CTP® Practice Quiz - 7
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When a company announces a significant and unexpected dividend increase, it signals to the market that management expects: *
1 point
A key issue for companies in complying with the Sarbanes-Oxley Act is: *
1 point
A put option gives the holder the right to: *
1 point
U.S. dollar-denominated instruments issued by foreign banks through their domestic branches are known as: *
1 point
Which of the following types of risk would an investor who does NOT receive payments on a security under the original terms be subject to? *
1 point
Given credit sales of $150,000, $225,000, and $450,000 for July, August, and September (respectively), what is the company's DSO for September if September's outstanding receivables were $375,000? *
1 point
Which of the following factors will allow a company to decrease the amount of collected balances required to compensate its bank for services? *
1 point
A company enters into a cash flow hedge to offset fluctuations in the value of foreign currency transactions occurring in two years. How should the company record the gains and/or losses on the cash flow hedge in the current year? *
1 point
A public company's risk profile is currently in balance. The management's mission statement is to minimize stock devaluation. However, it is forecasting a need for working capital in the short term. Which of the following solutions would BEST assist management in accomplishing its mission? *
1 point
Merchant MNO's sales for the day total $20,000. Fifty percent are credit cards, split between Card Red and Card Blue respectively, at 65% and 35% of the card volume. The average ticket is $50. Fees paid are 2% for Card Red and 2.5% for Card Blue and a fee of $0.05 per transaction. What are the fees that MNO will pay to the issuing banks? *
1 point
Racklyn Paint Company, a new paint and construction company, has vendor payables of $2 million due periodically over the next 3 months; payroll payable to its crews of $500K each month; a mortgage of $4.4 million with a fixed rate of 6.0%; and an equipment loan of $5 million with a bank at a 30-day LIBOR plus 150 bp payment of $100K due monthly. Racklyn receives their first contract valued at $12 million with half of the contract value due at the time of contract and final payment upon completion. Racklyn expects the job to last 6 months. Which option would be the BEST use of Racklyn Paint Company's cash? *
1 point
An investor concerned about taxes on dividend distributions will MOST LIKELY purchase stock on which of the following dates? *
1 point
The time between receipt of a mailed payment and the deposit of the payment in the payee's account is known as: *
1 point
An individual has just inherited several million dollars and has decided to purchase the stock of a telecommunications company to diversify his portfolio. Before purchasing shares, he would like to do some company-specific research to determine which company to select. Examples of the information the individual wishes to obtain are financial statements and disclosures, company organizational structure, code of conduct, pending litigation, and profiles of the board of directors. Who would be the BEST person to contact to obtain all this information? *
1 point
In evaluating alternative capital investments, a company should consider qualitative factors such as: *
1 point
A properly designed concentration system will potentially achieve which of the following results?; I. Increased authority to field offices; II. Increased investment income; III. Improved ability to take discounts; IV. Reduced dependence on third-party concentration vendors *
1 point
Treasury policies should be approved by the: *
1 point
Which of the following are treasury management objectives?; I. To meet obligations in a timely manner; II. To minimize holdings in non-earning cash balances; III. To monitor and assist in the control of financial risk; IV. To evaluate costs and benefits of capital projects *
1 point
A large, mature, diversified, publicly traded company sells the smallest of its business segments to a strategic buyer for cash. It uses the proceeds to pay off all bank debt and subordinated debenture debt on its books. The company also pays a regular steady dividend to shareholders. Management's short-term strategy is to embark on an aggressive growth plan including a major acquisition. Based on the above information, if the company uses the trade-off theory in considering its WACC, how will it finance its growth? *
1 point
An asset-based lender has decided to provide a loan to a company. In order to perfect its security interest in the assets used as collateral with the potential borrower, the lender will be MOST interested in reviewing which of the following? *
1 point
Treasury management systems and ERP systems allow companies to do all of the following EXCEPT: *
1 point
Under Section 404 of the Sarbanes-Oxley Act, management must state its responsibility for which of the following? *
1 point
The Treasurer of PJB Company is in charge of implementing new treasury management software. Without issuing any RFPs, the Treasurer hires a consulting company to install the software and program it to suit the company's needs. The Treasurer is responsible for approving the consultant's invoices for payment. Through conversation, the CFO discovered that the Treasurer's relative is one of the partners at the consulting company. The Treasurer was immediately terminated. What did the Treasurer MOST LIKELY violate? *
1 point
XYZ Corporation's current ledger balance of the controlled disbursement account is $1,286,500. Based on the information in the following,; 1-Day Float, $473,523; 2-Day Float, $212,977; Checks presented today, $473,256; Checks presentment tomorrow, $378,271; Maturing investments tomorrow, $2,000,000; What will the corporation's available balance be at the end of today? *
1 point
In analyzing the costs for services among several banks, a cash manager should compare all of the following EXCEPT the: *
1 point
Banks often control information flow, records and assets, therefore it is critical that banks have: *
1 point
A town has $25 million excess funds to invest long term. The town's investment policy requires it have full FDIC coverage on all investments. The town is willing to do its own due diligence on the financial institutions that they invest in, but would prefer to have one statement. Which of the following investment options meets its requirements? *
1 point
Which of the following can be exercised only on the expiration date? *
1 point
The KEY decision in using CCD+ and CTX formats for B2B payments is: *
1 point
A lockbox system is characterized by which of the following? *
1 point
QRT Corporation uses exponential smoothing in its cash flow forecasting model. Five days are used to calculate the moving average forecast.; Actual Cash on Day 1: $2,000,000; Day 2: $1,750,000; Day 3: $2,250,000; Day 4: $2,000,000; Day 5: $1,900,000; Day 6: $2,100,000; Moving Average Forecast on Day 6: $1,980,000; Day 7: $2,000,000; If the value of the smoothing constant is.60, what is the exponential smoothing forecast for day 7? *
1 point
A publicly traded company is looking to fund its next project with the issuance of stock. The company's stock is primarily held by a small group of investors. The company is concerned that issuing stock may upset these investors because it would dilute their holdings. Which of the following strategies would help address the investors' concern? *
1 point
Company GRA has retail locations in remote areas of Montana. All banking options within the area, deemed a safe distance for making cash deposits, fail the counterparty risk assessment. Deposits would include both cash and checks. In order to achieve immediate availability of funds, what deposit method should be utilized? *
1 point
A company with high operating leverage reduces its average cost per unit by 20% as its sales volume increases by 40% annually. This an example of *
1 point
When a subsidiary borrows money, the parent, sister subsidiary, or other entity is often used in order to: *
1 point
A company has large, ongoing short-term financing requirements with a maximum horizon of 250 days. It has a good credit rating and would like to use the least expensive source of short-term debt to finance its needs. The Treasurer might recommend which of the following? *
1 point
When a supplier uses evaluated receipts settlement (ERS), which of the following statements is true? *
1 point
Compared to debt, which of the following statements is true about a company issuing equity? *
1 point
JKL Company has been successful in shortening the time associated with its mail float, processing float and availability float. JKL Company will experience which of the following as a result of these improvements? *
1 point
XYZ Bank would like to conduct some foreign exchange transactions with JKL Bank. JKL isn't the most liquid and could have some credit risk. XYZ Bank should suggest which of the following in order to eliminate risk? *
1 point
Amalgamated Binding Consolidators takes 20 days to convert its raw materials to finished goods, 5 days to sell it, and 15 days to collect its credit sales. What is the company's days receivable period? *
1 point
A corporation has is sued long-term debt at an average rate of 8.28% and its cost of equity has averaged 14.25%. Its tax rate is 36%, and it maintains three times as much equity as debt. What is its WACC? *
1 point
Under which of the following circumstances is lengthening the disbursement mail float NOT a benefit to the disbursing company? *
1 point
A public corporation may value a defined contribution plan highly because it: *
1 point
Which of the following is a KEY operational advantage of short-term debt? *
1 point
Assets; Cash: $1,000; Marketable Securities: $3,000; Accounts Receivable: $10,000; Inventory: $6,500; Current Assets: $20,500; Net Fixed Assets: $24,500; Total Assets: $45,000; Liabilities and Owners' Equity; Accounts Payable: $15,000; Current Liabilities: $15,000; Long-term Debt: $20,000; Total Liabilities: $35,000; Shareholders' Equity $10,000; Total Liabilities and Equity: $45,000; The before-tax cost of long-term debt is 10% and the cost of equity is 12%. The marginal tax rate is 35%.; The company's weighted average cost of capital is: *
1 point
In a large company, the person who normally oversees both the treasury and the accounting functions is the: *
1 point
The 'agency problem' refers to: *
1 point
An analyst at XYZ Company was assigned with determining if the company should start to use a lockbox provider for its retail payments. The analyst determined that the company's annual sales of $324,000,000 were recorded evenly throughout the year. The Company receives 30,000 checks annually. Total dollar-days float without the lockbox is $76,500,000 and the annual opportunity cost is 5.5%; assume 30-day month. The industry's average opportunity cost is 6.0%. Using the information in the following: (Days - Calendar Days of Float with Lockbox.); Batch #1, 3 Days, $4,500,000; Batch #2, 1 Day, $13,500,000; Batch #3, 2 Days, $9,000,000; Total, $27,000,000; What would be the net effect of using the lockbox? *
1 point
Which of the following is a source of short-term financing? *
1 point
A retail brokerage firm is MOST like which one of the following types of financial institutions? *
1 point
Which of the following BEST describes an advantage of a company going public? *
1 point
Company A has decided to purchase $3,000,000 of real estate from Company B. Company A will make the payment in 3 parts. The electronic payments will be sent from Bank A to Bank B. On Day 1 Company A will send a $400,000 check as a deposit, which is deductible from the balance. The check is expected to clear in 4 days. On Day 2, two payments are initiated, one wire transfer for $2,000,000 and an ACH for $600,000 to complete the balance. On Day 2 what percentage of the payment to Company B is NOT final? *
1 point
A company has six fraudulent checks clear its primary disbursement account for a total of $7,652. The bank agrees to split the loss with the company to maintain a good relationship. As a condition of sharing the expense, the bank requires the company to establish positive pay on its disbursement accounts or have the company absorb the losses on future fraudulent payments. If the company determines that positive pay is too expensive and decides NOT to implement it, what type of risk financing technique is the company using? *
1 point
What is this firm's residual income?; Revenues: $110,000; Expenses (including COGS and all taxes): $87,000; Internal rate of return: 8.5%; Capital Investment: $55,000; ROI: 8.0%; Cost of capital: 11% *
1 point
In a private label financing arrangement, the seller does which of the following? *
1 point
What is a firm’s weighted average cost of capital if its marginal tax rate is 35%, its average cost of equity is 16%, its average cost of debt is 12%, and it carries one-half the amount of debt as equity? *
1 point
A lender is evaluating the creditworthiness of a company that has high levels of operating leverage. In determining the debt capacity of the company, the bank would MOST LIKELY prefer a: *
1 point
A grocery store chain would be likely to use all of the following services EXCEPT: *
1 point
A company has a $300,000 credit line of which $200,000 was the average amount outstanding for the year. The terms of the loan include a 1/2 of 1% commitment fee on the unused portion, an interest rate of 10%, and a compensating balance requirement of 2% of the total credit line. The company's compensating balances are funded from credit-line borrowings. What is the effective annual interest rate on the net usable funds? *
1 point
An accounts payable manager has been mandated to accept all trade discount opportunities with an effective cost of discount above 25%. An invoice has been presented and approved for payment with terms of 3/5, net 30 days. What is the difference between the effective cost of discount offered, and the 25% rate set by the company? *
1 point
A company is based in the United States and has an operating subsidiary in Germany. With a stable U.S. dollar and a depreciating euro, the company's cash manager may elect to: *
1 point
ABL Corporation is currently receiving a return of 10% on its investments. The bank is offering them an ECR of 15%. In order to get more value for their money ABL Corp. has decided to take advantage of the higher ECR and use funds from its Money Market Accounts to cover bank service charges. If ABL already has an average ledger balance of $750,000, how much more do they need to deposit on their account to cover all $10,000 of monthly service charges?; Average Ledger Balance: $750,000; Deposit Float: $75,000; Reserve Requirement: None; ECR: 15%; Service Charges for the month: $10,000; Days in month: 30 *
1 point
A company in the market to purchase a treasury management system (TMS) has issued a request for proposal to evaluate various vendors. One of the evaluation factors focuses on the long-term viability of the vendor. The company may have to choose between an untested new vendor with a superior product and an established vendor with an incomplete product suite. This dimension of the RFP is measuring what type of risk? *
1 point
In capital budgeting, a company might risk adjust which of the following? *
1 point
Treasury management systems help cash managers do which of the following?; I. Reduce borrowing expenses; II. Initiate transfers; III. Determine cash position; IV. Obtain account balances *
1 point
Disbursement float includes which of the following three float time intervals? *
1 point
Loss exposures related to treasury management may include which of the following? *
1 point
A U.S. company's pension plan is managed by an investment management firm, headquartered outside the United States. The investment management firm outsources the accounting for the plan to an organization on the Office of Foreign Assets Control (OFAC) sanctions lists and the firm does not advise the U.S. company of this fact. A financial loss in the pension plan is later realized due to the mismanagement of funds. When establishing its contract with the firm to protect itself from losses in the pension plan, the company should have: *
1 point
A company's Chief Financial Officer assigns a team reporting to the Treasurer to restructure the company's complex debt instruments and equipment leasing arrangements. The team executes the required settlement transactions using wire payments to facilitate the new debt structure, and in the process violates the lending requirements of the company's bank. What should the Treasurer have done to prevent the violation? *
1 point
A company that has a nationwide workforce may use which of the following methods for disbursing payroll to minimize the number of bank accounts?; I. Payable through draft; II. Multiple drawee checks; III. ACH credit transfers *
1 point
A company is experiencing the following long-term trend on a month-over-month basis: • Sales are increasing by $100,000, a 15% increase.; • Accounts receivable are increasing by $5,000, a 1% increase.; • Accounts payable are increasing $20,000, a 4% increase.; • Labor expenses are increasing by $40,000, a 3% increase.; With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company? *
1 point
Which of the following is a characteristic of giro systems used in countries in Europe? *
1 point
I. Banker's acceptances; II. Commercial paper; III. U.S. Treasury bills; IV. Federal agency securities; Which of the following is the MOST usual ranking, from lowest to highest risk, of the investments listed above? *
1 point
Which of the following would be considered insurance risk management services? *
1 point
LST Company is a publicly traded company with $120 million in sales. Historically, LST does not extend credit to customers beyond net 45 terms. To help promote sale of a new product introduced into the market this year, LST offered financing terms to customers purchasing the new product. As a result, sales increased by 15% from the prior year and accounts receivable increased by 5%. At the end of their fiscal year LST had a $15 million sale to a new customer that was recorded as a note receivable. LST recognizes revenue when goods leave the facility. During the financial audit the auditors discovered that the customer did not receive the product until three days after the year-end. Under GAAP accounting, the auditors would MOST LIKELY render a(n): *
1 point
Under an operating lease, possible benefits to the lessee include which of the following?; I. It requires no initial capital outlay.; II. It can be structured as an off-balance-sheet item.; III. It can offer tax advantages. *
1 point
A North American service company has autonomous offices in different geographic regions each handling their own sales and accounts receivables deposits to local banks which primarily consist of checks. By implementing a lockbox collection system, what objective in its collection policy would it have met? *
1 point
ABC Company's Treasury department outsourced its overnight investment duties to XYZ Money Management. XYZ placed the funds received from ABC into corporate commercial paper, which has recently gone into default after numerous ratings downgrades. The investment policy of ABC Company states that all investments must be in investment grade commercial paper; however, the agreement gives XYZ the ability to make exceptions with the approval of the Treasurer of ABC Company. The Treasurer was never notified of the ratings downgrades. What role or responsibility, if any, was violated with regards to the investment policy? *
1 point
The first step in the financial institution and financial services provider (FSP) selection process should be: *
1 point
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