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?
Bank A is to pay Bank B $6,000,000 for 10 transactions that occurred throughout the day. Bank B is to pay Bank C $8,000,000 for 13 transactions that occurred throughout the day. Bank B is to pay Bank A $5,000,000 for 17 transactions that occurred throughout the same day. These banks operate using a gross settlement system. How many transactions will occur between these banks to settle the payments?
When investing in commercial paper, the investor's primary consideration should be which of the following?
Under the standards of corporate governance adopted in 2002, an independent director must:
Under Section 404 of the Sarbanes-Oxley Act, management must state its responsibility for which of the following?
The MOST effective way to reduce the internal risk of technology as it relates to critical treasury functions is to:
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?
XYZ Company is a publicly held manufacturing company that has decided to branch out into the international market. Five million dollars is needed to set up management and hire the factory workers, $2 million for various government certifications in order to begin business in Poland, and $1 million for miscellaneous expenses. While looking for funding, XYZ found that local banks in Poland were not willing to provide financing without which of the following?
Company ABC is experiencing an increase in bank fees due to its new international customers paying by check. Nearly 15% of all deposited items are international checks. Twenty percent of the company’s checks have 1 day of float. Sixty-five percent of the company’s checks are on-us items. The company has $300,000 of deposits each day. The company’s deposits consist of both cash and checks, split evenly. On a typical day, how much of the deposit will be available immediately?
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?
Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company?
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?
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?
XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments. What type of bond should XYZ Company issue?
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 Treasurer at ABC Company currently uses an in-house company-processing lockbox center. The Treasurer has asked for an analysis to determine the major advantage of using a traditional check/mail-based lockbox system. ABC receives 287,000 payments per month and hired seven additional staff members to process the payments in-house. Additionally, $389,000 was invested in the equipment used to process the payments and NSF checks have decreased 7% since using the in-house center. The equipment’s current market value is equal to its book value. What major advantage should the analysis indicate?
A 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?
To arrive at today’s projected closing cash position, a cash manager starts with:
Which of the following industries is MOST LIKELY to use a sophisticated cash concentration system with multiple banks as part of its cash management system?
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?
A globally diversified manufacturing company can manage its liquidity more effectively by:
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 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 North American service company has autonomous offices in different geographic regions each handling their own sales and accounts receivables deposits to local banks which primarily consist of checks. By implementing a lockbox collection system, what objective in its collection policy would it have met?
What does a company with a restrictive current asset investment strategy typically have?
Which of the following are treasury management objectives?
I. To meet obligations in a timely manner
II. To minimize holdings in non-earning cash balances
III. To monitor and assist in the control of financial risk
IV. To evaluate costs and benefits of capital projects
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 main characteristic of a company with regional offices using a centralized treasury function is:
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?
In a maturity matching financing strategy, which of the following is financed using short-term sources?
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 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 employer wishing to reduce operating income volatility would MOST LIKELY offer what type of retirement option to its employees?
A company is looking for a way to finance their inventory. What is the BEST funding match?
Some treasury management systems are capable of initiating investment purchases and loan drawdowns automatically. The automating of these transactions is related to which of the following treasury management functions?
Which of the following are KEY issues to be considered when establishing a shared service center (SSC)?
I. Selecting the location
II. Comparing an SSC structure to outsourcing of a process
III. Choosing and implementing the technology for SSC
IV. Choosing the collection bank
To increase the money supply, the Federal Reserve would increase which of the following?
A company with $50 million in foreign assets decides to increase its foreign debt by $40 million for a debt ratio of 80%. This action will reduce which exposure?
A U.S. company has a secured committed line of credit of $5 million. The company successfully transmitted a $5.5 million wire transfer instruction out to the bank. The bank contacted the company and informed it that the wire transfer would not be processed. What is the MOST LIKELY reason the bank gave the company?
Company XYZ had the following sales over the last 5 years:
The company raised funds to invest in its operations. Considering the company’s growth, it is interested in future options that will allow it to maintain its debt level and keep debt costs low. The company is not concerned about changes to the working capital structure. Which security did the company issue?
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?
A company which experiences increased business volumes but a minimal increase in profitability MOST LIKELY has:
The combination of difference in condition (DIC) insurance and umbrella insurance:
Amalgamated Binding Consolidators takes 20 days to convert its raw materials to finished goods, 5 days to sell it, and 15 days to collect its credit sales. What is the company’s days receivable period?
A large mature company with limited growth opportunities (positive NPV projects) achieved abnormally high profits this year. After paying mandatory principal, interest, and taxes, the company has $200 million in surplus cash on hand. Assuming its investor base is most concerned with capital appreciation, which of the following is the BEST option for the company?
The fixed costs to manufacture widgets are estimated to be $54,000. The benefit (sales) of a widget is estimated to be $6.78 per unit, and the variable costs are estimated at $4.48 per unit. What is the estimated break-even point in units for the manufacture of widgets (rounded to the nearest unit)?
Which of the following prohibits price discrimination among customers where cost differences do NOT exist?
Which of the following fundamental factors involved in determining an operational risk management strategy is most affected by the new corporate governance standards and “whistle-blower” laws?
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?
Treasury management systems and ERP systems allow companies to do all of the following EXCEPT:
Who has responsibility for final approval of treasury policies that have a significant impact on the organization?
An investment is purchased for $10,000.00 that offers compounding of the first year's interest and it matures at the end of year two. If the value at maturity is $11,664.00, what is the rate of return on the investment?
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?
The treasury manager of an auto-parts manufacturer has noticed that checks were sent to a foreign individual not on the approved vendor list. The payables manager has explained the payments but did not provide an invoice. The treasury manager did no further research and is later disciplined for:
The yield on any short-term investment instrument is a function of the maturity or holding period, the amount paid and:
Using a digital certificate when accessing a financial services provider is one way to reduce what kind of risk?
Which of the following is generally NOT a benefit of financial risk management?
What is the premium (price) for an oil contract, if the following conditions are present?
LIBOR rate of 5%
Out of the money cost of $3
Strike price is $4
In the money price of $1
Speculative premium of $2
Loss exposures related to treasury management may include which of the following?
Company A is a large public company with annual revenue of $1.2 billion and high fixed costs. Its stock is listed on the New York Stock Exchange. Company B is a mid-sized company with annual revenue of $100 million and low fixed costs. Its stock is listed on the NASDAQ. Which of the following statements is MOST LIKELY to be true when comparing Company A and Company B?
Which of the following is NOT a key area to consider when establishing treasury policies?
A distribution business has used several bank loans to finance its expansion plans. After a fire destroyed the company’s facility and inventory, it went out of business due to the loss of revenue during the month it was closed. What type of insurance coverage should the company have had to prevent its demise?
A 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:
Which of the following are important uses of variance analysis in comparing actual cash flows with projected cash flows?
I. Identifying unanticipated changes in inventory
II. Enhancing short-term investment income
III. Validating a capital budget
IV. Identifying delays in accounts receivable collections
Which of the following services allows a bank to match checks presented for payment against company check issuance data?
Controlled disbursement notification times can be improved by which of the following?
A company can dispute any check alterations within how many days after the bank statement has been sent?
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?
If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?
Which of the following would MOST LIKELY cause a decrease in a company's deposited checks availability?
All of the following bank products and services can simplify the preparation of the daily cash position EXCEPT:
Traditionally the primary source of operating risk in the area of external theft or malfeasance has been related to:
If the Federal Reserve wanted to stimulate a sluggish economy, it could do so by:
An investor purchases securities that mature beyond the date when cash is required. The investor intends to sell the investment to meet the cash flow need. This strategy works best when:
XYZ Company's cash manager is evaluating cash concentration transfer options. The company has an 8% cost of funds and $50,000 in average daily field cash receipts. The wire transfer results in the transfer of funds one day faster. Which of the following options correctly ranks the transfer choices from most cost-effective to least cost-effective?
1. Electronic depository transfer costing $1.00
2. Electronic depository transfer costing $2.50
3. Wire transfer costing $8.00
4. Wire transfer costing $15.00
The Fed can reduce the money supply by doing which of the following?
1. Increasing reserve requirements
2. Purchasing government securities
3. Increasing legal lending limits
4. Selling government securities
Which one of the following is true of capital repatriation for multinational companies?
Company A and Company X are small companies doing business with only one bank. Company A has monthly sales of approximately $1.1 million and Company X has sales of $750,000. Typically, Company A holds daily available cash balances in the range of $175,000 to $250,000 and Company X holds $90,000 to $125,000. Which of the following can be said of the cash management practices of both companies?
Which of the following is a service typically provided by an investment custodian?
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as:
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):
The MOST common way that companies structure their treasury operations is as a:
A company is evaluating a project. What is the appropriate discount rate that it should use if its marginal tax rate is 34%, its capital structure is 40% common equity, and 60% debt. Its cost of equity is 10%, and its average cost of debt is 4%?
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 company's basic investment objectives should include all of the following EXCEPT:
The relationship between debt and equity in a company's capital structure is called:
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?
A U.S. bank regularly transmits international payments to European based XYZ Bank. The payments flow through an intermediary bank. Recently regulators audited the intermediary bank and discovered the bank may be unknowingly facilitating illegal activities. What payment method was MOST LIKELY used?
XYZ Corporation is presently a short-term borrower and uses a revolving line of credit with an interest rate of 7%. The Treasurer would like to reduce interest expense and increase liquidity without renegotiating the line of credit. Which of the following projects should the Treasurer support in order to achieve this objective as quickly as possible?
A U.S. government agency issues securities transfers using Fedwire Book-Entry Securities System. The first transfer request of the day in the amount of $1 million is sent at 1:00 p.m. EST, the second one for $2 million at 3:30 p.m. EST, the third one for $3 million at 4:30 p.m. EST and the fourth one for $4 million at 5:00 p.m. EST, all on the same day. Which of the following represents the total value transferred at 5:00 p.m. EST that day?
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
All of the following are common consumer-to-corporate international payment mechanisms EXCEPT:
All of the following are advantages of using traditional financial ratios for analysis EXCEPT:
When a supplier uses evaluated receipts settlement (ERS), which of the following statements is true?
Multinational corporations repatriate funds from foreign operations through which of the following?
A company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?
A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.
Which of the following would be the most efficient method of reducing the number of cross-border payments between two units of a company?
The PRIMARY objective of the AFP Account Analysis Standard is to help cash managers in which of the following areas?
The process by which a bank or insurance company guarantees the debt obligation of a borrower is referred to as credit:
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
Which of the following is responsible for liquidating the assets of failed financial institutions?
The time between the payor's mailing of a check and the payee's receipt of usable funds is known as:
Which of the following statements is true about a forward foreign exchange contract?
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
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
The term "collection float" is defined as the delay between the time the payor:
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:
Which of the following is an example of a qualitative factor used in making credit decisions?
XYZ Company is a net borrower. Its cost of funds is 5.0%, its earnings credit rate is 3.0%, and the reserve requirement is 10%. Average service fees are $50,000 per month. Its average ledger balance is $2,000,000, and its average collected balance is $1,000,000. What are the collected balances required to pay for services during a 30-day month?
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 are reasons for companies to use controlled disbursement?
I. To obtain timely check presentment information
II. To enhance supplier relationships
III. To increase their available cash
IV. To improve their overall creditworthiness
TESTED 13 May 2024
