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Sample Question 4
Which of the following institutions would be regulated by the Office of the Comptroller of the Currency (OCC)?
A. Regency Bank Holding Company B. Regency Federal Credit Union C. Regency National Bank D. Regency Savings and Loan
Answer: C
Sample Question 5
Which section of the statement of cash flows includes items that represent the cash inflows and outflows related to the daily functions of a company?
A. Cash flow from financing activities B. Cash flow from investing activities C. Change in cash balance D. Cash flow from operating activities
Answer: D
Sample Question 6
A disclaimer opinion is required on a set of financial statements when:
A. material deviations from GAAP occur. B. the auditor is not independent. C. the financial statements may be misleading. D. the financial statements are fairly stated.
Answer: B
Sample Question 7
The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:
A. chief financial officer and corporate secretary. B. chief financial officer and corporate controller. C. chief financial officer and chief executive officer. D. chief financial officer and chief operating officer.
Answer: C
Sample Question 8
What type of tax does a multinational auto manufacturer commonly pay in foreign countries at each stage of a vehicle’s production?
A. Withholding tax B. Capital tax C. Value added tax D. Asset tax
Answer: C
Sample Question 9
In order to reduce the premiums paid to insurance companies, a company should consider retaining or self insuring for:
A. small or low severity losses. B. high severity losses. C. only property losses but no liability losses. D. directors and officers liability losses.
Answer: A
Sample Question 10
Evaluating the liquidity needs of an organization is a function of:
A. long-term investment yield forecasting. B. long-term cash flow forecasting. C. short-term investment yield forecasting. D. short-term cash flow forecasting.
Answer: D
Sample Question 11
Which of the following objectives of treasury management refers to a company’s ability to meet current and future financial obligations in a timely, efficient, and cost-effective manner?
A. Establishing access to short-term financing B. Maintaining liquidity C. Optimizing cash resources D. Managing risk
Answer: B
Sample Question 12
All of the following bank products and services can simplify the preparation of the daily cash position EXCEPT:
A. ACH concentration. B. balance reporting. C. account analysis. D. controlled disbursement.
Answer: C
Sample Question 13
A company seeking an insured investment would avoid investing surplus cash in a:
A. commercial bank. B. credit union. C. mutual fund. D. savings and loan.
Answer: C
Sample Question 14
Which of the following is a regulation that is having a major impact on the treasury profession?
A. Gramm-Leach-Bliley Act B. Monetary Control Act C. Patriot Act D. Glass-Steagall Act
Answer: C
Sample Question 15
A multinational company that uses “notional pooling” for its euro zone subsidiaries will realize which of the following advantages?
A. Enhanced accounting for transactions since funds are transferred into one account B. Mobilization of cash resources and thus economies of scale in making transfers C. Subsidiary cash balances are netted each day to calculate interest, but funds are not transferred D. An expanded number of euro zone banks in order to facilitate better service to transfer funds
Answer: C
Sample Question 16
In a large company, the financial planning function typically falls directly under the responsibility of the:
A. treasurer. B. controller. C. chief executive officer. D. chief internal auditor.
Answer: B
Sample Question 17
A utility company is evaluating whether or not it should build a new plant. The process of reviewing the quantitative and qualitative factors are an example of which finance function?
A. Capital budgeting B. Funding C. Financial planning D. Financial risk management
Answer: A
Sample Question 18
Which of the following is NOT a component of the operating cycle?
A. Determining stale inventory B. Acquiring materials or resources C. Selling goods or services D. Collecting payment
Answer: A
Sample Question 19
At the time of the initial debt contract, the only way debt holders can protect their interests effectively is to establish certain provisions or covenants designed to:
A. reduce issuer refinancing options that could result in their bonds being called. B. eliminate all events that could result in a default. C. make it difficult for management to engage in actions that reduce the bond’s value. D. give debt holders a guarantee of full principal payment in the event of default.
Answer: C
Sample Question 20
What is the MOST appropriate definition of working capital?
A. Current liabilities plus equity B. Current assets plus equity C. Current assets minus current liabilities D. Current assets minus fixed assets
Answer: C
Sample Question 21
The MICR encoding on a check provides all of the following information EXCEPT:
A. the Fed district of the drawee bank. B. the payor's bank account number. C. the payee bank's institutional identification number. D. the dollar amount of the check.
Answer: C
Sample Question 22
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?
A. Ledger credit Tuesday, collected credit Wednesday B. Ledger credit Tuesday, collected credit Thursday C. Ledger credit Wednesday, collected credit Wednesday D. Ledger credit Wednesday, collected credit Thursday
Answer: D
Sample Question 23
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. Precautionary B. Strategic C. Opportunity D. Transaction
Answer: A
Sample Question 24
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 upondelivery in 15 days. The Canadian dollar is forecasted to weaken within this period. This is an example of A.
A. forward transaction at a premium. B. forward transaction at a discount. C. spot transaction at a premium. D. spot transaction at a discount.
Answer: B
Sample Question 25
An airline has entered into an agreement with its partners to offset receivables and payables for a specified period of time and to transmit or receive the difference via funds transfer at the end of the period. This is an example of:
A. a barter agreement. B. an inter-company loan. C. trade credit. D. a net settlement system.
Answer: D
Sample Question 26
Traditionally the primary source of operating risk in the area of external theft or malfeasance has been related to:
A. the disposition of excess inventories. B. the sale of idle or obsolete fixed assets. C. the payment of false invoices or check fraud. D. the receipt of unrecorded customer payments.
Answer: C
Sample Question 27
Since the inception of ABC Company's pension plan, 1,500 employees qualified and were paid pensions of $500 million after retirement, of which 700 employees were those who earned $110,000 or more and received $200 million in pension benefits. When the company filed for bankruptcy in 2010, the IRS claimed back taxes from the company stating that the pension plan was not qualified under ERISA. On what basis was the IRS MOST LIKELY making its claim?
A. Adequate funds were not available to meet the plan's obligations. B. Pension benefits were not safeguarded when the pension plan was terminated. C. The company failed to remit its PBGC premiums. D. The plan did not meet the minimum coverage requirements.
Answer: D
Sample Question 28
XYZ Company has decided to transition the responsibility for its hedging activities from the local offices to the head office; however, the local offices will continue to choose their own depository banks. Under the new structure, XYZ’s treasury operations will be:
A. centralized. B. combined. C. decentralized. D. shared service center.
Answer: A
Sample Question 29
Which of the following would MOST directly affect a company’s dividend policy?
A. Cost of capital B. The clientele effect C. A loan covenant D. Stock price
Answer: C
Sample Question 30
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. Matching maturity B. Availability of collateral C. Capital structure D. Flight to quality
Answer: D
Sample Question 31
Which of the following is LEAST important when a cash manager determines a company's short-term cash position?
A. Receipts and disbursements forecasts B. Pro forma financial statements C. Payments of dividends D. Disbursement clearing patterns
Answer: B
Sample Question 32
All of the following are typical uses of a zero balance account EXCEPT:
A. payroll. B. dividend payments. C. trade accounts payable. D. overnight investments.
Answer: D
Sample Question 33
An L/C in favor of a U.S. exporter is issued by a bank in an emerging-market country, and it is confirmed by the exporter’s bank. What risk is reduced for the U.S. exporter?
A. Credit risk B. Currency risk C. Re-investment risk D. Valuation risk
Answer: A
Sample Question 34
Improvements to the cash flow timeline from a selling company’s perspective would include:
A. decreasing disbursement float. B. decreasing collection float. C. increasing mail float. D. increasing invoice float.
Answer: B
Sample Question 35
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?
A. Trade credit B. Master note C. Securitization D. Commercial paper
Answer: B
Sample Question 36
A globally diversified manufacturing company can manage its liquidity more effectively by:
A. pooling cash of subsidiaries. B. centralizing bank accounts. C. reducing its international bank network. D. using repatriation strategies.
Answer: A
Sample Question 37
A multidivisional domestic company with centralized treasury decision-making can potentially utilize intra-company lending to:
A. reduce the overall liquidity of the company. B. establish individual subsidiary borrowing facilities. C. source debt in different currencies. D. lower the overall cost of short term funds.
Answer: D
Sample Question 38
A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?
A. A long futures contract and falling prices B. A long futures contract and steady prices C. A short futures contract and rising prices D. A short futures contract and falling prices
Answer: D
Sample Question 39
Which of the following is true about disbursement ZBAs?
A. Their funding requirements are known early in the day. B. They are funded by intra-bank transfer. C. They are pre-funded from a master account. D. They are not recommended in a decentralized environment.
Answer: B
Sample Question 40
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. Control of isolated losses B. Risk retention group C. Separation of exposures D. Contractual transfer
Answer: D
Sample Question 41
What is the MOST appropriate financial plan when a corporation wishes to establish its overall goals and objectives over a period of time?
A. Risk plan B. Strategic plan C. Operating plan D. Financing plan
Answer: B
Sample Question 42
Which of the following techniques would MOST accurately predict a company's daily cash position?
A. Receipts and disbursements forecasting B. Moving averages C. Net income averaging D. Capital budgeting
Answer: A
Sample Question 43
Financial ratios may provide an inaccurate forecast of a company's performance because they are:
A. difficult to incorporate into statistical forecasting. B. economic rather than accounting values. C. sensitive to seasonal cash flows. D. based on snapshots of the company's activity.
Answer: D
Sample Question 44
One reason for charging management fees to subsidiaries is to:
A. justify to local governments the flow of funds to the parent company. B. mitigate shareholder concerns about the large investments needed for overseas ventures. C. minimize the impact of call provisions generally associated with overseas investing. D. help reduce the variability of parent and subsidiary future cash flow.
Answer: A
Sample Question 45
Companies in the U.S. with a nationwide over-the-counter/field bank collection and concentration system often deal with:
A. few small financial institutions. B. one major banking institution with branch offices at all locations. C. many small financial institutions. D. one major bank with corresponding relationships.
Answer: C
Sample Question 46
Determining that payments are made to vendors and suppliers based on credit terms is the responsibility of:
A. the risk manager. B. the accounts receivable manager. C. the accounts payable manager. D. the cash manager.
Answer: C
Sample Question 47
A company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?
A. Bank cashier's checks B. Multiple drawee checks C. Controlled disbursements D. Staggered funding
Answer: B
Sample Question 48
ABC Company, a U.S. company, has an overseas customer, XYZ Inc., who wants to purchase $3.1 million of equipment from ABC Co. XYZ Inc. wants to structure payment by paying 10% at time of order, 40% at time of shipment and the remaining 50% at time of receipt of the equipment. The last time XYZ Inc. purchased equipment from ABC Co. they never paid the final 50%, claiming the equipment did not work properly. Which of the following can ABC Co. use for this transaction to guarantee payment?
A. Installment credit B. Documentary collection C. Performance guarantee D. Commercial letter of credit
Answer: D
Sample Question 49
A wholesale lockbox system does which of the following?
A. Relies on high speed automation B. Provides information about invoices C. Processes small dollar remittances D. Requires standard scannable documents
Answer: B
Sample Question 50
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. NOW B. Demand deposit C. Savings D. Money Market Deposit Account
Answer: D
Sample Question 51
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. ABC’s credit rating will suffer. B. The customer’s working capital has deteriorated. C. ABC’s working capital is unchanged. D. The customer’s cost of borrowing will increase.
Answer: C
Sample Question 52
Company ABC has recently started to experience a significant reduction in funds availability. Which of the following is MOST LIKELY to reduce funds availability?
A. Ledger balances have increased. B. Company negotiated a later availability schedule. C. Company no longer pre-encodes its checks for deposit. D. Deposits are arriving at bank later, but prior to cutoff time.
Answer: C
Sample Question 53
Which of the following is the appropriate strategy to use for an active portfolio manager who is faced with an upward sloping yield curve?
A. Purchase a security and hold to maturity B. Purchase a security and sell before maturity C. Purchase a security maturing before the funds are needed D. Purchase a security maturing when the funds are needed
Answer: B
Sample Question 54
If ¥120.14 = U.S.$1.00 and € .7564 = U.S.$1.00, how many ¥ = €1.00?
A. ¥.00629 B. ¥90.874 C. ¥120.8964 D. ¥158.831
Answer: D
Sample Question 55
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. Field deposit B. Preauthorized debit C. Direct deposit D. Wholesale lockbox
Answer: A
Sample Question 56
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. A capital budget B. A short term forecast C. A medium term forecast D. A long term forecast
Answer: C
Sample Question 57
In cash forecasting, which of the following is a certain cash flow?
A. New product sales B. Interest payments on long-term debt C. Insurance claims pending settlement D. Vendor check-clearing patterns
Answer: B
Sample Question 58
When a foreign subsidiary pays a dividend to its parent company the transfer of funds may be subject to:
A. turnover tax. B. lifting fees. C. capital tax. D. netting fees.
Answer: B
Sample Question 59
The MOST important tool the Federal Reserve Board has for influencing the amount of reserves in the banking system is:
A. meetings of the Reserve Board of Governors. B. open market operations by the New York Federal Reserve. C. term limits for the Federal Reserve Governors. D. accepting tax payments on behalf of the IRS.
Answer: B
Sample Question 60
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 Monday2.Anticipating deposits and initiating an ACH on Friday3.Initiating an ACH cash concentration transaction on Thursday4.Using a multibank lockbox network
A. 1 and 2 B. 1 and 3 C. 2 and 3 D. 2 and 4
Answer: A
Sample Question 61
Compared to a letter of credit, a documentary collection is:
A. less costly and offers less protection. B. less costly and offers more protection. C. more costly and offers less protection. D. more costly and offers more protection.
Answer: A
Sample Question 62
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. Change the payment discount terms for the trading partners. B. Allow the trading partners to use the company's e-commerce solution. C. Negotiate larger order quantities from the trading partners. D. Agree to a uniform data transfer protocol for all trading partners.
Answer: A
Sample Question 63
Multinational corporations repatriate funds from foreign operations through which of the following?
A. Dividends and management fees B. Reinvoicing and factoring C. Multilateral netting system D. Letters of credit and documentary collections
Answer: A
Sample Question 64
Financial statement preparation guidelines are provided by:
A. FOMC. B. FDIC. C. FASB. D. FATF.
Answer: C
Sample Question 65
Which of the following is an example of a typical passive investment strategy?
A. Riding the yield curve B. Using a dividend capture program C. Investing in overnight repos D. Executing a securities swap
Answer: C
Sample Question 66
Banks offer image exchange as a means to accelerate deposits for their customers. If a customer seeks to take advantage of this service, what should the customer implement?
A. Check conversion B. Re-presented check entry C. Remote deposit D. Time drafts
Answer: C
Sample Question 67
The USA Patriot Act has added significant amounts of overhead to financial transaction processing organizations to prevent money laundering. If an organization does NOT comply with the terms of this act, what external risk is it exposed to?
A. Fraud/theft B. Legal/regulatory C. Financial/budgetary D. Procedure/policy
Answer: B
Sample Question 68
Which of the following methods of compensation is NOT used by banks in the United States?
A. Account service fees B. Value dating C. Wire charges D. Check clearing charges
Answer: B
Sample Question 69
Treasury policies and procedures should outline roles and responsibilities for which of the following activities?
A. Monitoring compliance with trade payment terms B. Initiating and approving internal and external transfers C. Establishing and communicating a company’s credit policies D. Determining how much earnings are to be paid out in dividends
Answer: B
Sample Question 70
For days’ sales outstanding to be a meaningful method for evaluating the effectiveness of a company's receivable collections, it is usually compared to the:
A. overall level of past due receivables. B. accounts receivable turnover ratio. C. stated credit terms. D. bad debt reserve.
Answer: C
Sample Question 71
Which of the following is an intangible asset?
A. Prepaid supplies expense B. Patent on manufacturing equipment C. Paid-in-capital D. Cash value of life insurance
Answer: B
Sample Question 72
A Euro denominated payment can be settled through all of the following EXCEPT:
A. TARGET (Trans-European Automated Real-Time Gross Settlement Express Transfer System). B. EBA (Euro Bankers Association). C. ACSS (Automated Clearing Settlement System). D. Correspondent Banking.
Answer: C
Sample Question 73
Which of the following is a benefit to a company that publicly trades its stock?
A. It passes public disclosure requirements to shareholders. B. It reduces management and shareholder conflicts. C. It allows management holding a majority ownership to have control. D. Its stock price reflects the value of the company in the market.
Answer: D
Sample Question 74
In comparing the U.S. banking system and foreign banking systems, which of the following statements is true?
A. Most foreign banking systems do not have central banks. B. Foreign banking systems typically have more financial institutions than the U.S. C. Foreign banking systems are not permitted to own equity investments in corporations and U.S. banks are. D. Many foreign banking systems allow notional pooling and U.S. banks do not.
Answer: D
Sample Question 75
In a partial reconciliation, a bank provides a company with which of the following?
A. Listing of paid items B. Listing of issued items C. Listing of outstanding checks D. Electronic account analysis
Answer: A
Sample Question 76
What government legislation holds the CEO of a public company personally liable for the information in financial reports?
A. Securities Act of 1933 B. Sarbanes-Oxley Act C. Gramm-Leach-Bliley Act D. Glass-Steagall Act
Answer: B
Sample Question 77
Company Sales Figures:10% of sales collected in the current month of the sale45% of sales collected in the month after the sale30% of sales collected two months after the sale15% of sales collected three months after the saleJanuary Sales $300,000February Sales $250,000March Sales $400,000April Sales $450,000Based on the information above, what is the estimate for the company's April cash flows?
A. $330,000 B. $345,000 C. $1,055,000 D. $1,070,000
Answer: B
Sample Question 78
Which of the following situations is the best example of transaction exposure?
A. A U.S. headquartered firm consolidates their foreign subsidiary’s financial statements into their home currency. B. A company that purchases raw materials locally and sells its products in local markets recently encountered foreign competition. C. A U.S. exporter sells merchandise to a French buyer and records a balance receivable with payment terms in euros due in three months. D. A multinational corporation uses balance sheet hedging to reduce net exposure of the parent company.
Answer: C
Sample Question 79
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:
A. economic exposure. B. transaction exposure. C. translation exposure. D. futures risk exposure.
Answer: B
Sample Question 80
An international company with multiple divisions has several types of common stock. The
company spun off a new division that is growing very quickly and needs additional funding,
but the parent does not want additional ownership investment or additional voters. The
company would MOST LIKELY issue what kind of stock?
A. Tracking stock B. Common stock C. Preferred stock D. Convertible stock
Answer: A
Sample Question 81
The risk that one financial institution’s failure could lead to the failure of other financial institutions is known as:
A. settlement risk. B. systemic risk. C. credit risk. D. fraud risk.
Answer: B
Sample Question 82
The risk of one bank failing and endangering the liquidity of other banks is called:
A. sender risk. B. receiver risk. C. daylight overdraft risk. D. systemic risk.
Answer: D
Sample Question 83
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:
A. SEPA credit transfer. B. international wire transfer. C. international bank consolidations. D. paper-based international payments.
Answer: D
Sample Question 84
The primary bank for a major multinational company would use an overlay structure for euro zone cash concentration under which of the following circumstances?
A. The primary bank cannot provide full domestic banking services and thus must sweep surplus funds from local banks. B. The local banks can provide full pooling arrangements and not sweep surplus funds. C. It is cost effective for companies to provide their own in-house banking services. D. There is excessive competition among local banks for cash management business.
Answer: A
Sample Question 85
An electronics firm realizes that due to adverse events projected over the next 18 months
there is a 5% chance that its profits will decrease by $100,000. The company's beta is .08
and its cost of capital is 9%. What approach is the company MOST LIKELY using to
determine its level of financial risk?
A. Value at Risk B. Sensitivity analysis C. Scenario analysis D. Monte Carlo simulation
Answer: A
Sample Question 86
A manufacturing company begins using just-in-time (JIT) inventory management. Which JIT-related payment process is MOST LIKELY to be implemented?
A. Forward dated check B. Point of purchase C. Paid-on-production D. Fedwire
Answer: C
Sample Question 87
Which one of the following is NOT a method used by a company to repurchase stock?
A. Repurchase in the open market. B. Make a tender offer to its stockholders. C. Negotiate directly with the board of directors. D. Negotiate directly with a major stockholder.
Answer: C
Sample Question 88
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 transferresults 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 $1.002.Electronic depository transfer costing $2.503.Wire transfer costing $8.004.Wire transfer costing $15.00
A. 1, 2, 3, 4 B. 1, 3, 2, 4 C. 3, 1, 2, 4 D. 3, 4, 1, 2
Answer: C
Sample Question 89
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. The WACC will be reduced. B. The overall value of the company will be increased. C. The overall value of the company will be reduced. D. The overall value of the company will not be impacted.
Answer: C
Sample Question 90
What is a KEY reason that both a lessee and a lessor would enter into a lease financing agreement?
A. It substitutes debt. B. It reduces technological obsolescence. C. It provides tax benefits. D. It eliminates maintenance of assets.
Answer: C
Sample Question 91
Which of the following is an example of a passive investment strategy?
A. Riding the yield curve B. Investing in overnight repurchase agreements C. Utilizing a dividend capture program D. Purchasing an interest rate swap
Answer: B
Sample Question 92
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. Cost reimbursement insurance B. Business interruption insurance C. General liability insurance D. Fiduciary insurance
Answer: B
Sample Question 93
Which of the following services allows a single account to be used by a company with multiple units?
A. Payor bank services B. Check inquiry C. Positive pay D. High-order prefix
Answer: D
Sample Question 94
Investors typically require a higher yield as compensation for holding securities that have:
A. less marketability. B. low default risk. C. shorter maturity. D. tax exempt status.
Answer: A
Sample Question 95
What is the Weighted Average Cost of Capital for XYZ Company, assuming the following:The pre-tax cost of long term debt is 8%The cost of equity is 11%The marginal tax rate is 33%Total liabilities = $75,000Long term debt = $50,000Owners equity = $75,000
A. 7.2% B. 7.8% C. 8.7% D. 12.4%
Answer: C
Sample Question 96
Which of the following are differences between securities issued through the primary and private capital markets?I.Cost of issuance and speed of executionII.Investor baseIII.Reasons for the offeringIV.Registration requirements
A. I, II, and IV B. I and III C. II and IV D. II, III, and IV
Answer: A
Sample Question 97
A company in a distressed financial condition may choose to use which of the following
services to entice suppliers to continue to sell to it on open terms?
A. Bankers’ acceptance B. Documentary collection C. Standby letter of credit D. Corporate trust
Answer: C
Sample Question 98
An analysis of variances from expected cash flows is used to:
A. select investments. B. set hedging position. C. update forecasts. D. determine available balances.
Answer: C
Sample Question 99
A New York company wishes to use its treasury management system to send US funds to its London UK subsidiary. Which one of the following enables the same day settlement of funds transfer?
A. Automated Clearing House B. Correspondent accounts with the Federal Reserve C. Bankers Automated Clearing Service D. Clearing House for Interbank Payment Systems
Answer: D
Sample Question 100
If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?
A. The currency is at a discount to par. B. The currency is at a premium to par. C. There is an interest rate differential between the two countries equalizing the rates. D. The interest rate structure between the two countries is the same.
Answer: D
Sample Question 101
James Corp has a 7.98% WACC and an assumed tax rate of 30%. James Corp employed
€70,000,000 of capital (long-term debt and equity) in a project that generated an operating
profit of €9,500,000, after depreciation expense of €300,000. EVA in this case would be
A. €764,000. B. €1,064,000. C. €1,087,940. D. €1,274,000.
Answer: B
Sample Question 102
Which of the following ASC X12 transactions is used to confirm the receipt and compliance of transmitted sets?
A. 821 B. 822 C. 835 D. 997
Answer: D
Sample Question 103
The issue of corporate governance in publicly traded companies arises from:
A. the separation of shareholder ownership and management control. B. the conflict between the interests of bond holders and equity holders. C. the secrecy surrounding the proceedings of board of directors meetings. D. the inherent conflict of interest that exists when accounting firms are paid to provide
audit services.
Answer: A
Sample Question 104
The interest costs on commercial paper are determined by all of the following EXCEPT the:
A. dealer fees. B. backup line of credit fees. C. rating agency fees. D. maturity of the paper.
Answer: C
Sample Question 105
In predicting collections from credit sales, a cash manager can obtain prior period information from which of the following sources?I.Customer payment historiesII.The company's concentration bankIII.The accounts receivable departmentIV.The accounts payable department
A. I and II only B. III and IV only C. I and III only D. I, III, and IV only
Answer: C
Sample Question 106
Which of the following is a PRIMARY responsibility of a company's risk management
function?
A. Insurance B. Auditing C. Leasing D. Liquidity monitoring
Answer: A
Sample Question 107
Treasury policies and procedures should include responsibilities for:
A. determining when dividends should be paid. B. evaluating alternative capital projects. C. approving department salary increases. D. key personnel in the treasury organization.
Answer: D
Sample Question 108
A company invests in a bond and then later agrees to sell the bond to a bank with the
understanding that the company will buy the bond back at a later time. This is known as:
A. reverse repurchase. B. securitization. C. factoring. D. syndication.
Answer: A
Sample Question 109
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 payment2.Payment due date3.Availability of customer's funds4.Loss of float
A. 1 B. 1 and 2 C. 3 and 4 D. 2, 3, and 4
Answer: B
Sample Question 110
ABC Company is an energy-holding company which owns a number of regulated power utilities that have monopolies in different regions. The majority of the holding company’s income is realized from investment portfolios. The company has done well and is going to report its overallperformance to the public. What performance evaluation processes should management use to measure portfolio performance?
A. Benchmarking against competitors B. Establishing market index benchmarks C. Calculating the total return of the portfolio D. Determining the return on equity of the company
Answer: B
Sample Question 111
An international organization has decided to move its treasury operations to the head office in Paris, France. The company’s goal is to establish the treasury as the primary provider of banking services and all company financing. What would the new proposal be an example of?
A. A hybrid treasury structure B. A decentralized and a re-engineered organization C. An in-house bank and a centralized organization D. An outsourced shared service center
Answer: C
Sample Question 112
The Sarbanes-Oxley Act of 2002:
A. created the Financial Accounting Standards Board. B. created the Public Company Accounting Oversight Board. C. created the Public and Private Corporate Governance Board. D. created the International Accounting Standards Convergence Board.
Answer: B
Sample Question 113
Which of the following is true about using an RFI in the financial institution and FSP selection process?
A. RFI is a formal document that outlines objectives, needs and service requirements. B. An RFI can speed up the review process. C. A response to an RFI is a formal commitment for services. D. A response to an RFI is a binding agreement.
Answer: B
Sample Question 114
ABC company has a significant number of customers who are mainly consumers making monthly installment payments. Which one of the following types of lockbox would be the MOST appropriate for ABC to use?
A. Wholesale B. Retail C. In-house D. Hybrid
Answer: B
Sample Question 115
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. Request for Information (RFI) B. Request for Proposal (RFP) C. Public solicitation D. Bidder’s conference
Answer: B
Sample Question 116
To acquire an asset without putting debt on the balance sheet, a company should consider which of the following arrangements?
A. Financial lease B. Operating lease C. Capital lease D. Triple-net lease
Answer: B
Sample Question 117
To arrive at the closing cash position, a cash manager must add the expected settlements
in the collection and concentration accounts and deduct the projected disbursement totals
from the:
A. opening available balance. B. closing ledger balance. C. opening ledger balance. D. closing investment account balance.
Answer: A
Sample Question 118
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”?
A. Re-engineering B. Outsourcing C. Benchmarking D. Six Sigma
Answer: C
Sample Question 119
All treasury policies should be approved by:
A. external auditors. B. the SEC. C. legal counsel. D. the board of directors.
Answer: D
Sample Question 120
If the Federal Reserve wanted to stimulate a sluggish economy, it could do so by:
A. increasing reserve requirements. B. buying U.S. government securities in the open market. C. selling U.S. government securities in the open market. D. increasing margin requirements.
Answer: B
Sample Question 121
The U.S. Congress establishedthe.
A. UCC. B. FinCEN. C. OCC. D. OFAC.
Answer: C
Sample Question 122
An organization must maintain adequate liquidity to meet:
A. strategic objectives. B. five year plan. C. transaction requirements. D. defined contribution plan distributions.
Answer: C
Sample Question 123
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. supplier linkages. B. purchasing systems. C. working capital management. D. production resources.
Answer: C
Sample Question 124
A Treasury Management System (TMS) is used to:
A. obtain account balances. B. translate EDI documents. C. review bank availability schedules. D. open new bank accounts.
Answer: A
Sample Question 125
A U.S. exporter has agreed to export goods to a Canadian buyer with net 30 payment terms due in Canadian dollars. What type of risk is the exporter exposed to?
A. Economic exposure B. Commodity exposure C. Transaction exposure D. Translation exposure
Answer: C
Sample Question 126
Owners of a privately-held company have decided to sell the business, but are receiving offers dramatically lower than what the firm is worth (as estimated by the owners). Which of the following options is the BEST way for management to establish the true value of their company?
A. Issue stock to the public through an IPO. B. Increase the dividend payout ratio. C. Repurchase shares to elevate stock price. D. Alter the capital structure by issuing more debt.
Answer: A
Sample Question 127
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?
A. Long-term debt B. Short-term debt C. Net income D. Retained earnings
Answer: D
Sample Question 128
A company recently implemented a treasury code of conduct, which defined appropriate actions and business behaviors. The company developed policies and procedures that assigned duties to managers, and distributed the code to all treasury employees. The treasury group could have improved upon this implementation by doing which one of the following?
A. Having the code of conduct reviewed by the marketing department B. Providing training on the code to all employees C. Having the code certified under Sarbanes-Oxley Act requirements D. Incorporating the code under its disaster recovery plan
Answer: B
Sample Question 129
What is the primary weakness of a risk management policy that includes risk control
without specifically providing a plan for risk financing?
A. Resources are used to pay for losses that could have been prevented. B. Funding must be set aside for self-insurance. C. There is an increase in the potential for claims of negligence. D. Catastrophic losses could result in bankruptcy.
Answer: D
Sample Question 130
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?
A. A ledger overdraft B. A daylight overdraft C. A standby letter of credit D. A short-term line of credit
Answer: B
Sample Question 131
The PRIMARY goal of treasury management is to use which of the following efficiently?
A. Net income B. Cash C. Payment methods D. Equity
Answer: B
Sample Question 132
A put option is out of the money when the asset price:
A. is less than the strike price. B. exceeds the strike price. C. is unchanged relative to the purchase price. D. is equal to the strike price.
Answer: B
Sample Question 133
Fluctuations in interest rates and the availability of funds are more significant risks forcompanies that rely on:
A. short-term borrowing for long-term uses. B. short-term borrowing for short-term uses. C. long-term borrowing for long-term uses. D. long-term borrowing for short-term uses.
Answer: A
Sample Question 134
Which of the following is a service typically provided by an investment custodian?
A. Tax advice B. Audit service C. Portfolio reporting D. Written policy
Answer: C
Sample Question 135
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% annuallyStrategy #2: Invest all contributions in a stock fund that has returned 9% on average, although annual returns have varied between (2%) and 12%Assuming that the employee makes a one-time investment of $12,000 and that both strategies continue to perform as they have historically, how much more or less could the stock fund be worth after one year compared to the money market fund?
A. Between ($480) and $480 B. Between ($840) and $840 C. Between ($1,080) and $1,080 D. Between ($1,680) and $1,680
Answer: B
Sample Question 136
Whether through an active or passive decision by management, a risk management policy
of control without financing results in:
A. risk retention. B. risk transfer. C. risk avoidance. D. risk indemnification.
Answer: A
Sample Question 137
A U.S. company has a secured committed line of credit of $5.5 million and has an available balance of $4 million. The company successfully transmitted a $5.5 million wire transfer instruction out to the bank via SWIFT. 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?
A. Wires exceeding $5 million cannot be transmitted using SWIFT. B. The bank imposed a guidance line of credit on the account. C. The company exceeded its compensating balance requirement. D. The bank refused funding on the company’s discretionary line of credit.
Answer: B
Sample Question 138
The Fed can reduce the money supply by doing which of the following?1.Increasing reserve requirements2.Purchasing government securities3.Increasing legal lending limits4.Selling government securities
A. 1 and 2 B. 1 and 4 C. 3 and 4 D. 2, 3, and 4
Answer: B
Sample Question 139
Which of the following is an example of an intangible asset?
A. Goodwill B. Depreciation C. Uncollected debt D. Prepaid expenses
Answer: A
Sample Question 140
Which of the following will MOST LIKELY be affected when a company changes its terms
from net 30 to 2/10 net 30?
A. Sales revenue B. Bad debt charge-offs C. Collection expenses D. Credit evaluation expenses
Answer: A
Sample Question 141
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?
A. The accountant is protected by ‘whistle-blower’ laws. B. The CFO is liable for Bank Secrecy Act reporting. C. The accountant is in violation of Section 404 of the Sarbanes-Oxley Act. D. The CFO is protected by the code of ethics.
Answer: A
Sample Question 142
Which of the following is NOT a consideration for treasury managers when implementing
electronic communications with FSPs?
A. Cost limitations B. Security concerns C. Physical location of FSP D. Telecommunications infrastructure
Answer: C
Sample Question 143
A cash manager wants to convert wire payments to ACH. Which of the following would NOT be a good application for ACH?
A. Routine loan payments B. Lease payments C. Same day payments D. Future tax payments
