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AFP CTP Sample Question Answers

Question # 1

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

Question # 2

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

Question # 3

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.

Question # 4

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.

Question # 5

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

Question # 6

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.

Question # 7

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.

Question # 8

A company plans to perform an A/R cash analysis based on the following sales information: 60% of sales are collected within two months after the sale. After three months, $135,000 of January's sales has been collected. What was the percentage of January's sales collected in April?

A. 10%
B. 30%
C. 60%
D. 90%

Question # 9

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

Question # 10

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.

Question # 11

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.

Question # 12

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

Question # 13

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

Question # 14

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.

Question # 15

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

Question # 16

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

Question # 17

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.

Question # 18

When will a depositor receive ledger and collected credit for a western check deposited at 2:00 P.M. Wednesday?

A. Wednesday - Thursday
B. Wednesday - Friday
C. Thursday - Thursday
D. Thursday - Friday

Question # 19

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

Question # 20

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.

Question # 21

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

Question # 22

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

Question # 23

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.

Question # 24

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.

Question # 25

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.

Question # 26

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.

Question # 27

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.

Question # 28

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

Question # 29

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

Question # 30

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

Question # 31

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.

Question # 32

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

Question # 33

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.

Question # 34

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

Question # 35

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.

Question # 36

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.

Question # 37

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

Question # 38

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.

Question # 39

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

Question # 40

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

Question # 41

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

Question # 42

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.

Question # 43

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.

Question # 44

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.

Question # 45

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.

Question # 46

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

Question # 47

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

Question # 48

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

Question # 49

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

Question # 50

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.

Question # 51

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.

Question # 52

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

Question # 53

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

Question # 54

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

Question # 55

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

Question # 56

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

Question # 57

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.

Question # 58

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.

Question # 59

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

Question # 60

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.

Question # 61

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.

Question # 62

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

Question # 63

Financial statement preparation guidelines are provided by:

A. FOMC.
B. FDIC.
C. FASB.
D. FATF.

Question # 64

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?

A. $15,000
B. $45,000
C. $90,000
D. $135,000

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

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

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

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

Question # 69

Which currency will sell at the greatest discount in the forward market against the U.S.dollar.

A. Euro
B. Mexican peso
C. Japanese yen
D. Canadian dollar

Question # 70

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

Question # 71

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.

Question # 72

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

Question # 73

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.

Question # 74

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.  

Question # 75

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.

Question # 76

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  

Question # 77

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

Question # 78

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  

Question # 79

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.

Question # 80

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.

Question # 81

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  

Question # 82

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.

Question # 83

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.  

Question # 84

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.

Question # 85

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.

Question # 86

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  

Question # 87

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

Question # 88

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.

Question # 89

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

Question # 90

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.  

Question # 91

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.

Question # 92

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

Question # 93

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  

Question # 94

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

Question # 95

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.

Question # 96

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%  

Question # 97

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

Question # 98

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  

Question # 99

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.

Question # 100

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

Question # 101

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.

Question # 102

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.  

Question # 103

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

Question # 104

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. 

Question # 105

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.  

Question # 106

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

Question # 107

Which of the following is a PRIMARY responsibility of a company's risk management function?

A. Insurance  
B. Auditing  
C. Leasing  
D. Liquidity monitoring  

Question # 108

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.

Question # 109

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.  

Question # 110

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

Question # 111

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

Question # 112

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

Question # 113

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.  

Question # 114

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.

Question # 115

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

Question # 116

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  

Question # 117

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

Question # 118

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.  

Question # 119

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  

Question # 120

All treasury policies should be approved by:

A. external auditors.
B. the SEC.
C. legal counsel.
D. the board of directors.

Question # 121

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.

Question # 122

The U.S. Congress establishedthe. 

A. UCC.  
B. FinCEN.  
C. OCC.  
D. OFAC.  

Question # 123

An organization must maintain adequate liquidity to meet:

A. strategic objectives.
B. five year plan.
C. transaction requirements.
D. defined contribution plan distributions.

Question # 124

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.

Question # 125

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.

Question # 126

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

Question # 127

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.

Question # 128

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

Question # 129

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

Question # 130

On the basis of the information above, what level of net collected balances is necessary to compensate a bank for $1.00 worth of services?

A. $126
B. $154
C. $157
D. $159

Question # 131

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.  

Question # 132

Exhibit:What is the price to earnings ratio for Company ABC?

A. 3.88
B. 7.50
C. 8.33
D. 10.00

Question # 133

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  

Question # 134

The PRIMARY goal of treasury management is to use which of the following efficiently? 

A. Net income  
B. Cash  
C. Payment methods  
D. Equity  

Question # 135

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.  

Question # 136

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.  

Question # 137

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  

Question # 138

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

Question # 139

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.  

Question # 140

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.

Question # 141

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  

Question # 142

Which of the following is an example of an intangible asset?

A. Goodwill
B. Depreciation
C. Uncollected debt
D. Prepaid expenses

Question # 143

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  

Question # 144

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.

Question # 145

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  

Question # 146

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

Question # 147

Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?

A. Consolidating the cash resources of all divisions and subsidiaries in order to pay down corporate debt
B. Allocating corporate debt to each division or subsidiary according to its cash needs
C. Negotiating with suppliers to extend their payment terms for key divisions or subsidiaries
D. Establishing strict credit standards that are uniform for all divisions or subsidiaries

Question # 148

To monitor financial institution service quality, a company would use all of the following measures EXCEPT:

A. report cards.
B. an earnings allowance rate.
C. annual senior management reviews.
D. informal reviews on day-to-day relationship management.

Question # 149

Which of the following concentration transfer alternatives provide the fastest availability of funds?

A. Point-of-sale terminal transfers
B. Electronic depository transfers
C. Wire transfers
D. Value-added banks

Question # 150

Which of the following is an opportunity cost of maintaining excess liquidity?

A. Loss of time in securing credit
B. Increase in interest earnings
C. Decreased commitment fees
D. Interest paid on outstanding debt

Question # 151

Treasury uses which of the following internal sources of information in its daily operations?

A. Product development plans
B. Information technology budgets
C. Marketing reports
D. Sales and purchasing summaries

Question # 152

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?

A. The company charges the subsidiary negotiated licensing fees on proprietary software.
B. The subsidiary sets up a re-invoicing center in another, tax-friendly country to manage a transfer pricing program.
C. The subsidiary lends funds to the parent. The loan is not repaid and the subsidiary writes it off.
D. Set up an in-house bank program at the successful subsidiary to make use of the excess liquidity in-country.

Question # 153

The telecommunications network used to transmit international payment instructions is called:

A. the giro system.  
B. SWIFT.  
C. CHIPS.  
D. CHAPS.  

Question # 154

A manufacturing company's long-term capital structure is 30% debt and 70% equity, its cost of equity is 10%, its average cost of debt is 8%, and the marginal tax rate is 34%. If the company has invested total capital of $567,865 in its production unit and the unit's operating profit is $79,856, what is the economic value added (EVA) of the unit?

A. ($674.35)  
B. $3,982.14  
C. $5,412.56  
D. $6,571.78  

Question # 155

The owner of XYZ Company just completed an initial public offering. Which of the following is the MOST LIKELY outcome?

A. The owner will gain more operational control.  
B. The owner will be able to diversify his personal portfolio.  
C. The company will save on accounting costs.  
D. The company will increase productivity.  

Question # 156

In the event of bankruptcy and the subsequent liquidation of issuer's debt, in what order, from first to last, will the following be repaid?1.Senior secured debt2.Senior subordinated debt3.Junior secured debt4.Junior debentures

A. 1, 2, 3, 4
B. 1, 3, 2, 4
C. 2, 1, 3, 4
D. 2, 1, 4, 3

Question # 157

A retail company is performing a risk analysis on its accepted payment types. Cash is theprimary form of payment for this retailer. What is the PRIMARY issue with cash paymentsystems?

A. Weight of cash  
B. Cost of processing  
C. Security and integrity  
D. Cash-based accounting practices  

Question # 158

Which of the following payment instruments is initiated by the payee rather than the payor? 

A. Travelers checks  
B. Pre-authorized drafts  
C. Government warrants  
D. Money orders  

Question # 159

Which of the following is considered an important factor when selecting a financial service provider?

A. CAMELS score
B. Expertise of bank personnel
C. Country of origin
D. Timely response to the RFP

Question # 160

All of the following are discounted instruments EXCEPT: 

A. preferred stock.  
B. banker's acceptance.  
C. commercial paper.  
D. Treasury bills.  

Question # 161

In terms of targeting a company’s capital structure, when is it beneficial to assume a high level of financial risk? 

A. When the economy is rapidly expanding  
B. When the economy is experiencing slow growth  
C. When the company is experiencing growth  
D. When the rate of return on investments is advantageous  

Question # 162

The U.S. government agency that administers and enforces trade sanctions against targeted foreign countries is the:

A. Foreign Corrupt Practices Office.
B. Office of Foreign Assets Control.
C. Department of Justice.
D. Federal Trade Commission.

Question # 163

The company's monthly credit sales are in Table 1.  The company's receivables collection pattern is in Table 2. If this company's accounts receivable on March 31 is $0, what would the accounts receivable balance be at the end of July? Assume a 90-day quarter. 

A. $845,000  
B. $1,205,000  
C. $1,545,000  
D. $1,580,000  

Question # 164

The cash manager for a company is creating a list of transactions that should be considered when determining the daily projected closing cash position. Which of the following transactions should be removed from the list?

A. Controlled disbursement totals
B. Estimates of non-controlled disbursement account clearings
C. Expected settlements in collection (lockbox)
D. Future-dated wire transfers and disbursements

Question # 165

Which of the following would increase if the Fed were to announce a reduction in reserve requirements?

A. Monthly service charges
B. Monthly earnings credits
C. Average collected balances
D. Fed float

Question # 166

Liquidity reserves for opportunistic requirements are typically maintained in the form of:

A. short-term investments.
B. short-term borrowing facilities.
C. working capital.
D. long-term investments.

Question # 167

If a company does not have cash available to make an interest payment on a bond, the company is experiencing difficulty with its:

A. profitability.
B. asset-liability management.
C. capital structure.
D. liquidity management.

Question # 168

The Treasurer of a publicly-traded U.S. company discovers several large payments which were made from the company’s disbursement account without proper approval. These unauthorized payments represent an exposure to penalties imposed by which regulator?

A. The Office of the Comptroller of the Currency
B. The Office of Foreign Assets Control
C. The Public Company Accounting Oversight Board
D. The Financial Industry Regulatory Authority

Question # 169

When a company decides to discontinue a product line or divest of a subsidiary, it has made what type of corporate financial decision?

A. Accounting
B. Financing
C. Funding
D. Investment

Question # 170

Corporate governance for publicly traded U.S. companies includes: 

A. the roles and responsibilities of independent directors.  
B. full compliance with local and state regulations.  
C. the structure and organization of executive management.  
D. timely and complete submission of audited financial statements with the SEC.  

Question # 171

The term "factoring" refers to a:

A. mathematical formula used in calculating bond prices.
B. short-term financing method.
C. reduction of bank fees related to volume.
D. Federal Reserve Open Market Committee activity.

Question # 172

Which of the following occurs when the U.S. dollar strengthens?

A. Foreigners will purchase more U.S. goods.
B. U.S. exports become more competitive.
C. Foreign exports become less competitive.
D. Foreign exports become more competitive.

Question # 173

A firm’s air conditioning unit breaks down unexpectedly and must be replaced immediately.What type of liquidity requirement is this an example of?

A. Transaction
B. Precautionary
C. Speculative
D. Opportunity

Question # 174

A company's basic investment objectives should include all of the following EXCEPT:

A. ensuring liquidity.
B. optimizing returns.
C. maximizing exposure.
D. minimizing risk.

Question # 175

Subtracting dividends from net income available to common shareholders is reflected as a change to which of the following balance sheet items?

A. Treasury stock  
B. Paid-in capital  
C. Common stock at par value  
D. Retained earnings  

Question # 176

In a maturity matching financing strategy, which of the following is financed using shortterm sources?

A. Buildings
B. Equipment
C. Accounts payable
D. Accounts receivable

Question # 177

Which of the following is indicative of a consolidated operation? 

A. Shared service center  
B. Transfer pricing agreements between subsidiaries  
C. Intracompany loans  
D. Offshore financing  

Question # 178

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.

A. I only
B. II and III only
C. I, II, and III only
D. II, III, and IV only

Question # 179

Which of the following prohibits price discrimination among customers where cost differences do NOT exist?

A. Robinson Patman Act
B. Truth in Lending Act
C. Fair Credit Billing Act
D. Equal Credit Opportunity Act

Question # 180

BF Company, a manufacturer of food products, reported financial information shown in thetable below for the end of the year.  BF Company is subject to covenants under its revolving credit facility. It is in compliance with which of the following?

A. Maximum debt to tangible net worth ratio of 1.5:1  
B. Minimum times interest earned of 3.0 times  
C. Dividends cannot exceed 15% of retained earnings  
D. Minimum current ratio of 1.25:1.0  

Question # 181

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:

A. $1,605.
B. $1,886.
C. $3,491.
D. $5,886.

Question # 182

A small group of investors is purchasing a company using a large amount of debt. This group is intending to sell off pieces of the acquired company to other firms that it believes can take advantage of potential synergies. What is this type of a transaction more specifically known as?

A. A merger
B. An acquisition
C. A leveraged buyout
D. An asset purchase

Question # 183

Who has responsibility for final approval of treasury policies that have a significant impact on the organization? 

A. The board of directors  
B. The chief financial officer  
C. The treasurer  
D. The audit committee  

Question # 184

A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.

A. a decentralized treasury structure.
B. a shared service center.
C. a centralized treasury structure.
D. an in-house bank.

Question # 185

A multinational corporation with many FSPs requires a TMS that can display extensive and complex information in an effective manner. The corporation will be looking for a TMS with what functionality?

A. Bank administration  
B. Dashboards  
C. Data integration  
D. Modularity  

Question # 186

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. Decreased liquidity for the company’s stock
B. Decreased reporting and disclosure costs for company
C. Increased managerial flexibility for owners of the company
D. Increased ability to determine company value