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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 properly designed concentration system will potentially achieve which of the following results?
I. Increased authority to field offices
II. Increased investment income
III. Improved ability to take discounts
IV. Reduced dependence on third-party concentration vendors
Which of the following is NOT a key area to consider when establishing treasury policies?
Company Sales Figures:
Based on the information above, what is the estimate for the company's April cash flows?
What activity should the Treasurer be most interested in if core treasury functions were to be compared within the industry or cross-industry for the purpose of identifying “best practices”?
In terms of targeting a company’s capital structure, when is it beneficial to assume a high level of financial risk?
Which of the following is an advantage of a centralized treasury function?
A large U.S. based multinational corporation favors use of intra-company loans to repatriate funds from its foreign subsidiaries in order to take advantage of the favorable tax treatment of loans. In those countries which restrict repayment of intra-company loans the corporation may need to:
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:
Which of the following institutions would be regulated by the Office of the Comptroller of the Currency (OCC)?
ABC Company has recently moved away from paper-based invoicing systems and has begun implementing e-commerce solutions. Realizing that its e-commerce implementation may have a negative impact on the float of its trading partners, ABC can do which of the following to help address this concern?
A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?
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 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?
What is the Weighted Average Cost of Capital for XYZ Company, assuming the following:
What is the PRIMARY issue that management needs to consider when determining capital structure?
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as:
A French company conducts business strictly within the euro zone (the EMU). Which type of risk is of LEAST concern?
The MOST effective way to reduce the internal risk of technology as it relates to critical treasury functions is to:
The interest costs on commercial paper are determined by all of the following EXCEPT the:
Which of the following is a ratio that is often used by commercial banks to measure a company’s leverage and does not include the effect of assets that are difficult to value or are NOT easily converted to cash?
Fluctuations in interest rates and the availability of funds are more significant risks for companies that rely on:
Investors typically require a higher yield as compensation for holding securities that have:
Which of the following services allows a bank to match checks presented for payment against company check issuance data?
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?
Advantages of writing checks locally on a centralized disbursing bank include all of the following EXCEPT which statement?
XYZ Company has decided to purchase a close competitor. This acquisition would make XYZ Company the 4th largest in its industry allowing it better purchasing power and greater distribution channels. After completing the M&A analysis, it is determined that the combined companies would produce a 40% increase in revenue, reduce manufacturing costs by 30%, but would increase current liabilities by 27%. Which of the following would keep the acquisition from happening?
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 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 treasury employee of Company XYZ is privy to financial reporting information yet to be released to the public. He knows that year-end earnings exceed last year’s and would be viewed as positive to the investment community. He casually mentions to a relative that now would be a good time to buy the stock of Company XYZ. Which section of the treasury code of ethics would typically be violated by such a disclosure?
A company 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?
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:
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?
Which agency implements monetary policy through purchases and sales of treasury securities?
ABC Company’s Treasury department outsourced its overnight investment duties to XYZ Money Management. XYZ placed the funds received from ABC into corporate commercial paper, which has recently gone into default after numerous ratings downgrades. The investment policy of ABC Company states that all investments must be in investment grade commercial paper; however, the agreement gives XYZ the ability to make exceptions with the approval of the Treasurer of ABC Company. The Treasurer was never notified of the ratings downgrades. What role or responsibility, if any, was violated with regards to the investment policy?
XYZ Company experienced a substantial monetary loss due to over exposure to one particular sector of the stock market. The Treasurer had invested in companies tied to five different sectors, but violated the company investment policy by exceeding a 10% limit for any sector. In developing its investment policy, what should XYZ Company have considered to prevent this scenario?
The Treasury Manager of a privately held company is looking to finance new equipment that has a useful life of 5 years. What type of financing would the Treasury Manager MOST LIKELY employ to finance the equipment?
Company ABC has expanded its banking relationships due to international growth. ABC cannot figure out why its collection float amongst its international customers is longer than its domestic customers. Additionally, ABC is incurring significant costs related to the receipt and processing of these customer payments. ABC is MOST LIKELY experiencing issues related to:
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?
What type of tax does a multinational auto manufacturer commonly pay in foreign countries at each stage of a vehicle’s production?
A customer buys a laptop for $850 and a CD for $13. Only items with sale price of $15 and greater are subject to value added tax (VAT). Assuming VAT of 8.5%, how much tax does the customer incur at the point of sale?
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 XYZ is a high technology company. It is planning on acquiring another company in the high technology sector. Company XYZ does not have enough cash to acquire the company and is planning on financing the acquisition through a bond offering. Which of the following measures is company XYZ MOST LIKELY to use in its analysis of operating profits considering it is a high debt transaction?
Racklyn Paint Company, a new paint and construction company, has vendor payables of $2 million due periodically over the next 3 months; payroll payable to its crews of $500K each month; a mortgage of $4.4 million with a fixed rate of 6.0%; and an equipment loan of $5 million with a bank at a 30-day LIBOR plus 150 bp payment of $100K due monthly. Racklyn receives their first contract valued at $12 million with half of the contract value due at the time of contract and final payment upon completion. Racklyn expects the job to last 6 months. Which option would be the BEST use of Racklyn Paint Company’s cash?
A company transfers funds from its remote accounts by ACH with a one-day settlement and is notified of a same-day credit of $100,000 in one of its accounts. A wire transfer costs $27.75 incrementally. Assuming a 360-day year, which of the following is the minimum rate of interest that must be earned on these funds to justify the cost of a wire transfer?
Which of the following business practices does NOT comply with the Uniform Commercial Code?
I. Banker’s acceptances
II. Commercial paper
III. U.S. Treasury bills
IV. Federal agency securities
Which of the following is the MOST usual ranking, from lowest to highest risk, of the investments listed above?
XYZ Company is considering the purchase of a security that generates a tax equivalent yield of 10% and a tax exempt yield of 7.1%. What is XYZ's marginal investment tax rate?
If a company uses accrual accounting, deferred taxes are reported on which financial statement?
The earnings allowance rate applied to collected balances is usually determined by which of the following rates?
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?
There are 31 calendar days in the month, and the opportunity cost of funds is 9%.
What is the annual cost of float for the batches listed?
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?
This question is based on the following data describing a company's actual deposits.
If a five-day moving average is used, what was the deposit forecast for day six?
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?
All of the following are advantages of using traditional financial ratios for analysis EXCEPT:
The company's monthly credit sales are in Table 1 and its receivables collection pattern is in Table 2. If this company wishes to achieve a second quarter (April-June) DSO of 60 days, what would its ending accounts receivable balance need to be?
Assume a 90-day quarter.
From a buyer’s perspective, which of the following types of float would be eliminated if checks were replaced by electronic payment methods?
An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as:
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 lender is evaluating the creditworthiness of a company that has high levels of operating leverage. In determining the debt capacity of the company, the bank would MOST LIKELY prefer a:
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 company with constant earnings and excess cash is considering a significant stock repurchase plan. Which of the following is MOST LIKELY to occur?
Which of the following trade payment methods virtually eliminates the seller's credit risk?
An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:
Two critical factors in determining an operational risk management strategy for a company are:
A publicly traded company is looking to fund its next project with the issuance of stock. The company’s stock is primarily held by a small group of investors. The company is concerned that issuing stock may upset these investors because it would dilute their holdings. Which of the following strategies would help address the investors’ concern?
Under Section 404 of the Sarbanes-Oxley Act, management must state its responsibility for which of the following?
One of the KEY risks associated with a company’s use of financial institutions is the possibility that:
A buyer receives an invoice from a supplier that offers discount terms of 3/10, net 60. What is the effective cost of discount?
Which of the following is a type of borrowing between a company and a lender in which the paperwork connected with it is used to simplify the lending process?
If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?
All of the following are examples of treasury management system transactions for liquidity management EXCEPT:
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?
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?
ABC Company, a leading provider of office supplies, has successfully implemented EDI based on a request from one of its customers. ABC will not only benefit from the strategic alliance that will result, but as more of ABC’s customers adopt the program, ABC will also experience a positive impact on its:
When company profits are high, what is the MOST LIKELY way management will prefer to finance growth?
Kensley Biscuit Company Ltd. decides to invest £125,000 in new packaging equipment to help it keep up with increased demand. As a result of this investment, the company’s annual profit improves by £11,763. If Kensley’s cost of capital is 8.25% and its corporate tax rate is 42%, what is its residual income (RI) from the investment?
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?
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:
Sign Company and Paint Company have a twenty-year business relationship, and they work together when sending and receiving payments. Sign Company also does a large amount of business with Brush Company, a subsidiary of Paint Company. Brush Company’s Treasurer recently received a memo from the Treasurer of Paint Company reminding it that when dealing with vendors, extensive information is required when receiving or making ACH payments. What ACH payment format are Sign Company and Paint Company MOST LIKELY to use?
A-Plus Company has made arrangements for a new insurance broker to provide products to its employees. Historically, A-Plus Company’s employees made insurance payments via payroll deduction, but the new broker will be collecting payments from employees directly. What will the broker MOST LIKELY use to minimize collection float?
Usually, corporations receiving dividends from another corporation can exclude 70 percent of dividend payments from income for tax purposes as long as the stock is owned for at least:
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:
What is the reserve-requirements provision of the Federal Reserve Act of 1913 known as?
Treasury management systems and ERP systems allow companies to do all of the following EXCEPT:
A consumer is presented with payment options from a merchant when making a purchase. The consumer does not wish to share any information that could be later used in identity theft or fraud, while the merchant requires guaranteed payments within 24 hours with no NSFs or declined payments. Which of the following options would suit both the consumer and the merchant?
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?
A short-term bank line with $20 million of unused capacity and an investment in an overnight money market fund are both forms of which liquidity requirement?
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:
Which of the following methods of compensation is NOT used by banks in the United States?
Which of the following payment instruments is initiated by the payee rather than the payor?
If the Federal Reserve wanted to stimulate a sluggish economy, it could do so by:
The cash manager for a company is creating a list of transactions that should be considered when determining the daily projected closing cash position. Which of the following transactions should be removed from the list?
The MOST important tool the Federal Reserve Board has for influencing the amount of reserves in the banking system is:
When a company creates future receivables and/or payables that are denominated in a currency other than its home or functional currency it is faced with:
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?
The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted?
A U.S. company decides to enter a new geographic market facing some dominant competitors, but projects sales growth of 40% in its first year due to its superior product line. The company decides to only offer electronic payment methods for settlement of its receivables. A year later, the company’s sales volume only increases by 10%, but their average days’ sales outstanding of 32 days is the best in the industry. What should the company have considered in its collection policy objectives?
A company can dispute any check alterations within how many days after the bank statement has been sent?
MICR encoding errors may be detected by all of the following TMS modules EXCEPT:
A company issues $5 million of commercial paper at a discount for 60 days. The interest cost is $85,000. The backup line fee for this transaction is $2,000, and the dealer fee is $1,000. What is the annual interest rate?
An auto manufacturing plant in Michigan has high scheduled demand for its product. If the company does not have a long-term contract for raw materials, what type of exposure could it face?
Company A anticipates the following cash inflows and outflows for the next three months:
If the company's treasurer is preparing a cash-flow projection for Month 2, and he is focusing purely on items that can be projected with a fair degree of certainty, what will the net projection be?
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?
According to the Capital Asset Pricing Model, which of the following would increase the required rate of return, given a beta of 1?
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
A good credit rating has which of the following effects on debt?
I. Improved marketability
II. Decreased cost of funds
III. Decreased maturity
IV. Increased dealer fees
Which of the following cash concentration transfers is MOST LIKELY to result in a bank ledger overdraft?
Which of the following factors is NOT used by a cash manager to estimate a target compensating balance?
Which of the following will exempt commercial paper from SEC registration?
I. A maturity of fewer than 270 days
II. A rating grade of A-1 or P-1
III. Distribution through a licensed dealer
IV. Backing by a U.S. bank letter of credit
TESTED 22 Nov 2024