CTP® Practice Quiz - 5
Sign in to Google to save your progress. Learn more
West Coast Retail Shop has experienced reduced cash availability in its bank account since a new store manager was hired. The manager is responsible for manually preparing daily bank deposits, which generally include a large number of checks, for processing at a bank branch in the same shopping mall as the store. Which of the following should West Coast Retail Shop implement to improve the available balance in its bank account? *
1 point
An increase in the availability float on a company's collections would cause a reduction in which of the following?; I. Earnings credit; II. Ledger balance; III. Service charges; IV. Collected balance *
1 point
Money market funds are able to obtain very competitive trading terms because: *
1 point
Which two of the following are optimal uses for short-term excess cash?; I. Pay down credit lines.; II. Make overnight investments.; III. Repurchase stock.; IV. Make capital expenditures. *
1 point
A diversified industrial company operates multiple remote manufacturing facilities that manage local supplier relationships. The company draws on a single line of credit for all of its working capital needs. Which of the following types of disbursement systems would BEST meet this company's needs? *
1 point
Which of the following items would be classified as a source of cash on a company's statement of cash flow?; I. Selling, general, and administrative expense; II. Increase in accounts payable; III. Increase in inventory; IV. Depreciation expense *
1 point
A large mature company with limited growth opportunities (positive NPV projects) achieved abnormally high profits this year. After paying mandatory principal, interest, and taxes, the company has $200 million in surplus cash on hand. Assuming its investor base is most concerned with capital appreciation, which of the following is the BEST option for the company? *
1 point
The accounting requirement that a product’s selling costs be recorded in the same period as the product’s revenue is recorded, regardless of when the cash is paid, is an example of the: *
1 point
What is the future value of a $1,000 investment with an interest rate of 5.5% that pays off in three years? *
1 point
After a recent review of its insurance policies, a petroleum products company determines it needs to re-evaluate its risk exposure to potentially reduce its insurance premiums. The company has operated in two locations for 20 years but only produces and stores petroleum at one location. In doing so, the risk manager determines the following exposures: • The number of employee workers compensation claims due to injures while loading trucks has increased 25% in the past 12 months.; • The primary tank used for petroleum storage is 13 years old and standard life of tanks of this model is 20 years.; • There is only one road into the current petroleum storage facility.; Given the above information, if the risk manager adds a tank at its second facility, what loss control technique is being used? *
1 point
The combination of difference in condition (DIC) insurance and umbrella insurance: *
1 point
The treasury management department of a company hires a consulting firm to provide research on how other companies in the industry have structured their treasury operations. This is an example of which practice? *
1 point
While revising the investment policy, the CFO performs a sensitivity analysis for the company's cash flow from investments, and identifies that increasing the maximum dollar value for bond purchases will improve returns by 10% on average, all other variables being equal. What issue will the CFO now need to address in the investment policy? *
1 point
An equity management company's Chief Financial Officer and Treasurer are evaluating their corporate investments and decide that they need to diversify their stock holdings to include personal care products companies. Based on their analysis, publicly-traded companies A and B stand out as choices. Company A has a beta value of 0.65 while company B has a beta value of 1.10. They decide to invest in Company A. What objective of their investment policy did they use to make their decision? *
1 point
If a company has $126 million in debt at an average cost of 7% and $234 million in equity at a cost of 11%, what is its weighted average cost of capital, assuming a marginal tax rate of 35% and a risk-adjusted rate of 13%? *
1 point
The board of directors announces an increase in its dividend from $0.11/share to $0.15/share. Over the next two quarters, management notices that its investor base has shifted to include a large percentage of pension funds and endowment funds. This is the result of: *
1 point
Company XYZ has determined that its weighted average cost of capital is 12.5%. The capital structure of the company is made up of 75% equity and 25% debt. The before-tax cost of debt is 10%. Given a tax rate of 34%, what is XYZ's cost of common stock? *
1 point
What step can a cash manager take to validate a cash flow forecast? *
1 point
Which of the following government agencies has (have) authority to conduct formal bank examinations?; I. Comptroller of the Currency; II. Securities and Exchange Commission; III. State banking commissions *
1 point
All of the following items may be found on an income statement EXCEPT: *
1 point
If a 91-day T-bill of $250,000 is offering a discount rate of 4.75%, how much will a short-term investor invest on day 1? *
1 point
Which of the following is NOT a key area to consider when establishing treasury policies? *
1 point
Sign Company and Paint Company have a twenty-year business relationship, and they work together when sending and receiving payments. Sign Company also does a large amount of business with Brush Company, a subsidiary of Paint Company. Brush Company's Treasurer recently received a memo from the Treasurer of Paint Company reminding it that when dealing with vendors, extensive information is required when receiving or making ACH payments. What ACH payment format are Sign Company and Paint Company MOST LIKELY to use? *
1 point
Two months after a government overthrow, the new Minister of Industry and Culture took over the country's largest steel company and compensated the owners at 50% of book value. What is the government's action called? *
1 point
As an internal control tool, what does the matching of an invoice to the original purchase confirm? *
1 point
A company which experiences increased business volumes but a minimal increase in profitability MOST LIKELY has: *
1 point
When a buyer receives goods, but payment is not due to the supplier until some later date, this is defined as: *
1 point
A company is considering expanding to a three-site lockbox system from its current two-site system and has collected the following data: Average Mail Time: Current 4.0 days; Proposed 2.5 days; Average Processing Time: Current 1.0 days; Proposed 1.0 days; Average Availability Time: Current 1.5 days; Proposed 1.0 days; Annual System Cost: Current $200,000; Proposed $350,000; Average Daily Receipts: Current $2,000,000; Proposed $2,000,000; The average collection float in the current system is: *
1 point
An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as: *
1 point
A company invests all of its short-term excess cash in T-bills on a daily basis. To prevent delays in processing its outgoing wire transfers, the company may ask its cash management bank to establish a: *
1 point
Which of the following would be MOST suitable for a risk-averse electronics manufacturer that uses copper in many of its components? *
1 point
A cash manager has determined that the break-even amount for justifying a wire transfer over an ACH for concentration of funds is $145,000. Using a wire instead of an ACH gives the company use of the funds two days earlier to make overnight investments. Based on a wire transfer cost of $10.00 and an ACH transaction cost of $0.70, what is the company’s overnight investment interest rate on a 365-day year basis? *
1 point
A company’s bank applies a back-value of two calendar days to all checks disbursed by the company. If the opportunity cost of funds is 15 percent and the annual volume of the company’s check disbursements is 100 million francs, the approximate annual cost to the company of the value dating arrangement is: *
1 point
At the end of the year, ABC Company’s actual revenue is $85,000,000 versus budget revenue of $90,000,000. Actual operating expenses are $20,000,000 versus budget operating expenses of $22,000,000. Budget variance analysis would indicate a(n): *
1 point
Capital budgeting is defined as the: *
1 point
A publicly held U.S. company has reported at the beginning of the year that it expects to increase shareholder value by 5%. The current expectations are for interest rates to remain steady with a decline in fourth quarter. Treasury policy requires that investments be 90 days or less and investment grade. How should the company invest excess cash to support this goal? *
1 point
The rate of interest commercial banks charge their best credit rated customers is called the: *
1 point
Representations and warranties in a loan agreement refer to which of the following? *
1 point
A national retailer's cash management system includes a field deposit system using multiple banks. To limit the impact of a failure of one of these banks, a cash manager should: *
1 point
If a corporation pays 70% of its current earnings to its stockholders in the form of cash dividends, the remaining 30% kept by the company will cause a(n): *
1 point
XYZ Company has a well established commercial paper (CP) program that they use to fund operations. The company is expanding by purchasing a new factory. The CFO is worried about the time and expense needed to issue long-term debt and decides to use the funds they raise in the CP market to pay for the purchase of the factory. This strategy will be successful if: *
1 point
A foreign company could raise capital in the United States using an: *
1 point
The year-end income statement for a company is presented as the following: Revenue: $300,000; Cost of Goods Sold: (120,000); Gross Profit: 180,000; Operating Expenses: (60,000); Depreciation: (40,000); Operating Profit: 80,000; Interest Expenses: (40,000); Net Income Before Taxes: 40,000; Taxes: (14,000); Net Income: 26,000; The balance sheet is presented as the following: Assets; Cash: $10,000; Accounts Receivable: 10,000; Inventory: 20,000; Total Current Assets: 40,000; Equipment: $180,000; Total Assets: 220,000; Liabilities and Owners' Equity; Accounts Payable: $30,000; Total Current Liabilities: 30,000; Long-term Debt: 150,000; Total Liabilities: 180,000; Common Stock at Par: 70,000; Paid-in Capital: 30,000; Retained Earnings: (60,000); Total Owners' Equity: 40,000; Total Liabilities and Equity: 220,000; What is the company's return on equity? *
1 point
Company X has a rating that is below investment grade. The treasurer would prefer to use commercial paper for its short-term financing needs and has a commitment from its bank to provide a standby letter of credit. What costs would be associated with this process? *
1 point
A bank is evaluating the credit risk for a company seeking to optimize costs and originate a high volume of outgoing ACH payments. What is the BEST provision the bank should establish to control its credit exposure? *
1 point
On a daily basis, the cash manager is responsible for all of the following EXCEPT: *
1 point
Company ABC is experiencing an increase in bank fees due to its new international customers paying by check. Nearly 15% of all deposited items are international checks. Twenty percent of the company's checks have 1 day of float. Sixty-five percent of the company's checks are on-us items. The company has $300,000 of deposits each day. The company's deposits consist of both cash and checks, split evenly. On a typical day, how much of the deposit will be available immediately? *
1 point
A residential mortgage company that wants to collect monthly payments from customers electronically via the ACH would initiate: *
1 point
Due to a loss of proprietary information held for clients, ABC Company has been named in a billion dollar lawsuit. It was determined that the loss of information was due to a breach in its computer system firewalls by outside parties. When the lawsuit became public, the company experienced a steep drop in its stock price. This scenario is an example of what kind of risk? *
1 point
A United States corporation purchases finished products from a German subsidiary and sells raw materials to the subsidiary several times in one month. To minimize foreign exchange transaction costs, the U.S. corporation's cash manager would MOST LIKELY use: *
1 point
A U.S. company has a secured committed line of credit of $5 million. The company successfully transmitted a $5.5 million wire transfer instruction out to the bank. 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? *
1 point
A cash manager is determining the threshold over which cash concentrations will be done by wire. An ACH transaction costs $0.50. A wire costs $12.00. Funds are available 2 days quicker by wire and the opportunity cost of funds is 5%. What threshold should the cash manager use? *
1 point
A company is evaluating a project. What is the appropriate discount rate that it should use if its marginal tax rate is 34%, its capital structure is 40% common equity, and 60% debt. Its cost of equity is 10%, and its average cost of debt is 4%? *
1 point
Which of the following is generally NOT a benefit of financial risk management? *
1 point
Customers of an electronic trading firm are experiencing problems with the online trading platform. The company IT department discovered that although display of market data is in the proper place, there are no tags being used to populate specific information in the necessary fields. The company is MOST LIKELY experiencing a problem with: *
1 point
A retail chain with 500 locations throughout the United States would use which of the following systems? *
1 point
One reason for using a sale and lease-back arrangement in lease financing is to: *
1 point
Making payments through electronic payments networks can be a part of a treasury management system's functionality, but it is subject to numerous constraints. Which of the following is a true statement of those constraints? *
1 point
USA Tires, LLC is a U.S. company that manufactures a high performance tire. It has $500 million in annual domestic sales. Customer A is located 50 miles from the USA Tires warehouse. Customer A orders 1,000 high performance tires per month at a price of $50 per tire. It has credit terms of 30 days. Customer B is located 40 miles from the USA Tires warehouse. Customer B orders 1,000 high performance tires per month at a price of $60 per tire. Customer B has credit terms of 20 days. Which legislation is being violated in the scenario? *
1 point
Simplifying upgrades and system restoration, access from multiple remote locations, and interfacing with multiple applications are all reasons to: *
1 point
Company XYZ's government relations team has done a poor job in maintaining and nurturing its relationship with the local government. Because of new business ventures it is pursuing, the company needs a method that will help it monitor and collect international accounts receivables between subsidiaries. What technique is more suited given its situation? *
1 point
Given a corporate tax rate of 34%, a tax-exempt yield of 7% is equivalent to a taxable yield of: *
1 point
A company’s receivable balance pattern is as follows:  95% sales from current month; 70% sales from 1 month prior; 10% sales from 2 months prior; 0% sales from 3 months prior; Sales are as follows: February $430; March $500; April $750; May $600; June $400; The accounts receivable balance at the end of May is: *
1 point
An option can be exercised in the market at its: *
1 point
Which of the following payment types is at the greatest risk for fraud? *
1 point
In which of the following international cash management methods is title for goods transferred for intercompany sales? *
1 point
ABC Corporation receives images of paid check exception items from its bank and reviews them daily. What action should be taken on an item where the payee on the image does NOT match the data from ABC Corporation's accounts payable? *
1 point
A U.S. based multinational company is filing its U.S. tax return and notes that its U.K. subsidiary had pre-tax income equal to $1 million. The U.K. subsidiary paid an effective tax rate on this income of 40%. If the U.S. tax rate is 34%, what will be the amount of the foreign tax credit on the U.S. tax return related to the U.K. income? *
1 point
Which of the following are interest-bearing instruments?; I. Certificates of deposit; II. Treasury bills; III. Treasury notes; IV. Banker's acceptances *
1 point
Following the latest round of cost-cutting measures at ABC Corporation, the Treasury Department retained a headcount of 2 individuals. While the analyst was out sick, she gave her password to her Manager so that payments could be released via the bank's wire transfer system. The Manager sent 3 wires out with incorrect banking instructions. The problem was not identified until the angry suppliers called several weeks later demanding payment. The corporation has not yet recovered the $130,000 sent to erroneous accounts. In this instance, which control failed for ABC Corp.? *
1 point
A company transfers funds from its remote accounts by ACH with a one-day settlement and is notified of a same-day credit of $100,000 in one of its accounts. A wire transfer costs $27.75 incrementally. Assuming a 360-day year, which of the following is the minimum rate of interest that must be earned on these funds to justify the cost of a wire transfer? *
1 point
The relationship between debt and equity in a company's capital structure is called: *
1 point
A main characteristic of a company with regional offices using a centralized treasury function is: *
1 point
A manufacturing company is working to improve its cash conversion cycle. Factory production has increased over the last year to increase inventory levels. They have an inventory turnover of 3.1 and asset turnover of 5.0. The company has a days' payable of 30 and a days' receivable of 60. It has started enforcing its net 30 terms and placed customers with balances outstanding more than 45 days on credit hold. As a result, the company collected receivables quicker but it suffered a 10% loss in sales. What can the company do to reduce its cash conversion cycle? *
1 point
Which of the following industries is MOST LIKELY to use a sophisticated cash concentration system with multiple banks as part of its cash management system? *
1 point
Company XYZ is aggressively expanding globally. It is evaluating four markets: Latin America, Europe, Asia and Middle East.;  Latin America: Risk adjusted discount rate=15%; Payback period=7 years, IRR=15%; Europe: Risk adjusted discount rate=8%, NPV=$20M; Middle East: Risk adjusted discount rate=11%, IRR=12%, NPV=$5M; Asia: WACC=9%, Payback=2 yrs, IRR=8%; Based on the information, which two markets will company XYZ MOST LIKELY pursue? *
1 point
A telecommunications company receives a profit of $587,542 from its cellular phone production unit in the year after investing $962,870 in a new product line. What is the first year return on its original investment? *
1 point
Which of the following is MOST LIKELY to have a significant impact on the financial condition of an organization? *
1 point
The key parties involved in a disaster recovery plan are generally classified as internal resources or external counterparties. When evaluating the risks of both parties, which of the following can be assumed? *
1 point
Which of the following statements is true about a forward foreign exchange contract? *
1 point
Submit
Clear form
This content is neither created nor endorsed by Google. Report Abuse - Terms of Service - Privacy Policy
Google Forms