CTP® Practice Quiz - 10
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ABC Company, a publicly held U.S. multinational, owns several manufacturing plants in Latin America as well as several ships to transport its products globally. 60% of its sales are from its euro-based subsidiaries. The company uses various derivative instruments to mitigate exposure to fluctuations in fuel prices and FX rates. The hedging deals are long-term and placed with many counterparties. ABC Company is also a net borrower and has a syndicated credit facility in place. Which of the following actions to mitigate counterparty risk would MOST benefit the company? *
1 point
When a project has an initial cash outflow with cash inflows in subsequent years, what decision model is most applicable to use to evaluate the adequacy of the project? *
1 point
A netting system can be used for all of the following EXCEPT: *
1 point
An evaluated receipts settlement would be MOST commonly used in an environment where: *
1 point
A cash manager should use which of the following techniques to measure the differences among cash flows with different timings and amounts? *
1 point
Convertible securities consist of preferred stock and *
1 point
The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for which of the following? *
1 point
Which institution or accord was approved in 2009 to strengthen the regulatory capital framework for banks by focusing on minimum capital requirements, supervisory review and market discipline? *
1 point
A bank issues a letter of credit (L/C) and receives a request for payment under the L/C. The buyer notifies the issuing bank not to make payment because there is a dispute over the quality of the merchandise. However, the documents received fully comply with the terms of the L/C. Which of the following statements is true? *
1 point
ABC Company, a leading provider of office supplies, has successfully implemented EDI based on a request from one of its customers. ABC will not only benefit from the strategic alliance that will result, but as more of ABC's customers adopt the program, ABC will also experience a positive impact on its: *
1 point
An analyst for a landscaping company wants to adjust her cash-flow forecast to account for the seasonality of outflows. How can this be accomplished? *
1 point
XYZ Inc. has limited cash flow, total liabilities to total assets greater than 52%, and a high WACC. To help meet the goal of lowering their WACC, the company plans to issue several million dollars of private equity to the chairman of the board. If the company proceeds with this plan, the company may: *
1 point
An analyst at Davis Company uses the tax payment (TXP) banking convention for payment of state taxes. The analyst is preparing to pay $650,000 in taxes to the state where Davis Company is domiciled. What payment method will the analyst use to make the tax payment? *
1 point
Which statement is true about credit unions? *
1 point
One of the KEY risks associated with a company's use of financial institutions is the possibility that: *
1 point
Two critical factors in determining an operational risk management strategy for a company are: *
1 point
Using a digital certificate when accessing a financial services provider is one way to reduce what kind of risk? *
1 point
Cash management services commonly used outside the United States include which of the following?; I. Interest-bearing deposit accounts; II. Controlled disbursement systems; III. Pooling of bank accounts *
1 point
A PRIMARY objective of the cash concentration function is to: *
1 point
A company is evaluating its employee healthcare expense and payroll applications. If the company wishes to provide maximum convenience to its employees, which payment method is the BEST choice? *
1 point
Which of the following types of payments would NOT be included in cash flow forecasting? *
1 point
Which of the following statements is typically true about a net settlement system? *
1 point
A pizza restaurant chain maintains separate accounts at bank branches near each of their 1,067 restaurants to handle the deposit of cash received. Early each morning, the company's point-of-sale system electronically transmits collection totals from the previous day to its main computer. ACH debits are then initiated to concentrate the funds from the local accounts to the concentration account the following day. Recently, several of the ACH debits have been returned for insufficient funds because deposits weren't being taken to the bank on a timely basis by the local employees. Without increasing staff at the restaurants, what could Treasury do to prevent this from happening and avoid overdrafts at the local banks? *
1 point
A merchant closes its day with a total of 100 credit card transactions of an average ticket value of $100. The interchange reimbursement fees are 2% and transaction fees are $0.05. If this merchant receives gross settlement, what would be the value of deposit to the account for that day? *
1 point
A banker's acceptance can be described as all of the following EXCEPT: *
1 point
The ACH system eliminates float because the: *
1 point
Net working capital is defined as: *
1 point
When establishing a retail collection system that accepts consumer debit cards, a company must comply with which Federal Reserve regulation? *
1 point
All of the following statements are true about loan participations EXCEPT: *
1 point
Which of the following correctly describes pooling as practiced in the European cash management environment? *
1 point
Examples of fixed assets include which of the following?; I. Inventory; II. Treasury bills; III. Forklift; IV. Goodwill *
1 point
An increasing number of multinational companies have adopted formal multilateral netting systems for which of the following reasons? *
1 point
Account analysis statements should be examined for which of the following reasons?;  I. To verify volumes processed;  II. To determine daily cash shortages;  III. To verify the accuracy of bank service charges;  IV. To ensure that company-initiated transactions have occurred *
1 point
Today's modern cash management systems would include which of the following? *
1 point
One of the advantages of raising capital through public offerings is that: *
1 point
Which of the following is an example of a Eurobond? *
1 point
A company that is issuing a new class of stock would use the services of a(n): *
1 point
Which of the following is NOT characteristic of commercial paper with a term of less than 270 days? *
1 point
Company ABC has undergone substantial system enhancements in order to take advantage of B2B efficiencies. To encourage its trading partners, ABC has offered a 1.5% discount to those who allow ABC to debit their bank account electronically on the day the product is delivered. The greater number of trading partners who agree to this arrangement, the greater improvement Company ABC will see in its: *
1 point
The use of debt to finance a company is called: *
1 point
Usually, corporations receiving dividends from another corporation can exclude 70 percent of dividend payments from income for tax purposes as long as the stock is owned for at least: *
1 point
When a short-term loan is paid with a lump sum payment and the payment includes both interest and principal, the loan is often referred to as a: *
1 point
A company with constant earnings and excess cash is considering a significant stock repurchase plan. Which of the following is MOST LIKELY to occur? *
1 point
When considering Fedwire, ACH and CHIPS as 3 different payment systems, which of the following applies only to Fedwire? *
1 point
Which of the following companies would be MOST LIKELY to use a wholesale lockbox? *
1 point
Company X has asked its banking partner for a recommendation on which type of bank account would be best if it has excess funds that are not required for daily cash management. The company determined the excess cash flows by using the short-term cash forecasting distribution method. Company X will require a return on these funds. Which account is recommended? *
1 point
A deck furniture supply company maintains a large inventory during the summer sales season. One of the PRIMARY benefits of this approach is that the company avoids which of the following costs? *
1 point
During a company's cash flow analysis review it discovers that for every 10 new customers it gains, there is an increase of 2% in its float costs associated with the payment methods it offers. If the company pursues faster collection methods for payments, resulting in greater availability of surplus cash with a correlating decrease in the need to issue commercial paper, what risk will the company mitigate? *
1 point
A treasurer has been advised that his privately held company has just lost its largest customer, which will have a significant impact on earnings. The treasurer applies an aggressive working capital strategy. Presently, the yield curve is upward sloping. Given this information, the treasurer should ensure that the company has: *
1 point
If an investment banker discovers non-public material information and does not act upon it, has he/she broken the law *
1 point
Which of the following statements is true about lockbox network systems? *
1 point
DGB Inc.'s CEO and founder retired shortly after the company went public two years ago. DGB Inc. has recently struggled, and the founder has agreed to return as an independent director. What violation, if any, has occurred? *
1 point
Which of the following is a ratio that is often used by commercial banks to measure a company's leverage and does not include the effect of assets that are difficult to value or are NOT easily converted to cash? *
1 point
Which of the following is a characteristic of MOST mutual funds? *
1 point
Which agency implements monetary policy through purchases and sales of treasury securities? *
1 point
T-bill discount rate = 5.85%; T-bill face value = $100,000; Initial term = 90 days; If the U.S. Treasury was considering issuing a 91-day T-bill at the same time as this T-bill, what discount rate would cause both instruments to have the same purchase price? *
1 point
The PRIMARY objective of the AFP Account Analysis Standard is to help cash managers in which of the following areas? *
1 point
Securities sold by companies in an initial public offering (IPO) are *
1 point
Senior management at ABC Company plans to make a large capital expenditure to bolster its infrastructure exactly one year from now. Their primary concern is to preserve the current capital position until the expected cash outlay. The majority of the cash at ABC Company is held in treasury notes, but management would like to also invest some of the money into corporate bonds and money market funds. Which investment objective BEST suits the needs of ABC Company? *
1 point
The principal roles of corporate finance include which one of the following combination of functions? *
1 point
A merchant, wanting to accept credit cards as payment method, will negotiate its fees with which of the following participants? *
1 point
In a typical swap transaction, two parties agree to exchange: *
1 point
Which of the following options would be BEST suited for a firm that wishes to pay no premium? *
1 point
A U.S.-based electronics company that buys components from one of its foreign subsidiaries at a price above market is likely to: *
1 point
A portfolio manager would like to purchase U.S. 50 million of 10-year notes 3 months from now, but has heard news that the Federal Reserve will start a purchasing program of longer term treasuries that will include 10-year notes. The purchase program would likely cause a lowering of market interest rates. The manager would also like to avoid having to use margin on a daily basis. To remove the price risk that may be associated with the Federal Reserve purchasing program, the portfolio manager would MOST LIKELY enter into an: *
1 point
A U.S. financial institution expects to grow at an exponential rate to become one of the largest companies in the country. It wants to hire the best talent in the industry and is willing to pay excessive compensation. In order to achieve the high growth, it is planning on charging hidden fees on mortgages, credit cards etc. Further, it wants to engage in risky practices pertaining to over-the-counter derivatives, asset-backed securities and hedge funds. The financial institution has hired an outside law firm to determine if it is feasible to escape unwanted regulation and oversight from various government entities. Which of the following regulations prohibits the financial institution from engaging in the described practices? *
1 point
Which of the following is NOT an example of a derivative instrument? *
1 point
Which report is MOST LIKELY to be a current-day information report? *
1 point
The fixed costs to manufacture widgets are estimated to be $54,000. The benefit (sales) of a widget is estimated to be $6.78 per unit, and the variable costs are estimated at $4.48 per unit. What is the estimated break-even point in units for the manufacture of widgets (rounded to the nearest unit)? *
1 point
A U.S. exporter sells goods to a foreign buyer in U.S. dollars and wants to guarantee that payment is made by the buyer. The exporter would MOST LIKELY require a(n): *
1 point
Examples of traditional factors used in making a credit decision include which of the following?; I. Capacity; II. Capital; III. Compliance; IV. Character *
1 point
A U.S. bank is actively trying to establish its operations in an emerging market country, but is not experiencing much success due to differences in the business culture. To gain some market share, an executive of the bank decides to give the son of a local dignitary a highly paid position in the organization. Furthermore, the dignitary is a person of interest on various terror watch lists. Sanctions can be placed on the bank because the executive did NOT establish compliance with which of the following? *
1 point
An institutional investor has purchased an investment that provides a fixed rate of return with some potential for delays in payments. The return is 70% tax deductible for this particular investor. What type of investment was MOST LIKELY purchased? *
1 point
Which of the following instruments is sold at multiple price bid auctions? *
1 point
A payment method designed to eliminate the need for a supplier to provide an invoice to the customer is referred to as: *
1 point
ABC company received $400 in service charges. The earnings credit rate = 4.55%, and the reserve requirement is 10%. What balance would the company need to offset the charges in this 28 day month. *
1 point
An 810 invoice is an example of a(n) *
1 point
Which of the following is true of modern treasury management systems (TMSes)? *
1 point
If the Average Deposit Float is $1,000, the Average Ledger Balance is $10,000, and the Reserve Requirement is 10%, what is the Average Collected Balance? *
1 point
Average ledger balance = 300,000; Reserve requirement = 10%; earnings credit rate = 3.45%; days in month = 30; Deposit float = 35,000. What is the earnings credit amount? *
1 point
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