CTP® Practice Quiz - 4
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Which of the following objectives is most crucial to a company’s treasury? *
1 point
Which of the following is NOT true for both bankers' acceptances and trade acceptances? *
1 point
Based on the following information, what is the required collected balance to cover all monthly service charges?; Deposit Float $10,000; Reserve Requirement 5%; Earnings Credit Rate 15%; Monthly Service Charges $6,000; Days in month 30 *
1 point
A company has a beginning cash balance of $50,000. Its weekly cash flow forecast shows the following information for the next three weeks.;  Cash Receipts in Week #1: $100,000; Week #2: $50,000; Week #3: $150,000.; Disbursements in Week #1: $55,000; Week #2: $10,000; Week #3: $180,000.; Which of the following statements is true? *
1 point
Company XYZ has stable cash flows and sizable assets. The board of directors compared its WACC with its own industry's averages and determined that it may be at a competitive disadvantage. In order to become more competitive, what action will XYZ MOST LIKELY take? *
1 point
RAL Capital, a lean global financial service provider with revenues of $8 billion, has 10 regional offices located around the world. The RAL global trading groups are structured as profit centers with each center having its own profitability targets. The group's clients consist of large multinational corporations and financial institutions that require the buying and selling of large amounts of currency. The Treasurer is considering reorganizing his department into a profit center. The group processes millions of transactions every year. What is a downside of this scenario? *
1 point
The MOST common way that companies structure their treasury operations is as a: *
1 point
A company determines that no combination of risk control or financing techniques will produce an adequate, risk-adjusted rate of return on manufacturing a new product. It decides to discontinue the product line. This is an example of: *
1 point
A put option on a company's stock has an exercise price of $20. On the delivery date, the stock is trading at $24 per share. What should the investor who has paid $2 for the option do? *
1 point
ABC Company offers a discount of 2/10, net 30 to its customers. ABC factored its accounts receivables with an outside vendor, under a 'with recourse' arrangement. What impact might this have on the company? *
1 point
Place the following methods of international trade payments in order of most protection to least protection for the seller.; I. Documentary collection; II. Letter of credit; III. Cash before delivery; IV. Open account *
1 point
On the basis of the following exchange rates, which of the following currency amounts has the greatest value in U.S. dollars?;  US Dollar/Canadian Dollar: 1.781; US Dollar/British Pound: 0.62; US Dollar/Euro: 0.847; US Dollar/Japanese Yen: 139 *
1 point
The historic rate of return in the U.S. stock market is 8%. An investment portfolio has a mix of equity investments consisting of 40% A-Corp stock, 30% K-Corp stock, 10% M-Corp stock and 20% W-Corp stock. The investment portfolio manager tends to buy and hold the equity investment position for 3 years on average. To calculate the required rate of return for this investment portfolio, what rate from the table would be used as the risk-free rate?; Discount Rate: 0.75%; Fed Funds Rate: 0.25%; 3-mo. Treasury Bill: 0.10%; 10-yr Treasury Note: 3.30%; 30-yr Treasury Bond: 4.50%; A-Corp beta: 1.50; K-Corp beta: 0.60; M-Corp beta: 2.10; W-Corp beta: 1.35 *
1 point
Management of a small, rapidly growing high tech company wants to bring in additional funds while keeping a low coupon bond issue outstanding. The company will issue: *
1 point
Company XYZ offers a retirement plan wherein the value of the plan's assets and liabilities is measured separately. The plan's funding and valuation can have a significant impact on the financial condition of the company. Company ABC offers a retirement plan wherein the amount owed to the participants at retirement is based solely on the account balance at the time of withdrawal with participants often bearing the responsibility for managing the investments in their account. Which of the following BEST describes the above two retirement plans and which act governs them? *
1 point
The Federal Reserve can increase the money supply by: *
1 point
In an organization with personnel limitations, which of the following strategies should be considered to mitigate cash management system risk? *
1 point
A company’s capital structure includes $800,000,000 in total capital, of which $200,000,000 comes from debt. The firm’s after-tax cost of debt is 6%, and its cost of equity is 12%. The marginal tax rate is currently 40%. What is the company’s weighted average cost of capital? *
1 point
To increase the money supply, the Federal Reserve would increase which of the following? *
1 point
Company ABC is a restaurant chain that has enjoyed a surge in customers' dining with not much of a profitability increase in the last couple of years. Following a bad restaurant review, customer traffic deteriorated with not much change in profitability. Which of the following BEST describes the cost structure of the company? *
1 point
Commercial paper is issued for 60 days at for a discounted (nominal) rate of 5.25%. What is its nominal yield for $1 million of this CP? *
1 point
JMW Company processes its consumer payments using a lockbox provider. On average 35% of its remittance advices contain encoding errors. JMW Company's cost for the lockbox provider to process these payments will be least impacted if it uses: *
1 point
A portfolio manager purchases a floating rate mortgage backed security that would currently provide a 4% yield to the company. Since mortgage rates have been fluctuating significantly over the past month, the manager is thinking about entering into an interest rate swap to hedge against the rate movements. Although the manager would remove most of the price sensitivity of the asset by executing the swap, it would also lower the total yield on the investment due to swap costs. What objective in the company investment policy is guiding the portfolio manager's decision? *
1 point
An electronics manufacturer is attempting to protect itself from financial losses due to projected high warranty claims costs for one of its technically complex products. What kind of assessment should the company perform to determine the appropriate external insurance coverage that would protect it from the claims? *
1 point
A high-yield, non-investment-grade security is commonly referred to as which of the following? *
1 point
Which of the following statements is (are) true about non-repetitive wires?; I. They may require additional security steps.; II. They are typically used for cash concentration.; III. They may be used for transactions where dates, parties, and/or amounts may be variable. *
1 point
Which of the following is an example of a company's internal data used for cash management? *
1 point
Assume the cost of an ACH transaction is $0.80, the charges for a wire transfer are $30.00, the monthly account maintenance fee is $10.00, and the company earns interest at an annual rate of 1.825% on overnight investments. What is the break-even point where the interest earned on overnight investments offsets the incremental wire costs? *
1 point
What document serves as the basic account or service authorization, empowering a representative of a business to enter into agreements for financial services? *
1 point
A major toy retailer operates 65 retail stores throughout the Midwest. Which of the following credit terms is MOST LIKELY to be offered to this company by its suppliers? *
1 point
A U.S. company wants to increase its cash turnover rate. It is finding that customers are not taking the offered discount terms of 3/15, net 35. What action might the company take in order to achieve its goal? *
1 point
A company expects the U.S. dollar to depreciate in value compared to the British pound. The company will have a British pound payment to make in five months. The company would MOST LIKELY buy: *
1 point
A company has multiple wholly-owned subsidiaries that issue their own checks which are signed by head office staff. The company decides to move to electronic payments using their bank's internet-based payment systems to reduce costs. Payments are now initiated by the subsidiaries. What element of the payment policy should be considered if the company still wants to maintain head office control over payments? *
1 point
A firm’s controlled disbursement account is funded with an ACH transfer. On Tuesday the account’s opening ledger balance is $2,000 and daily clearing will be $1,600. If the firm wishes to restore a $2,000 opening ledger balance for Wednesday, it must make an ACH transfer in which of the following amounts? *
1 point
Which of the following is a practical obstacle to the success of using policy and procedure statements? *
1 point
The stock of a manufacturing company is priced so that its expected rate of return is below its required rate, as calculated by the Capital Asset Pricing Model (CAPM). Which of the following will occur in an efficient capital market? *
1 point
A company is starting a project to redesign its cash management information systems. What would be an important tool in this effort? *
1 point
Private companies usually go public by making an initial public offering. What is the term for offering subsequent shares in the market? *
1 point
A company is looking for a way to finance their inventory. What is the BEST funding match? *
1 point
XYZ Company is a fairly new and high growth company funded by venture capital. Which of the following performance measures is it MOST LIKELY to use? *
1 point
What is a company’s after-tax cost of debt is its pre-tax rate is 8.50% and its tax rate is 33%? *
1 point
A pension plan fiduciary administers a plan which allows highly compensated employees the ability to contribute a larger percentage of their salary to the plan than the percentage allowed for all other employees. Under ERISA rules, this plan would be considered: *
1 point
Which of the following trade payment methods virtually eliminates the seller's credit risk? *
1 point
A company converts the expense processing for its sales team from reimbursement by check to providing the team with travel and entertainment cards. Immediately, the company's expenses for the sales force increase by 10%, with no concurrent increase in sales volumes. What aspect should the company have covered in their policies for card use to prevent the increased expenses? *
1 point
A company hires an investment firm to fully underwrite a new stock issuance. Which of the parties carries the MOST risk? *
1 point
Which of the following is an advantage of a decentralized disbursement system? *
1 point
Advantages of writing checks locally on a centralized disbursing bank include all of the following EXCEPT which statement? *
1 point
A company with $50 million in foreign assets decides to increase its foreign debt by $40 million for a debt ratio of 80%. This action will reduce which exposure? *
1 point
A sinking fund is primarily used for which of the following purposes? *
1 point
Which of the following is responsible for liquidating the assets of failed financial institutions? *
1 point
The treasury analyst at RST Corporation has been asked to forecast cash levels for the company's year-end balance sheet. The analyst has been given the following information: Net income: $125 million; Depreciation: $14 million; Dividend payments: $3 million; Change in A/R balance: $(15 million); Change in inventory balance: $(7 million); Change in payables balance: $(12 million); Fixed asset purchases: $7 million; Note payment: $100 million; Beginning cash balance: $11 million; What should the analyst project as the upcoming year-end cash balance? *
1 point
A company’s use of deposit anticipation to initiate an EDT transfer is based on the company’s: *
1 point
XYZ Company is a publicly held manufacturing company that has decided to branch out into the international market. Five million dollars is needed to set up management and hire the factory workers, $2 million for various government certifications in order to begin business in Poland, and $1 million for miscellaneous expenses. While looking for funding, XYZ found that local banks in Poland were not willing to provide financing without which of the following? *
1 point
The MOST effective way to reduce the internal risk of technology as it relates to critical treasury functions is to: *
1 point
What is the correct sequence of the following disbursement float events, from first to last step?; 1. Check clears back to drawee bank account.; 2. Check is encoded and enters the clearing system.; 3. Depositor receives ledger credit.; 4. Lockbox bank receives check. *
1 point
A multinational company (MNC) that operates a shared service center charges its foreign subsidiaries a management fee. This management fee may need to be: *
1 point
The controller is developing a financial plan that includes an operating budget and a financial budget. Which of the following statements is true? *
1 point
Which of the following would MOST LIKELY cause a decrease in a company's deposited checks availability? *
1 point
A dealer is selling securities to a client. What is the yield/price at which the dealer will sell? *
1 point
A U.S. company that is expecting to receive a payment of C$1,000,000 purchased a put option of C$1,000,000 at a strike price of 1.75 C$/US$. Two days before the receipt of the payment, the spot rate is 1.85 C$/US$. To maximize its receipt of dollars, the company should do which of the following? *
1 point
The Treasurer for XYZ Manufacturing, Inc. recently exchanged a portion of its euro holdings into U.S. dollars to purchase gas futures contracts. This was done in anticipation of an assumed rise in gas prices due to the continued weakening of the U.S. dollar. Which of the following types of risk is being mitigated? *
1 point
Which statement is true about private placements compared to public offerings? *
1 point
Which of the following capital budgeting methods ignores the time value of money? *
1 point
All of the following are common consumer-to-corporate international payment mechanisms EXCEPT: *
1 point
A U.S. corporation has annual revenues of $500 million and a corporate tax rate of 15%. It has subsidiaries in Country A and Country B. Subsidiary A has annual revenues of $50 million. Subsidiary B has annual revenues of $20 million. The parent company has asked the Subsidiary A to transfer the equivalent of $10 million to Subsidiary B. There is a 5% withholding tax in Country A and a 3% withholding tax in Country B. How much withholding tax will the company owe as a result of this transaction? *
1 point
EDI infrastructure includes which of the following four PRIMARY components? *
1 point
A company has a line of credit and a bond trustee agreement with a bank. To prevent a decline in the company’s bond rating from having a negative impact on the company’s line of credit, the bank should have which of the following in place? *
1 point
Which of the following is NOT subject to transaction exposure? *
1 point
On which exchange is a company's stock traded on the over-the-counter market? *
1 point
An employee earning $80,000 per year decides to begin contributing to his company's 401(k) plan effective January 1st. Assuming he is in the 25% tax bracket, contributes 15% of his pay into the plan each month and receives a company match of $0.50 for every dollar he contributes, what is his taxable compensation that year? *
1 point
Which of the following are KEY issues to be considered when establishing a shared service center (SSC)?; I. Selecting the location; II. Comparing an SSC structure to outsourcing of a process; III. Choosing and implementing the technology for SSC; IV. Choosing the collection bank *
1 point
A measure of the incremental impact of a company's investments on market capitalization is known as: *
1 point
A company receives proceeds of $1,119,274 from the sale of $1,150,000 worth of commercial paper. The paper is outstanding for 95 days. If a 360-day year is used, the company's annual interest rate is closest to which of the following? *
1 point
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as: *
1 point
Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT: *
1 point
Geographical proximity should be taken into consideration when setting up all of the following collection systems EXCEPT: *
1 point
A bank uses all of the following to determine whether a company's balances are sufficient to compensate for services EXCEPT: *
1 point
One example of increased use of electronic payments for retail businesses to convert customer checks to cash at the counter more quickly is: *
1 point
Which of the following factors is NOT used by a cash manager to estimate a target compensating balance? *
1 point
The exchange of a fixed interest rate cash flow for a floating interest rate cash flow with both interest rates in the same currency is an example of: *
1 point
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