowing agreement that includes certain covenants. A fire has destroyed the manufacturing plant owned by ABC, one of the XYZ subsidiaries that is part of the credit facilities. All loans, including the ABC loan, are up to date and being repaid as required. However, after the fire, the bank notified XYZ that it was in default. Which one of the following covenants is MOST LIKELY a term of the borrowing agreement?
XYZ Company has incurred a financially devastating event because of a hurricane at its offshore manufacturing plant. Due to the impact on liquidity, the company may not be able to survive. What should the Treasurer have done in order to assess the risk associated with this type of event?
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?
XYZ Corporation uses ABC Bank for their lending and treasury management. In addition, the bank serves as bond trustee for XYZ Corp. If XYZ Corp. becomes distressed, this relationship could create a conflict of interest for the financial institution. What barrier prevents a financial institution from sharing confidential information between divisions?
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?
An analyst at XYZ United is in charge of setting up the bank accounts. Fraud is a major concern due to the analyst’s past experience with previous employers. The analyst has estimated that the company will earn 3.7% on surplus cash. Surplus cash must be invested in short-term investment grade investments. The company’s closest competitor earned 4.1% for its surplus cash in its latest fiscal year. What bank service should the analyst use to maximize the company's surplus cash?
A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?
Companies in the U.S. with a nationwide over-the-counter/field bank collection and concentration system often deal with:
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 is NOT a component of the operating cycle?
Which of the following objectives of treasury management refers to a company’s ability to meet current and future financial obligations in a timely, efficient, and cost-effective manner?
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?
In predicting collections from credit sales, a cash manager can obtain prior period information from which of the following sources?
I. Customer payment histories
II. The company's concentration bank
III. The accounts receivable department
IV. The accounts payable department
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
A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.
ABC Company offers trade terms of 2/10 NET 30. For several reasons, ABC has decided to eliminate the requirement for a letter of credit from one of its customers. If ABC puts the customer on open book credit, what is the MOST LIKELY outcome?
Which of the following is a regulation that is having a major impact on the treasury profession?
A multinational company that uses “notional pooling” for its euro zone subsidiaries will realize which of the following advantages?
Traditionally the primary source of operating risk in the area of external theft or malfeasance has been related to:
A multidivisional domestic company with centralized treasury decision-making can potentially utilize intra-company lending to:
Which section of the statement of cash flows includes items that represent the cash inflows and outflows related to the daily functions of a company?
Company ABC has recently started to experience a significant reduction in funds availability. Which of the following is MOST LIKELY to reduce funds availability?
Company A has operated a Pension Plan since 1985. Despite a recent surge in asset values, the plan remains significantly underfunded. With the passage of the Pension Protection Act of 2006, Company A will be need to:
A company has $75 million in adjustable-rate debt, $25 million in fixed-rate debt, and $50 million in accounts receivable. If the company is concerned that interest rates will rise, which of the following would be the BEST interest rate derivative?
A company's accounts receivable balance pattern is shown in the first table. Credit sales are shown in the second table.
What is the cash inflow for the month of August?
The PRIMARY difference between money market instruments and capital market instruments is that capital market instruments are securities that are:
Controlled disbursement notification times can be improved by which of the following?
A supplier can improve invoicing float by:
Which of the following types of payment transactions requires the authorization of both the initiating and the receiving party?
Which of the following are examples of covenants in loan agreements?
I. Financial ratios
II. Corporate resolutions
III. Borrower limitations
IV. Borrower obligations
A company has average monthly sales of $2,700, of which 5 percent is on a cash basis, with the remaining sold on open account. The company's accounts receivable aging schedule at the end of March is as follows:
What is the company's DSO?
Under the strict cash basis of accounting, revenue is recorded when:
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?
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?
Based on the above information, before making the major acquisition, several large institutional shareholders have asked management to consider all of the following EXCEPT:
Which agency appoints the chairman and members of the Public Company Accounting Oversight Board?
Each of the following statements is true of both defined benefit plans and defined contribution plans EXCEPT:
BF Company, a manufacturer of food products, reported financial information shown in the Exhibit for the end of the year. BF Company is subject to covenants in its commercial paper program. It is in compliance with which of the following?
Subtracting dividends from net income available to common shareholders is reflected as a change to which of the following balance sheet items?
Which of the following is an advantage of a centralized treasury function?
A UK based manufacturer has a subsidiary in Belgium and a manufacturing plant in Italy. The subsidiary wants to sell its products in Sweden. How would the UK parent best structure the movement of funds within the organization to optimize management of working capital while ensuring recourse?
Investors typically require a higher yield as compensation for holding securities that have:
To arrive at the closing cash position, a cash manager must add the expected settlements in the collection and concentration accounts and deduct the projected disbursement totals from the:
To monitor financial institution service quality, a company would use all of the following measures EXCEPT:
An employee is considering two investment strategies for his 401(k) plan:
Strategy #1: Invest all contributions in a money market fund that has returned 5% annually
Strategy #2: Invest all contributions in a stock fund that has returned 9% on average, although annual returns have varied between (2%) and 12%
Assuming that the employee makes a one-time investment of $12,000 and that both strategies continue to perform as they have historically, how much more or less could the stock fund be worth after one year compared to the money market fund?
A company pays its vendors with the following methods:
If the company has a daylight overdraft agreement, which of the above presents the highest single-day credit risk for the bank if the company enters bankruptcy?
Which of the following ASC X12 transactions is used to confirm the receipt and compliance of transmitted sets?
Which of the following is an opportunity cost of maintaining excess liquidity?
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?
The issue of corporate governance in publicly traded companies arises from:
Which of the following methods of compensation is NOT used by banks in the United States?
A review of a company's risk management strategy would include all of the following EXCEPT:
The company's monthly credit sales are in Table 1.
The company's receivables collection pattern is in Table 2. If this company's accounts receivable on March 31 is $0, what would the accounts receivable balance be at the end of July? Assume a 90-day quarter.
A company has made all required payments on its revolving credit facility but its debt to tangible net worth ratio violates the facility’s covenant. What has occurred?
One of the PRIMARY ways the Fed addresses systemic risk is by:
An employer wishing to reduce operating income volatility would MOST LIKELY offer what type of retirement option to its employees?
The exchange of a fixed interest rate cash flow for a floating interest rate cash flow with both interest rates in the same currency is an example of:
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?
Today’s modern cash management systems would include which of the following?
The measurement of the significance of any loss exposure depends on:
A company has large, ongoing short-term financing requirements with a maximum horizon of 250 days. It has a good credit rating and would like to use the least expensive source of short-term debt to finance its needs. The Treasurer might recommend which of the following?
Which of the following must be considered when designing the basic framework for a cash management system?
A multinational company may use which of the following to locate profits in subsidiaries in low-tax countries?
Establishing the authority to open bank accounts is the responsibility of:
The key parties involved in a disaster recovery plan are generally classified as internal resources or external counterparties. When evaluating the risks of both parties, which of the following can be assumed?