As a result of an employee's intentional actions, an electronic payment to a supplier was misdirected to an unauthorized account. This is an example of which of the following types of risk?
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?
Which of the following correctly describes pooling as practiced in the European cash management environment?
When establishing a retail collection system that accepts consumer debit cards, a company must comply with which Federal Reserve regulation?
Which of the following ways of financing accounts receivable requires a company to relinquish control of the type of customer to which it sells?
Which of the following factors will allow a company to decrease the amount of collected balances required to compensate its bank for services?
Which of the following is a common approach to negotiating EDI payment terms versus paper payment terms?
In a large company, the person who normally oversees both the treasury and the accounting functions is the:
A U.S. government agency issues securities transfers using Fedwire Book-Entry Securities System. The first transfer request of the day in the amount of $1 million is sent at 1:00 p.m. EST, the second one for $2 million at 3:30 p.m. EST, the third one for $3 million at 4:30 p.m. EST and the fourth one for $4 million at 5:00 p.m. EST, all on the same day. Which of the following represents the total value transferred at 5:00 p.m. EST that day?
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:
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?
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?
A Chicago meat processor is concerned about the volatility of pork belly prices. Which of the following derivative products would be used to fix these prices within a given range?
The earnings allowance rate applied to collected balances is usually determined by which of the following rates?
All of the following are common consumer-to-corporate international payment mechanisms EXCEPT:
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 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.
What type of risk financing technique is the bank using?
A UK based manufacturer has a subsidiary in Belgium and a manufacturing plant in Italy. The subsidiary wants to sell its products in Sweden. How would the UK parent best structure the movement of funds within the organization to optimize management of working capital while ensuring recourse?
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?
The following information about a company is at the end of its fiscal year.
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 current ratio is:
An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:
Future treasury operations will be affected MOST significantly by consolidation of which of the following?
The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for which of the following?
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?
Regarding dividends, on which of the following dates would a company's current assets be reduced?
Kahuna Boards Co. has just experienced a very profitable year and wants to share the success with its shareholders. In order to pay dividends, a sequence of events must occur. Which of the following chronological sequence of events is correct?
1. Stock is sold without the upcoming dividend attached.
2. Dividend is paid.
3. Board of directors announces the dividend.
4. Holders of record are specified.
Companies in the U.S. with a nationwide over-the-counter/field bank collection and concentration system often deal with:
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 debt
2. Senior subordinated debt
3. Junior secured debt
4. Junior debentures
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 major toy retailer operates 65 stores throughout the Midwest. Which of the following collection methods is MOST LIKELY to be used by this company?
In predicting collections from credit sales, a cash manager can obtain prior period information from which of the following sources?
I. Customer payment histories
II. The company's concentration bank
III. The accounts receivable department
IV. The accounts payable department
Which of the following is a regulation that is having a major impact on the treasury profession?
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 upon delivery in 15 days. The Canadian dollar is forecasted to weaken within this period. This is an example of A.
Which of the following actions would the CFO of a Canadian multinational conglomerate MOST LIKELY take to repatriate profits from its international subsidiaries?
A nationwide discount retailer is re-evaluating financing methods since the most-popular and most-expensive electronics “must-have” item for this year is set to ship from factories in China. Which of the following credit facilities would be MOST effective for the retailer to use?
On June 1, a manufacturing company experienced a system failure that lasted more than 24 hours. The company did not have any contingency plans in place and as a result the cash manager was unable to process the following payments: $25,000 to the p-card issuer, $125,000 for weekly payroll, $500,000 for a bond interest payment, $260,000 for the weekly vendor payments and $50,000 for the monthly utilities. The receivables were deposited at the bank; however, the cash manager does not have a way to confirm the amounts. The suppliers are threatening to stop shipments due to the delay in payment and the loss of supplier shipments threatens the company’s just-in-time production. What did the manufacturing company trigger as a result of the system failure?
Kensley Biscuit Company Ltd. decides to invest £125,000 in new packaging equipment to help it keep up with increased demand. As a result of this investment, the company’s annual profit improves by £11,763. If Kensley’s cost of capital is 8.25% and its corporate tax rate is 42%, what is its residual income (RI) from the investment?
A company has decided to manage its short-term investment portfolio in-house. It is looking for enhanced capital gains as well as the ability to sell the instruments on the secondary market at a premium. The investment manager has forecasted the interest rates shown below:
Which investment strategy should be employed by the company?
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:
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:
After several internal discussions about treasury management systems (TMSes), ABC Company has determined that it has no need for customization but that it does want a backup for high priority capabilities. The company wants to reduce its IT costs and resources but still have IT support with in-depth knowledge of the solutions available. These parameters will MOST LIKELY result in what kind of TMS?
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?
Which of the following is true about using an RFI in the financial institution and FSP selection process?
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?
In terms of targeting a company’s capital structure, when is it beneficial to assume a high level of financial risk?
The main objective of a company's international cash management function is to:
As a result of the Sarbanes-Oxley Act, what new entity was established to sanction firms and individuals for audit violations?
Which of the following must be considered when designing the basic framework for a cash management system?
When projecting the closing cash position, a cash manager must estimate which of the following?
A main characteristic of a company with regional offices using a centralized treasury function is:
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 transfer results 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 $1.00
2. Electronic depository transfer costing $2.50
3. Wire transfer costing $8.00
4. Wire transfer costing $15.00
Which of the following payment instruments is initiated by the payee rather than the payor?
XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments. What type of bond should XYZ Company issue?
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?
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?
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?
A treasury manager has $5 million that is not needed for 6 months. The treasury manager has decided to invest the funds in a liquid instrument, using the current portion of a 5-year AA rated corporate bond that is subject to U.S. Securities and Exchange Commission (SEC) regulations. In what market would the treasury manager purchase this investment?
QRT Corporation uses exponential smoothing in its cash flow forecasting model. Five days are used to calculate the moving average forecast.
If the value of the smoothing constant is .60, what is the exponential smoothing forecast for day 7?
Company ABC experienced a loss in the past when an employee in the treasury department was able to transfer $1.5 million to a personal account offshore. The company is working with a security agent to prevent this from happening in the future. ABC also accepts a large number of checks as payment. The agent has suggested upgrades to ABC’s payment process. What step should be taken to help mitigate this type of risk in the future?
The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted?
The Treasurer of a company would like to establish an investment policy for the organization. One objective that should be included in the investment policy that would BEST allow the organization to limit its exposure to a particular market sector would be to:
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?
The Treasury Manager of a chain of department stores wants to develop a medium-term forecast. Management plans to open two new stores, and anticipates same-store sales to increase by 15%. Which of the following items can be predicted with the highest degree of certainty?
XYZ Company is a U.S. based company that has just issued some euro-denominated bonds in London. The bonds have a duration of 10 years at a rate of 3.5% with a par value of EUR 50 million. An FX swap contract was created on the date of the issuance in EUR/USD, with a spot rate of 1.2908 and a forward rate of 1.1102. This bond is subject to what type of risk?
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?
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?
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?
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:
A bank's reserve requirement on demand deposits is 10%, and its earnings credit rate is 6%. If a company uses bank services amounting to $2,600 and has an excess of $550 in earnings credit, what is the average collected balance in the account based on a 30-day month?
Which of the following services allows a bank to match checks presented for payment against company check issuance data?
Each of the following statements is true of both defined benefit plans and defined contribution plans EXCEPT:
The lockbox receipt records for one 30-day month are provided below. The opportunity costs are 10%.
What is the annual cost of float rounded to the nearest dollar?
Included in the CAMELS rating system for financial institutions are all of the following EXCEPT:
If a company’s pension plan offered its executives the right to contribute a greater percentage of their salary to the plan than the percentage offered to other employees, it would be at risk of violating the ERISA nondiscrimination rule related to what?
ACCOUNTS RECEIVABLE AT THE END OF MARCH
On the basis of the accounts receivable balance pattern above and April sales of $600, the cash flow forecast for April is:
Which of the following should NOT be a consideration when setting an optimal dividend policy?
Which of the following types of payment transactions requires the authorization of both the initiating and the receiving party?
Which of the following is NOT one of the three goals of a disbursement system?
The year-end income statement and balance sheet accounts for a company as of December 31, Year 1 are shown in the Exhibit.
If no changes occurred in the current asset and current liability account balances from the beginning of the period, except for cash, what was the net cash flow from operations for Year 1?
All of the following staff would be involved in the evaluation of an outsourced accounts payable solution EXCEPT:
Check MICR line information includes which of the following?
I. Bank of deposit identification number
II. Payee bank identification number
III. Federal Reserve bank code
IV. Payor's account number
Which of the following is a common method for assigning float on a check deposited to a non-US bank account?
A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company's effective interest rate be reduced?
A company that is issuing a new class of stock would use the services of a(n):
A good credit rating has which of the following effects on debt?
I. Improved marketability
II. Decreased cost of funds
III. Decreased maturity
IV. Increased dealer fees
Which two of the following are necessary to calculate average collected balances?
I. Deposit float
II. Reserve requirements
III. Ledger balance
IV. Earnings credit rate
A merchant presents 2 different batches of credit card transactions for processing, each batch has the same dollar value and number of transactions, but the fees are different. Which of the following explains why?
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:
Which of the following is NOT a method multinational companies (MNC) use to repatriate capital?
A company has negotiated a credit facility with the following terms:
What is the effective annual borrowing rate for the line of credit?
Which of the following is true when a company purchases goods using trade credit from suppliers?
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:
A treasurer overhears several employees talking about selling their company stock before a pending deal impacts the stock negatively. What action should the treasurer take to control this behavior in the future?
A construction company just received a notification from its bank advising it of an altered dollar amount on a check. This notification is MOST LIKELY the result of:
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?
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?
The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:
Multinational corporations repatriate funds from foreign operations through which of the following?
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?
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 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
A retail lockbox system is characterized by which of the following?
I. An emphasis on processing cost
II. Detailed information on discounts taken
III. Small-dollar amounts per invoice
IV. Multiple invoices per payment
A cash manager should use which of the following techniques to measure the differences among cash flows with different timings and amounts?
Which of the following will exempt commercial paper from SEC registration?
I. A maturity of fewer than 270 days
II. A rating grade of A-1 or P-1
III. Distribution through a licensed dealer
IV. Backing by a U.S. bank letter of credit
Which of the following investment instruments would provide a company with the greatest liquidity and least risk?
Given a corporate tax rate of 34%, a tax-exempt yield of 7% is equivalent to a taxable yield of:
A grocery store chain would be likely to use all of the following services EXCEPT:
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TESTED 02 May 2025
