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Liquidity reserves for opportunistic requirements are typically maintained in the form of:
Which communication protocol increased standardization for information reporting details improving on BAI2?
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.
An analyst at XYZ Company was assigned with determining if the company should start to use a lockbox provider for its retail payments. The analyst determined that the company’s annual sales of $324,000,000 were recorded evenly throughout the year. The Company receives 30,000 checks annually. Total dollar-days float without the lockbox is $76,500,000 and the annual opportunity cost is 5.5%; assume 30-day month. The industry’s average opportunity cost is 6.0%. Using the information in the table, what would be the net effect of using the lockbox?
A nationwide discount retailer is re-evaluating financing methods since the most-popular and most-expensive electronics “must-have” item for this year is set to ship from factories in China. Which of the following credit facilities would be MOST effective for the retailer to use?
Fluctuations in interest rates and the availability of funds are more significant risks for companies that rely on:
A multinational corporation (MNC) moving all of its Mexican peso-denominated revenues into a lower tax-rate jurisdiction could adopt any of the following treasury practices EXCEPT:
Loss exposures related to treasury management may include 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:
Which of the following is generally NOT a benefit of financial risk management?
Simplifying upgrades and system restoration, access from multiple remote locations, and interfacing with multiple applications are all reasons to:
Which of the following is NOT true for both bankers’ acceptances and trade acceptances?
When a company announces a significant and unexpected dividend increase, it signals to the market that management expects:
What document serves as the basic account or service authorization, empowering a representative of a business to enter into agreements for financial services?
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?
Company A purchases materials on cash-before-delivery terms, while Company B uses paid-on-production terms. Both companies are diligent with the protection of assets, but Company B has concerns with respect to transfer of title of the materials. Company B is MOST LIKELY what type of business?
Which of the following correctly describes pooling as practiced in the European cash management environment?
Treasury uses which of the following internal sources of information in its daily operations?
An employee who became vested in his/her employer ' s retirement plan upon reaching five years of service decides to resign after working for seven years.
However, he/she will not reach retirement age for another six years. Referring to the employee ' s annual earnings above, if the plan is structured as a cash balance plan, what is the value of the employee ' s plan if benefits accrued at 8% per year and future annual salary inflation is 3%?
A town has $25 million excess funds to invest long term. The town’s investment policy requires it have full FDIC coverage on all investments. The town is willing to do its own due diligence on the financial institutions that they invest in, but would prefer to have one statement. Which of the following investment options meets its requirements?
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.
What is the effective annual interest rate on the net usable funds?
A company with constant earnings and excess cash is considering a significant stock repurchase plan. Which of the following is MOST LIKELY to occur?
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.
What type of risk financing technique is the bank using?
After several internal discussions about treasury management systems (TMSes), ABC Company has determined that it has no need for customization but that it does want a backup for high priority capabilities. The company wants to reduce its IT costs and resources but still have IT support with in-depth knowledge of the solutions available. These parameters will MOST LIKELY result in what kind of TMS?
Which of the following actions would the CFO of a Canadian multinational conglomerate MOST LIKELY take to repatriate profits from its international subsidiaries?
An institutional investor has purchased an investment that provides a fixed rate of return with some potential for delays in payments. The return is 70% tax deductible for this particular investor. What type of investment was MOST LIKELY purchased?
ABC Ltd. uses a third party lockbox provider to collect and clear its paper receivables. A customer disputes the price charged for a binding machine and issues a check to ABC Ltd. for 50% of the balance due, noting “paid in full” on the face of the check. The third party provider does not bring the check to ABC ' s attention prior to depositing it. Which regulation allows ABC to attempt to collect the remaining balance?
Which of the following is an example of a company ' s internal data used for cash management?
A company can use all of the following documents to establish a relationship with a bank EXCEPT:
Buying a security with the intent of selling it prior to its maturity date to increase the return is an example of:
Given a corporate tax rate of 34%, a tax-exempt yield of 7% is equivalent to a taxable yield of:
The renegotiation of trade payment terms in an e-commerce environment should include which of the following?
When investing in commercial paper, the investor ' s primary consideration should be which of the following?
A retail lockbox system is characterized by which of the following?
I. An emphasis on processing cost
II. Detailed information on discounts taken
III. Small-dollar amounts per invoice
IV. Multiple invoices per payment
Cash management services commonly used outside the United States include which of the following?
I. Interest-bearing deposit accounts
II. Controlled disbursement systems
III. Pooling of bank accounts
Compared to debt, which of the following statements is true about a company issuing equity?
Which of the following are interest-bearing instruments?
I. Certificates of deposit
II. Treasury bills
III. Treasury notes
IV. Banker ' s acceptances
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:
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?
Which of the following is NOT a consideration for treasury managers when implementing electronic communications with FSPs?
Company XYZ has an underfunded defined benefit plan. Company XYZ is required to provide filings for this plan to all of the following EXCEPT:
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?
A cash manager wants to convert wire payments to ACH. Which of the following would NOT be a good application for ACH?
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?
The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for which of the following?
Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?
ABC Company is a national retail company and uses XYZ Bank for its collections and payroll services. XYZ has recently experienced financial problems; what is the greatest risk to ABC Company?
A French company conducts business strictly within the euro zone (the EMU). Which type of risk is of LEAST concern?
In evaluating alternative capital investments, a company should consider qualitative factors such as:
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?
Which of the following is a characteristic of giro systems used in countries in Europe?
A treasury analyst is working with the fraud and risk department to investigate suspicious payments. After collecting the analysis, the analyst presents the results to the fraud and risk department. What role is the treasury analyst fulfilling in treasury management?
Company ABC wants to consolidate bank balance reporting, do daily cash positioning, and make payments from a centralized platform for multiple banks. What vehicle should the company use?
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?
Which institution or accord was approved in 2009 to strengthen the regulatory capital framework for banks by focusing on minimum capital requirements, supervisory review and market discipline?
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?
Which of the following statements is true about a forward foreign exchange contract?
Which of the following are commonly used for financing accounts receivable?
I. Factoring
II. Issuing credit cards
III. Revolving bank loans
IV. Letters of credit
A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company ' s effective interest rate be reduced?
U.S. dollar-denominated instruments issued by foreign banks through their domestic branches are known as:
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?
Which of the following are basic security issues to be considered in evaluating a treasury management system?
I. Data recovery
II. Anti-virus protection
III. Database access controls
IV. Data integration
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
Components of a field banking system include which of the following?
I. Local bank
II. Concentration bank
III. Lockbox bank
Which of the following companies would be MOST LIKELY to use a wholesale lockbox?
Improvements to the cash flow timeline from a selling company’s perspective would include:
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.
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?
A company ' s lockbox bank, which processes 24 hours per day, has a 6:00 P.M. ledger credit cutoff and grants same-day availability on checks drawn on Bank B that are received by 10:00 P.M. Which of the following ledger and collected credit postings would result from a Bank B check received at 11:00 P.M. on Tuesday?
If a company does not have cash available to make an interest payment on a bond, the company is experiencing difficulty with its:
Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?
In a large company, the financial planning function typically falls directly under the responsibility of the:
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?
Contingency plans often focus on the business supply chain, ensuring that customer service is maintained. The financial supply chain, which is equally critical to the plan, should address:
A cash manager is responsible for a small subsidiary that has significant funds but only writes one check per month. Which of the following types of accounts would the cash manager use for this subsidiary?
A U.S. company is selling product for US$10,000 to a Canadian company with payment in Canadian dollars. The exchange rate has been booked at C$1.45/US $1 for payment upon delivery in 15 days. The Canadian dollar is forecasted to weaken within this period. This is an example of A.
Company M operates a grocery distribution business on Main Street. As part of its business continuity plan, Company M intends to purchase insurance to cover the facility lease for its Main Street warehouse in the event it cannot operate for a period of time. What type of coverage should Company M purchase?
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?
When company profits are high, what is the MOST LIKELY way management will prefer to finance growth?
BEA Company has determined its breakeven dollar amount for concentrating remote funds is $550.00. BEA Company has a daily earnings rate of 6% and gains one day of accelerated funds. If a wire costs BEA $35.00 dollars, what is the cost of an electronic funds transfer for BEA Company?
Recently LEW Utilities, a local utility company, began using the company processing center method to process customer payments. Prior to this change, it used its local depository bank’s lockbox to process the payments. The PRIMARY advantage of the new method is to:
Which of the following business practices does NOT comply with the Uniform Commercial Code?
Which of the following ONLY measures the time required to convert a credit sale into cash?
Company XYZ uses Bank A as its concentration bank and Bank B as its primary disbursement bank for check, wire transfer, and ACH disbursements. The bank relationship manager at Bank B asks Company XYZ ' s treasurer for the estimated daily dollar amount of disbursements so that the bank can establish a:
The treasury analyst for XYZ Corporation, a small retailer, is trying to forecast daily cash receipts being swept from the store depository accounts. The analyst has been given the data in the table regarding receipts from the last few days. The analyst chooses to use a seven-day simple moving average f orecast methodology.
What is the amount that XYZ Corp. would expect to receive on Day 10 (rounded to the nearest whole $)?
A company decided to lease a car 4 years ago for its daily driving business. The company maintained the car as per the lease agreement. Last year, the company decided to expand into event hosting and experienced an increase in business, especially when hosting overnight events. The company decided to purchase a minivan and return the car at lease expiration. When returning the car, the company had to pay $1,500 to the lessor. What was the MOST LIKELY cause of the additional expense?
A financially sound company sends wires to investors in the morning but does not receive replacement funds until the afternoon. Which facility will the company MOST LIKELY arrange with its bank to facilitate the company’s wire payment activities on any given day?
An Australian firm wishes to borrow CAD 100 million for 10 years to fund an investment in Canada that matures in 12 years. The current exchange rate is AUD/CAD 1.25. The company expects to use the annual net profit of CAD 25-50 million to fund its interest and principal payments. In a rising rate environment, the firm is able to lock in a fixed interest rate of 2.95% from its Australian lender. A Canadian lender is willing to provide a floating rate CAD loan at 235 basis points over the Bank of Canada benchmark lending rate of 0.5%, offering an all-in interest rate cap of 6.00% with a 75 bps premium. What should the company do to manage its foreign exchange exposure?
A company launches an innovative product and notices that a competitor based in another country begins to offer a very similar product. After investigating, the company discovers that its intellectual property was stolen after a foreign government ' s employee gained access through a weakness in the company ' s treasury management system (TMS). To which type of risk has the company been exposed?
Which of the following is a service typically provided by an investment custodian?
An investment firm wants to add a new commercial paper issuer to its program for one of its money market funds. The investment policy states that an analysis to evaluate and assess the probability that the issuer might default needs to be performed on an annual basis. This policy was established to mitigate which risk?
A disbursement check was intercepted in the mail, fraudulently altered, and subsequently cashed for $1,000 more than it had been written. The fraud was not detected until two months later, when the vendor phoned about late payment. Which of the following could have detected the fraud sooner?
A company can dispute any check alterations within how many days after the bank statement has been sent?
A newly hired Treasurer must establish the organizational structure of the treasury department for ABC Corporation which is a publicly traded multinational organization with sales offices in over 50 countries. There are limited opportunities for trading and hedging activity. The first challenge is to identify the most appropriate structure for the treasury group that will provide control, visibility, economies of scale, and lower operating expenses. What structure should be chosen?
MCA, Inc. upgraded the Treasury workstation that had been in place for two years and used data from that 24-month period to develop a new short-term forecast. A trend factor was applied to controlled disbursements of 97% on a month-by-month basis and the variance to actual disbursements is less than 1%. Which of the following model validation techniques was utilized?
PTC Corporation has determined that the threshold amount for initiating a wire transfer vs. an ACH payment for concentrating funds is $60,225. Wires cost $9.00 and save one day of float. If the opportunity cost is 5%, what is the cost of the ACH payment?
All of the following staff would be involved in the evaluation of an outsourced accounts payable solution EXCEPT:
A company determines that no combination of risk control or financing techniques will produce an adequate, risk-adjusted rate of return on manufacturing a new product. It decides to discontinue the product line. This is an example of:
A buyer receives an invoice from a supplier that offers discount terms of 3/10, net 60. What is the effective cost of discount?
Company X has a rating that is below investment grade. The treasurer would prefer to use commercial paper for its short-term financing needs and has a commitment from its bank to provide a standby letter of credit. What costs would be associated with this process?
Which of the following could be considered a weakness of a forecast derived by regression analysis?
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?
Disbursement float includes which of the following three float time intervals?
When projecting the closing cash position, a cash manager must estimate which of the following?
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?
A company with a relatively poor credit rating borrows most of its funds with short maturities. They may want to change its exposure to interest rates to more correctly reflect the long-term nature of the projects it is funding. Or, they may believe that long-term interest rates are going to rise, causing it to seek protection against the impact of higher interest rates on its balance sheet. Which of the following would be a solution?
The first step in the financial institution and financial services provider (FSP) selection process should be:
Two critical factors in determining an operational risk management strategy for a company are:
Under the standards of corporate governance adopted in 2002, an independent director must:
The year-end income statement for a company is presented in Table 1. The balance sheet is presented in Table 2.
What is the company ' s return on equity?
" 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:
In a publicly traded company, internal auditors typically report directly to the:
A company plans to double its dividend to its shareholders. Which of the following characteristics of the company would be MOST affected by this increase?
What is the impact, if any, on a company ' s cash conversion cycle if smart safes are used in all of its retail locations, including those that are remote?
A company is looking for a technology solution to best link the different functional areas of its company. Which of the following solutions will BEST suit the company?
A company is preparing for a U.S. IPO transaction. A full-service investment bank has been selected, via an RFP, as the investment advisor and the underwriter. The lead banker is a personal friend of the CEO and is supporting both activities. The investment bank recommended $29 as the offer price. The stock closed at $31 after its first day of trading. Why would the SEC be concerned?
Which of the following is an opportunity cost of maintaining excess liquidity?
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?
A treasury manager expects the price of a commodity to be highly volatile between the time of option purchase and exercise. Which option style would provide the greatest flexibility?
An airline wants to lock in the price of the jet fuel it needs to purchase to satisfy the peak in-season demand for travel. The airline wants to manage its exposure to fluctuations in fuel prices. What type of exposure is this?
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?
One of the KEY risks associated with a company’s use of financial institutions is the possibility that:
Which of the following is true when a company purchases goods using trade credit from suppliers?
For a retirement plan to be qualified under ERISA, employer and employee contributions must be:
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 arrive at today’s projected closing cash position, a cash manager starts with:
When using the Internet to access auction markets, companies may use certificate authorities to reduce their exposure to which of the following types of risk?
To strengthen outside auditor independence with regard to publicly held companies, the Sarbanes-Oxley Act requires that:
Banks often control information flow, records and assets, therefore it is critical that banks have:
Company XYZ ' s government relations team has done a poor job in maintaining and nurturing its relationship with the local government. Because of new business ventures it is pursuing, the company needs a method that will help it monitor and collect international accounts receivables between subsidiaries. What technique is more suited given its situation?
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:
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?
Company A has decided to purchase $3,000,000 of real estate from Company B. Company A will make the payment in 3 parts. The electronic payments will be sent from Bank A to Bank B. On Day 1 Company A will send a $400,000 check as a deposit, which is deductible from the balance. The check is expected to clear in 4 days. On Day 2, two payments are initiated, one wire transfer for $2,000,000 and an ACH for $600,000 to complete the balance. On Day 2 what percentage of the payment to Company B is NOT final?
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?
Assuming a marginal tax rate of 36%, the taxable equivalent yield for an investment with a tax-exempt yield of 3% would bE.
Which of the following factors will allow a company to decrease the amount of collected balances required to compensate its bank for services?
A merchant closes its day with a total of 100 credit card transactions of an average ticket value of $100. The interchange reimbursement fees are 2% and transaction fees are $0.05. If this merchant receives gross settlement, what would be the value of deposit to the account for that day?
With the advent of the euro, many U.S. companies have seen a reduction in their number of foreign currency transactions. As a result, these U.S. companies have benefited from which of the following?
I. Reduced FX transaction costs
II. Consolidated banking relationships
III. Simplified exchange risk management
IV. Reduced need to monitor foreign political climates
Which of the following would MOST LIKELY cause a decrease in a company ' s deposited checks availability?
Company XYZ sends an ACH debit file valued at $300,000 with an average item value of $1,000. The file settlement date is March 10. The file contains no duplicate items and items are split equally between corporate and consumer items. One percent of consumer items and 2% of corporate items were returned. What would be the final net settlement value for Company XYZ?
A company ' s investment guidelines typically restrict all of the following EXCEPT:
Over the past 3 years XYZ Company has expanded into multiple countries and significantly grown its banking relationships. The company now incurs significant expenses related to payment transaction costs and maintaining multiple bank connections. What should the company use to combat these rising costs?
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?
A publicly held U.S. company has reported at the beginning of the year that it expects to increase shareholder value by 5%. The current expectations are for interest rates to remain steady with a decline in fourth quarter. Treasury policy requires that investments be 90 days or less and investment grade. How should the company invest excess cash to support this goal?
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?
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?
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?
The Treasurer of a company would like to establish an investment policy for the organization. One objective that should be included in the investment policy that would BEST allow the organization to limit its exposure to a particular market sector would be to:
A merchant has a chargeback rate of 0.03% on average daily sales of $200,000. After switching to a new merchant acquirer that is a bank, the merchant sees the rate increase to 0.05% or $10,000. The merchant’s analysis reveals that the bank maintains its data warehouse in another country where the system network is routinely hacked. What act or standard is being violated?
A U.S. corporation has annual revenues of $500 million and a corporate tax rate of 15%. It has subsidiaries in Country A and Country B. Subsidiary A has annual revenues of $50 million. Subsidiary B has annual revenues of $20 million. The parent company has asked the Subsidiary A to transfer the equivalent of $10 million to Subsidiary B. There is a 5% withholding tax in Country A and a 3% withholding tax in Country B. How much withholding tax will the company owe as a result of this transaction?
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?
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?
A shareholder right found in many corporate charters is the preemptive right which provides:
Company X, a US based multi-national, is exploring the option of locating a subsidiary in another country where there has been some historical risk of expropriation of local assets of foreign corporations. Therefore, as part of the risk assessment process the company must specifically quantify the:
A treasurer is monitoring the yield curve through a service provider (like Reuters) and notices that it is moving from downward sloping to upward sloping. Based on this information, the treasurer should consider:
Customers of an electronic trading firm are experiencing problems with the online trading platform. The company IT department discovered that although display of market data is in the proper place, there are no tags being used to populate specific information in the necessary fields. The company is MOST LIKELY experiencing a problem with:
Company GRA has retail locations in remote areas of Montana. All banking options within the area, deemed a safe distance for making cash deposits, fail the counterparty risk assessment. Deposits would include both cash and checks. In order to achieve immediate availability of funds, what deposit method should be utilized?
Due to a loss of proprietary information held for clients, ABC Company has been named in a billion dollar lawsuit. It was determined that the loss of information was due to a breach in its computer system firewalls by outside parties. When the lawsuit became public, the company experienced a steep drop in its stock price. This scenario is an example of what kind of risk?
Which of the following is a KEY objective when instituting a collection and concentration policy?
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?
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?
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 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?
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?
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?
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?
XYZ Company has a well established commercial paper (CP) program that they use to fund operations. The company is expanding by purchasing a new factory. The CFO is worried about the time and expense needed to issue long-term debt and decides to use the funds they raise in the CP market to pay for the purchase of the factory. This strategy will be successful if:
Company ABC is a restaurant chain that has enjoyed a surge in customers’ dining with not much of a profitability increase in the last couple of years. Following a bad restaurant review, customer traffic deteriorated with not much change in profitability. Which of the following BEST describes the cost structure of the company?
XYZ Bank would like to conduct some foreign exchange transactions with JKL Bank. JKL isn’t the most liquid and could have some credit risk. XYZ Bank should suggest which of the following in order to eliminate risk?
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?
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?
XYZ Inc. is a publicly traded company with revenues of $1B and an operating profit of 7.5%. The treasury organization consists of a treasurer and an assistant treasurer. The assistant treasurer is responsible for the creation and approval of all payments. The treasurer is responsible for compilation of the financial statements. Under Section 404 of the Sarbanes-Oxley Act, what should be viewed as a concern?
Treasury management systems and ERP systems allow companies to do all of the following EXCEPT:
A retail brokerage firm is MOST like which one of the following types of financial institutions?
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?
What do MOST companies try to maintain due to the signaling effect and clientele effect?
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?
Which of the following is an example of a qualitative factor used in making credit decisions?
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?
The amount of the discount required to renegotiate credit terms in EDI depends on which two of the following?
I. Present value impact of the timing change
II. Credit risks involved
III. Revolving credit agreements
IV. Transaction costs savings
A measure of the incremental impact of a company ' s investments on market capitalization is known as:
A company offers credit terms of net 40, with an opportunity cost of 12% to a customer. What discount would have to be offered for the customer to be indifferent between paying on Day 40 and paying with the discount on Day 10?
Based on the above information, before making the major acquisition, several large institutional shareholders have asked management to consider all of the following EXCEPT:
Advantages of writing checks locally on a centralized disbursing bank include all of the following EXCEPT which statement?
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:
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?
Check MICR line information includes which of the following?
I. Bank of deposit identification number
II. Payee bank identification number
III. Federal Reserve bank code
IV. Payor ' s account number
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?
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:
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?
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?
All of the following would encourage a company operating nationwide to develop multiple banking relationships EXCEPT:
The lockbox receipt records for one 30-day month are provided below. The opportunity costs are 10%.
What is the annual cost of float rounded to the nearest dollar?
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:
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?
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?
In developing treasury policies and procedures, which activity requires key controls to be in place?
Which two of the following are optimal uses for short-term excess cash?
I. Pay down credit lines.
II. Make overnight investments.
III. Repurchase stock.
IV. Make capital expenditures.
ABC Company 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?
Which of the following should NOT be a consideration when setting an optimal dividend policy?
Which of the following activities creates administrative costs associated with a concentration system?
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?
Which of the following types of payment transactions requires the authorization of both the initiating and the receiving party?
The PRIMARY difference between money market instruments and capital market instruments is that capital market instruments are securities that are:
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?
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?
A commercial paper issuer who repays investors earlier in the day than it receives funds from new investors often creates which of the following?
A company has a high value for its current ratio. What does this suggest in terms of liquidity and risk?
During the 1970s, many companies instituted dividend reinvestment plans (DRIPS). There are many benefits of this plan. What is the one negative aspect?
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):
A company has a line of credit and a bond trustee agreement with a bank. To prevent a decline in the company’s bond rating from having a negative impact on the company’s line of credit, the bank should have which of the following in place?
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?
In terms of capital structure, lease financing normally has the same effect as:
Company XYZ is not sure which direction interest rates are headed. Which of the following would be MOST suitable?
ASC Topic 815 (FAS 133) is applicable when accounting for which of the following?
With respect to the Sarbanes-Oxley Act, a company may avoid additional reporting requirements by:
Which of the following is NOT a key area to consider when establishing treasury policies?
A public company’s risk profile is currently in balance. The management’s mission statement is to minimize stock devaluation. However, it is forecasting a need for working capital in the short term. Which of the following solutions would BEST assist management in accomplishing its mission?
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?
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?
XYZ Company has one inventory supplier, and title to inventory is transferred to the company during the manufacturing process. Which of the following BEST describes XYZ’s relationship with its supplier?
A company is starting a project to redesign its cash management information systems. What would be an important tool in this effort?
Company A regularly modifies its capital structure by repurchasing stock. Which one of the following is a true statement?
An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as:
What must be measured and monitored to ensure that a company has adequate liquidity?
A company hires an investment firm to fully underwrite a new stock issuance. Which of the parties carries the MOST risk?
In the event of bankruptcy and the subsequent liquidation of issuer ' s debt, in what order, from first to last, will the following be repaid?
1. Senior secured debt
2. Senior subordinated debt
3. Junior secured debt
4. Junior debentures
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
Which currency will sell at the greatest discount in the forward market against the U.S. dollar?
Which of the following techniques would MOST accurately predict a company ' s daily cash position?
A globally diversified manufacturing company can manage its liquidity more effectively by:
What is a KEY reason that both a lessee and a lessor would enter into a lease financing agreement?
Company ABC has recently started to experience a significant reduction in funds availability. Which of the following is MOST LIKELY to reduce funds availability?
Companies in the U.S. with a nationwide over-the-counter/field bank collection and concentration system often deal with:
U.S.-based manufacturing Company XYZ is looking to deliver finished goods to ABC Company in a developing nation. The credit department wants to ensure collectability and has asked the treasury department for guidance. The desired solution may impact days sales’ outstanding but will have the lowest credit risk to Company XYZ. What will treasury recommend?
An olive oil producer in Macedonia is arranging for shipment of its product to an international distributor. To support this activity, the company arranges for export financing because:
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?
A multinational company that uses “notional pooling” for its euro zone subsidiaries will realize which of the following advantages?
A firm’s air conditioning unit breaks down unexpectedly and must be replaced immediately. What type of liquidity requirement is this an example of?
The primary bank for a major multinational company would use an overlay structure for euro zone cash concentration under which of the following circumstances?
In order to reduce the premiums paid to insurance companies, a company should consider retaining or self insuring for:
What is the MOST appropriate financial plan when a corporation wishes to establish its overall goals and objectives over a period of time?
Determining that payments are made to vendors and suppliers based on credit terms is the responsibility of:
When will a depositor receive ledger and collected credit for a western check deposited at 2:00 P.M. Wednesday?
Ledger Credit - Collected Credit
In a maturity matching financing strategy, which of the following is financed using short-term sources?
LLZ Company manufacturers metal detectors in California at a cost of $9 per unit. The most expensive component to make is the sensor which goes in the finished product. The cost is $5 per sensor. Last month LLZ acquired a company in Mexico that makes the sensors for $1 per sensor. LLZ plans to move all sensor manufacturing operations to the factory in Mexico. What is the movement of this cost saving process called?
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?
Following the latest round of cost-cutting measures at ABC Corporation, the Treasury Department retained a headcount of 2 individuals. While the analyst was out sick, she gave her password to her Manager so that payments could be released via the bank’s wire transfer system. The Manager sent 3 wires out with incorrect banking instructions. The problem was not identified until the angry suppliers called several weeks later demanding payment. The corporation has not yet recovered the $130,000 sent to erroneous accounts. In this instance, which control failed for ABC Corp.?
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?
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 $200,000 in three days.
Using this information, as well as the data in the table, what is the closing cash position for XYZ Corporation?
A company has asked its marketing, payroll and sales teams to collaborate in finding a solution that could augment its customer base, reduce payroll cost and increase sales. The solution has to be market ready. Which of the following will serve all 3 purposes?
When establishing a retail collection system that accepts consumer debit cards, a company must comply with which Federal Reserve regulation?
A company wants to gather daily balance reporting from its international subsidiaries ' bank accounts. Which of the following systems would allow the company ' s bank to gather the balance positions from the local banks?
In a large company, the person who normally oversees both the treasury and the accounting functions is the:
A company is considering expanding to a three-site lockbox system from its current two-site system and has collected the following data:
The average collection float in the current system is:
Which of the following global cash concentration methods would be MOST appropriate for a company with operations in the United States, Germany, Mexico, and Japan?
A company agrees to pay ¥10,000,000 for a shipment from Japan. At the time the purchase order is placed the exchange rate is ¥168/US$. At the time of payment the exchange rate is ¥163/US$. What is the net effect on the dollar cost of the shipment if the transaction has NOT been hedged?
A small import/export company, XYZ Company, has recently set up an account with a German firm. The contract between the companies states that XYZ is to be paid as soon as all documents are in order showing that the transaction terms have been met. Which of the following forms of payment drafts would be MOST appropriate for XYZ?
Which of the following will directly increase a company ' s cost in a fee-only bank relationship?
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 $)?
An international company would establish a re-invoicing center for which of the following reasons?
Major Manufacturing Inc. (MMI) is a manufacturer of customized restaurant equipment. MMI ' s supplier relations policy is to take advantage of trade discounts, when available. All suppliers offer payment terms of 1/10, net 30. MMI invoices customers at the end of its 30-day manufacturing cycle. Which of the following is the correct chronological sequence of the events listed?
1. Customer invoice is sent.
2. Supplier payment is sent.
3. Customer payment is received.
4. Order is shipped.
5. Customer order is received.
6. Supplier order is placed.
All of the following factors influence a company ' s decision to use electronic commerce EXCEPT:
Which of the following is NOT characteristic of commercial paper with a term of less than 270 days?
All of the following statements are true about adjustable-rate preferred stocks EXCEPT:
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.
When a subsidiary borrows money, the parent, sister subsidiary, or other entity is often used in order to:
To increase the money supply, the Federal Reserve would increase which of the following?
In a private label financing arrangement, the seller does which of the following?
The time between receipt of a mailed payment and the deposit of the payment in the payee ' s account is known as:
Which of the following investment instruments would provide a company with the greatest liquidity and least risk?
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?
Which of the following would be the most efficient method of reducing the number of cross-border payments between two units of a company?
TESTED 02 May 2026