According to risk management experts, the BEST approach in managing operational risk is to:
Without regard to costs, which of the following concentration mechanisms maximizes investment income in a multi-bank environment?
Exhibit:
If a company had the above activity at a bank for the previous month (a 31-day month), the bank was overcompensated by approximately:
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 is the authoritative accounting standard-setting body for state and local governments, public schools, state universities, and other government-affiliated agencies?
Which of the following is true about using an RFI in the financial institution and FSP selection process?
A company has selected a specific project for investment. If the weighted average cost of capital (WACC) used to evaluate the project results in a negative net present value (NPV), which of the following will occur?
A publicly-traded U.S. company has a German subsidiary which has accumulated significant cash balances. The company needs to pay its quarterly dividend but lacks the funds to make the payment. What is its BEST alternative for obtaining the funds?
An employee is considering two investment strategies for his 401(k) plan:
Strategy #1: Invest all contributions in a money market fund that has returned 5% annually
Strategy #2: Invest all contributions in a stock fund that has returned 9% on average, although annual returns have varied between (2%) and 12%
Assuming that the employee makes a one-time investment of $12,000 and that both strategies continue to perform as they have historically, how much more or less could the stock fund be worth after one year compared to the money market fund?
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?
Which of the following forms of payment is covered by Regulation CC?
In terms of targeting a company’s capital structure, when is it beneficial to assume a high level of financial risk?
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?
A corporation is considering utilizing ACH transactions for its large value transfers, as opposed to wire transfers. Which of the following would MOST LIKELY deter the corporation from implementing this change?
A privately held company is planning to issue an IPO. If the company decides to do so, which of the following will MOST LIKELY result?
A company is experiencing the following long-term trend on a month-over-month basis:
With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company?
An analyst is performing a lease versus buy analysis on a corporate jet. In the evaluation, a cost is relevant if it is:
XYZ Inc. has limited cash flow, total liabilities to total assets greater than 52%, and a high WACC. To help meet the goal of lowering their WACC, the company plans to issue several million dollars of private equity to the chairman of the board. If the company proceeds with this plan, the company may:
On June 1, a manufacturing company experienced a system failure that lasted more than 24 hours. The company did not have any contingency plans in place and as a result the cash manager was unable to process the following payments: $25,000 to the p-card issuer, $125,000 for weekly payroll, $500,000 for a bond interest payment, $260,000 for the weekly vendor payments and $50,000 for the monthly utilities. The receivables were deposited at the bank; however, the cash manager does not have a way to confirm the amounts. The suppliers are threatening to stop shipments due to the delay in payment and the loss of supplier shipments threatens the company’s just-in-time production. What did the manufacturing company trigger as a result of the system failure?
A corporate compliance officer is drafting an agenda for an ethics training session. Which of the following would NOT be an appropriate item to include?
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?
JMW Company processes its consumer payments using a lockbox provider. On average 35% of its remittance advices contain encoding errors. JMW Company’s cost for the lockbox provider to process these payments will be least impacted if it uses:
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?
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?
Which of the following is a true statement about operating leverage?
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?
Simplifying upgrades and system restoration, access from multiple remote locations, and interfacing with multiple applications are all reasons to:
The board of directors announces an increase in its dividend from $0.11/share to $0.15/share. Over the next two quarters, management notices that its investor base has shifted to include a large percentage of pension funds and endowment funds. This is the result of:
Based on the above information,
if the company uses the trade-off theory in considering its WACC, how will it finance its growth?
DGB Inc.’s CEO and founder retired shortly after the company went public two years ago. DGB Inc. has recently struggled, and the founder has agreed to return as an independent director. What violation, if any, has occurred?
Which of the following is NOT true for both bankers’ acceptances and trade acceptances?
A French company conducts business strictly within the euro zone (the EMU). Which type of risk is of LEAST concern?
Assume the cost of an ACH transaction is $0.80, the charges for a wire transfer are $30.00, the monthly account maintenance fee is $10.00, and the company earns interest at an annual rate of 1.825% on overnight investments. What is the break-even point where the interest earned on overnight investments offsets the incremental wire costs?
Convertible securities consist of preferred stock anD.
In which of the following international cash management methods is title for goods transferred for intercompany sales?
Which of the following is subject to transaction exposure?
Which of the following is NOT a drawback to using ROI as a performance measure?
An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:
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?
Company A regularly modifies its capital structure by repurchasing stock. Which one of the following is a true statement?
The stock of a manufacturing company is priced so that its expected rate of return is below its required rate, as calculated by the Capital Asset Pricing Model (CAPM). Which of the following will occur in an efficient capital market?
The KEY decision in using CCD+ and CTX formats for B2B payments is:
Which of the following is MOST LIKELY to have a significant impact on the financial condition of an organization?
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?
What must be measured and monitored to ensure that a company has adequate liquidity?
In terms of capital structure, lease financing normally has the same effect 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):
Company XYZ offers a retirement plan wherein the value of the plan’s assets and liabilities is measured separately. The plan’s funding and valuation can have a significant impact on the financial condition of the company. Company ABC offers a retirement plan wherein the amount owed to the participants at retirement is based solely on the account balance at the time of withdrawal with participants often bearing the responsibility for managing the investments in their account. Which of the following BEST describes the above two retirement plans and which act governs them?
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?
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?
An individual has just inherited several million dollars and has decided to purchase the stock of a telecommunications company to diversify his portfolio. Before purchasing shares, he would like to do some company-specific research to determine which company to select. Examples of the information the individual wishes to obtain are financial statements and disclosures, company organizational structure, code of conduct, pending litigation, and profiles of the board of directors. Who would be the BEST person to contact to obtain all this information?
When a buyer receives goods, but payment is not due to the supplier until some later date, this is defined as:
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?
What should a company’s senior management consider in their payment policies to eliminate the co-mingling of funds for payables, receivables and foreign exchange transactions?
Economists are forecasting a rise in gas prices within the next 3 months. Charged with the task of establishing a risk mitigation approach for the company, the CRO has determined that the company has considerable exposure to fluctuations in gas prices. In coming to this conclusion, the CRO:
While revising the investment policy, the CFO performs a sensitivity analysis for the company’s cash flow from investments, and identifies that increasing the maximum dollar value for bond purchases will improve returns by 10% on average, all other variables being equal. What issue will the CFO now need to address in the investment policy?
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?
The regional offices of ABC Company implemented a system that would allow the employees to pass information between regions in a secure fashion. This system requires that all offices have the same key in order to read messages sent electronically. Which e-commence security type is MOST LIKELY being used?
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?
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?
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?
ABC Company offers a discount of 2/10, net 30 to its customers. ABC factored its accounts receivables with an outside vendor, under a “with recourse” arrangement. What impact might this have on the company?
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 renegotiation of trade payment terms in an e-commerce environment should include which of the following?
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
Which of the following functions is LEAST likely to be part of a cash manager's responsibilities?
Which of the following is NOT characteristic of commercial paper with a term of less than 270 days?
Systemic risk can be caused by which of the following?
Which statement is typically true about cash dividends?
The time between when the payor mails the check and the payee receives available funds is known as:
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?
Treasury management systems help cash managers do which of the following?
I. Reduce borrowing expenses
II. Initiate transfers
III. Determine cash position
IV. Obtain account balances
Which of the following is a common method for assigning float on a check deposited to a non-US bank account?
Which of the following are primary objectives of cash forecasting?
I. Managing liquidity
II. Optimizing float
III. Enhancing financial control
IV. Minimizing borrowing costs
To increase the money supply, the Federal Reserve would increase which of the following?
Which of the following factors is NOT used by a cash manager to estimate a target compensating balance?
A KEY feature of municipal bonds is that they are:
A company that is issuing a new class of stock would use the services of a(n):
All of the following statements are true about loan participations EXCEPT:
Which of the following is a source of short-term financing?
The combination of difference in condition (DIC) insurance and umbrella insurance:
A company has negotiated a credit facility with the following terms:
What is the annual interest rate on the line of credit?
A company has negotiated a credit facility with the following terms:
What is the effective annual borrowing rate for the line of credit?
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 evaluating candidates who have responded to an RFP for banking services, a highly leveraged company will probably apply a higher weighting to:
A seller’s cost of capital is 12%. The average credit sale is $200,000, and the credit terms are 2/10, net 30. What is the present value of receiving full payment on day 30?
If a corporation pays 70% of its current earnings to its stockholders in the form of cash dividends, the remaining 30% kept by the company will cause a(n):
A multinational company may use which of the following to locate profits in subsidiaries in low-tax countries?
A U.S. firm acquires a large U.K. manufacturer that generates high levels of cash flow in its local currency. The purchase is denominated in British pounds and is financed through the issuance of 10-year, 7.5% U.S. dollar bonds. The U.S. firm will rely entirely on the U.K. manufacturer's cash flows to fund the interest payments on the bonds. What derivative instrument would help the U.S. firm manage its FX exposure?
The goal of investor relations is to:
A large U.S. company is planning to fund its Canadian subsidiary. Currently, the Canadian dollar is trading at CAD 1.25 per U.S. dollar, and the U.S. dollar is expected to depreciate in the near term. To manage this FX exposure, what technique should the company implement?
In order to be defined as independent, a corporate director:
Which of the following is NOT a method multinational companies (MNC) use to repatriate capital?
A company’s credit agreements or loan covenants may require:
As a result of the Sarbanes-Oxley Act, what new entity was established to sanction firms and individuals for audit violations?
A manufacturing company is working to improve its cash conversion cycle. Factory production has increased over the last year to increase inventory levels. They have an inventory turnover of 3.1 and asset turnover of 5.0. The company has a days’ payable of 30 and a days’ receivable of 60. It has started enforcing its net 30 terms and placed customers with balances outstanding more than 45 days on credit hold. As a result, the company collected receivables quicker but it suffered a 10% loss in sales. What can the company do to reduce its cash conversion cycle?
"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:
Which of the following correctly describes pooling as practiced in the European cash management environment?
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?
Which of the following statements is (are) true about non-repetitive wires?
I. They may require additional security steps.
II. They are typically used for cash concentration.
III. They may be used for transactions where dates, parties, and/or amounts may be variable.
Which of the following factors will allow a company to decrease the amount of collected balances required to compensate its bank for services?
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's investment guidelines typically restrict all of the following EXCEPT:
Which statement is true about private placements compared to public offerings?
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:
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?
Which of the following can be exercised only on the expiration date?
Which of the following business practices does NOT comply with the Uniform Commercial Code?
A pizza restaurant chain maintains separate accounts at bank branches near each of their 1,067 restaurants to handle the deposit of cash received. Early each morning, the company’s point-of-sale system electronically transmits collection totals from the previous day to its main computer. ACH debits are then initiated to concentrate the funds from the local accounts to the concentration account the following day. Recently, several of the ACH debits have been returned for insufficient funds because deposits weren’t being taken to the bank on a timely basis by the local employees. Without increasing staff at the restaurants, what could Treasury do to prevent this from happening and avoid overdrafts at the local banks?
Which two of the following are necessary to calculate average collected balances?
I. Deposit float
II. Reserve requirements
III. Ledger balance
IV. Earnings credit rate
The PRIMARY objective of a corporation is to:
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.
All of the following bank products and services can simplify the preparation of the daily cash position EXCEPT:
If ¥120.14 = U.S.$1.00 and € .7564 = U.S.$1.00, how many ¥ = €1.00?
A manufacturing company has no liquidity and needs to purchase additional inventory in 60 days. Which of the following would have helped the company plan for this situation?
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?
The term "factoring" refers to a:
A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the average rate on local government bond investments is 2.5%. What would be the BEST method for the company to repatriate local profits?
Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?
Which two of the following are methods for concentrating weekend deposits in a field deposit system?
1. Using a wire transfer for the funds on Monday
2. Anticipating deposits and initiating an ACH on Friday
3. Initiating an ACH cash concentration transaction on Thursday
4. Using a multibank lockbox network
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?
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?
The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:
A company is considering issuing debt in a market environment in which there is a larger than normal spread between high- and low-risk investments. Among several factors, what are the concerns regarding investor behavior that the treasurer will MOST need to consider?
A company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?
The MICR encoding on a check provides all of the following information EXCEPT:
A company that is considering using a central lockbox for collections has conducted an initial study and determined the following:
What will be the annual net dollar benefit to the company if it uses a lockbox?
A treasury project manager is tasked with improving day’s sales outstanding. The company, a major retailer, sells 70% of its products to businesses. The project manager has convinced the Treasurer to proceed with purchasing $500,000 worth of equipment to convert the checks they receive to electronic form. What did the project manager overlook in making the decision?
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:
Included in the CAMELS rating system for financial institutions are all of the following EXCEPT:
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?
Which of the following are examples of covenants in loan agreements?
I. Financial ratios
II. Corporate resolutions
III. Borrower limitations
IV. Borrower obligations
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 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?
The PRIMARY difference between defined benefit and defined contribution pension plans is whether the employee or the employer:
The PRIMARY difference between money market instruments and capital market instruments is that capital market instruments are securities that are:
Which of the following types of payment transactions requires the authorization of both the initiating and the receiving party?
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?
Copyright © 2021-2025 CertsTopics. All Rights Reserved
