Treasury (2)

A company is looking to improve its collection rate of returned checks. If the company implements re-presented check entry (RCK) with its bank, it might see a reduction in what type of returned items? A. Consumer payments less than $2,500 B. Corporate payments less than $2,500 C. Consumer payments more than $2,500 D. Corporate payments more than $2,500

A. Consumer payments less than $2,500

Using a digital certificate when accessing a financial services provider is one way to reduce what kind of risk? A. Counterparty risk B. Process risk C. Reputational risk D. Compliance Risk

A. Counterparty risk

All of the following are examples of treasury management system transactions for liquidity management EXCEPT: A. FX transactions B. loan draw-downs C. investment sales D. loan paydowns

A. FX transactions

Which of the following would be considered insurance risk management services? A. information-systems consultants who upgrade loss controls B. External auditors who are hired to review financial statements C. IT professionals who ensure the treasury workstation properly converts FX D. Risk group that recommends the CFO approve SOX 404 compliance

A. Information-systems consultants who upgrade loss controls

What is the reserve-requirements provision of the Federal Reserve Act of 1913 known as? A. Regulation D B. Regulation E C. Regulation J D. Regulation Q

A. Regulation D

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? A. The cooling-off period has not been met B. Section 404 of the SOX Act has been violated C. ERISA disclosure requirements have not been met D. No violation has occurred

A. The cooling-off period has not been met

A large retailer is preparing to accept credit cards and anticipates monthly card sales of $1,000,000. If the terms with the acquiring bank include bundled allocation fees of 6% and the retailer wishes to delay fee payment as long as possible, what should the retailer do? A. accept gross settlement B. place a hold on consumer credit limits C. receive net settlement D. delay funds transfer to card-issuing banks

A. accept gross settlement

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? A. an intraday credit limit for the company B. a limit on the number of items processed per day C. an overdraft facility for the company D. a standby letter of credit for the company

A. an intraday credit limit for the company

A portfolio manager wishes to make a ST investment. His investment policy requires that ST investments be low risk and secured, have a fixed interest rate and be highly liquid/redeemable prior to maturity. Which of the following should the manager choose? A. Asset-backed commercial paper B. Bank obligations C. Commercial paper D. Gov't treasury bills

A. asset-backed commercial paper

A nationwide retailer has been making EFT payments to its suppliers for several years. It will expand its processes to include consumer payments in its EFT initiative. Which of the following will support this initiative at the point-of-sale? A. check truncation B. consumer-to-business C. paid-on-production D. prearranged payment

A. check truncation

EDI infrastructure includes which of the following four PRIMARY components? A. Communication networks and standards, computer hardware, EDI software, and standard formats B. Business-to-business banking services, EDI e-commerce, EDI software, and electronic payments networks C. Authentication devices, evaluated receipts settlement, firewalls, and single source arrangements D. File transfer protocol, hypertext transfer protocol, uniform resource locator, and Extensible Markup Language (XML)

A. communication networks and standards, computer hardware, EDI software, and standard formats

JKL Co. has been successful in shortening the time associated with its mail float, processing float and availability float. JKL Co. will experience which of the following as a result of these improvements? A. decrease in its opportunity cost B. Increase in its earnings rate C. Increase in its collection float D. decrease in its NSF charges

A. decrease in its opportunity cost

When a company announces a significant and unexpected dividend increase, it signals to the market that management expects: A. earnings in future periods will be higher than in past periods B. earnings in future periods will be lower than in past periods C. earnings in future periods will not change D. to split the stock in future periods

A. earnings in future periods will be higher than in past periods

Co. 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? A. issue new debt and repurchase common shares B. Issue more common shares and retire debt C. Reduce the dividend for a few quarters D. Issue preferred shares with convertible warrants

A. issue new debt and repurchase common shares

The treasury manager at an auto-parts manufacturer has noticed that checks were sent to a foreign individual not on the approved vendor list. The payables manager has explained the payments but did not provide an invoice. The treasury manager did no further research and is later disciplined for: A. not reporting suspicious activity under the USA Patriot Act B. not purchasing enough surety insurance C. ignoring International Accounting Standards Board regulations D. not implementing "Check 21"

A. not reporting suspicious activity under the USA Patriot Act

A small regional bank is losing market share in fiduciary services and the CEO has decided to scale back the trust department. Which of the following is considered a core service of the trust department? A. Paying agent for dividend and interest payments B. Monitoring compliance with audit procedures C. Providing consulting services in debt origination D. Processing drafts for collection

A. paying agent for dividend and interest payments

Co. ABC, w/ a current debt rating of BBB- from Standard & Poor's, is negotiating a new revolving credit agreement with its lenders. The company anticipates closing on a small acquisition within a year of executing this new agreement and would like maximum flexibility to determine its capital structure. The co. is most concerned about the lenders' inclusion of a: A. ratings trigger B. growth rate covenant C. change in control covenant D. limit on internal financing

A. ratings trigger

Treasury management systems and ERP systems allow companies to do all of the following EXCEPT: A. reduce cash processing costs B. migrate external data into GL infrastructure C. increase productivity through seamless exchange of data D. reduce redundant data entry errors

A. reduce cash processing costs

The yield on any ST investment instrument is a function of the maturity or holding period, the amount paid and: A. the cash flows received B. the money market yield C. the after-tax yield D. the issuing price

A. the cash flows received

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: A. the clientele effect B. the ex-dividend date C. the dividend reinvestment plan D. dividend capture

A. the clientele effect

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 receivables period? A. 5 days B. 15 days C. 20 days D. 40 days

B. 15 days

Usually, corporations receiving dividends from another corporation can exclude 70% of dividend payments from income for tax purposes as long as the stock is owned for at least: A. 30 days B. 45 days C. 60 days D. 90 days

B. 45 days

What do MOST companies try to maintain due to the signaling effect and clientele effect? A. A stable policy of retained earnings B. A stable dividend policy C. A consistent payement date D. A dividend reinvestment plan

B. A stable dividend policy

A nationwide discount retailer is re-evaluating financing methods since the most-popular and most-expensive electronics "must-have" item for the year is set to ship from factories from China. Which of the following facilities would me MOST effective for this retailer to use? A. Factoring B. Asset-based credit line C. Securitization D. Commercial paper issuance

B. Asset-based credit line

When company profits are high, what is the MOST LIKELY way management will prefer to finance growth? A. By borrowing funds B. By retaining earnings C. By investing in current assets D. By issuing stock

B. By retaining earnings

Which of the following options would be BEST suited for a firm that wishes to pay no premium? A. Cap B. Collar C. Floor D. Swaption

B. Collar

Which of the following types of risk would be an investor who does NOT receive payments on a security under the original terms be subject to? A. Price B. Credit C. Asset liquidity D. Foreign exchange

B. Credit

EML Inc., which has $600M in outstanding debt, is preparing to issue commercial paper in excess of $100M within the next 6 months. The new assistant treasurer has recently spent time getting to know the issuing and paying agent, the rating agency analyst, and the legal counsel, and has been following the financial markets. What is this an example of? A. Benchmarking with peers B. External collaboration C. Decentralized control D. Risk transfer

B. External Collaboration

A portfolio manager's investment policy states that they are not allowed to hold any investments that have extension risk. Which type of investment should the portfolio manager avoid? A. REMICs B. Ginnie Mae MBSes C. Municipal bonds D. Treasury notes

B. Ginnie Mae MBSes

Co. ABC has a concentrated investor base consisting primarily of large institutional shareholders. It would like to increase its number of smaller shareholders using the most cost effective method of raising capital available. What should ABC do to accomplish this? A. Issue preferred stock B. Implement a dividend reinvestment plan C. Issue warrants D. Implement a stock repurchase plan

B. Implement a dividend reinvestment plan

One example of increased use of electronic payments for retail businesses to convert customer checks to cash at the counter more quickly is: A. BOC B. POP C. ARC D. POD

B. POP

A treasury manager at a MNC manufacturing corp assigned a team of analysts to re-engineer the company's FX exposure management program. Which of the following alternatives would BEST accomplish this objective? A. Leading and lagging B. Re-invoicing C. Transfer pricing D. value dating

B. Re-invoicing

XYZ Inc. is a publicly traded co. with revenues of $1B and an operating profit of 7.5%. The treasury org. consists of a treasurer and an assistant treasurer. The assistant treasurer is responsible for the creation and approval of all payments. The treasurer is responsible for compilation of the financial statements under Section 404 of SOX. What should be viewed as a concern? A. Audit committee governance B. Segregation of duties C. Subcertification D. Signature on SEC Form 10-K

B. Segregation of Duties

A company in the market to purchase a treasury management system 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. The dimension of the RFP is measuring what type of risk? A. Reputational risk B. Supplier risk C. Technology risk D. Financial risk

B. Supplier risk

A US co. has a secured committed line of credit of $5M. The co. successfully transmitted a $5.5M wire transfer instruction to the bank. The bank contacted the co. and informed it that the wire transfer would not be processed. What is the MOST LIKELY reason the bank gave the company? A. The co. overdraft facility was sufficient B. The bank imposed a guidance line of credit on the account C. The company reached its maximum limit on the committed line D. The bank refused funding on the company's discretionary line of credit

B. The bank imposed a guidance line of credit on the account

Which of the following is a true statement about operating leverage? A. The higher the company's fixed costs are, the lower its operating leverage B. The higher the company's fixed costs are, the higher its operating leverage C. The lower the company's fixed costs are, the higher its operating leverage D. The higher the company's variable costs are, the higher its operating leverage

B. The higher the company's fixed costs are, the higher its leverage

Which statement is true about credit unions? A. They offer lending rates similar to other financial institutions B. They are not-for-profit organizations C. Their deposits are insured by the FDIC D. They can only be chartered by state agencies

B. They are not-for-profit orgs

An analyst is performing a lease vs. buy analysis on a corporate jet. In the evaluation, a cost is relevant if it is: A. tied to inflation B. different in each scenario C. considered a sunk cost D. unlikely to be incurred

B. different in each scenario

Recently LEW Utilities, a local utility company, began using the company processing center method to process customer payments. Prior to this change, it used its local depository bank's lockbox to process the payments. The PRIMARY advantage of the new method is to: A. decrease mail float as a result of applying payments in-house B. ensure that payments are correctly applied to the customer's account C. reduce the processing float since payments are mailed directly to the customer D. lower overall costs since in-house processing is cheaper than third-party processing

B. ensure that payments are correctly applied to the customer's account

JMW Co. processes its consumer payments using a lockbox provider. On average 35% of remittance advices contain encoding errors. JMW Co.'s cost for the LB provider to process these payments will be least impacted if it uses: A. wholesale LB B. hybrid LB C. direct LB D. retail LB

B. hybrid LB

A small for-profit, start-up company is designing a retirement plan with the goal of minimizing costs and operating income volatility while providing a qualified retirement savings vehicle. Which of the following would be the BEST choice? A. defined benefit plan B. internal revenue code 401(k) plan C. hybrid plan D. internal revenue code 403 (b) plan

B. internal revenue code 401k plan

A company which experiences increased business volumes but a minimal increase in profitability MOST LIKELY has: A. very high level of operating leverage B. low fixed costs and high variable costs C. high fixed costs and low variable costs D. high effective cost of debt

B. low fixed costs and high variable costs

The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY: A. enter into a ST floating rate agreement B. obtain LT fixed interest rate debt C. roll-over ST debt at each maturity D. obtain a LT floating rate agreement

B. obtain LT fixed interest rate debt

Money market funds are able to obtain very competitive trading terms because: A. there is no diversification B. of the economies of scale C. invested funds are locked in for a specific period of time D. the investment manager only purchases high yielding instruments

B. of the economies of scale

A co. is experiencing the following LT trend on a month-over-month basis: -Sales increasing by $100,000, a 15% increase -AR increasing by $5,000, a 1% increase -AP increasing by $20,000, a 4% increase -Labor expenses increasing by $40,000, a 3% increase With all other income, expenses, LT assets and liabilities remaining stable, this trend would MOST likely prompt what action by the company? A. financing working capital requirements B. repaying ST debt C. Reducing labor costs D. Factoring AR

B. repaying ST debt

Which of the following is a characteristic of MOST mutual funds? A. shares are primarily held by corporations and pension funds B. the value of shares fluctuates with the performance of underlying securities C. funds are insured by the FDIC D. shares may be sold on the NYSE

B. the value of shares fluctuates with the performance of underlying securities

XYZ Inc. has limited cash flow, total liabilities to total assets greater than 52%, and a high WACC. To help meet their goal of lowering their WACC, the co. 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: A. not comply with SOX requirements B. violate shareholder preemptive rights C. require approval from the PCAOB D. need to report the large currency tranaction

B. violate shareholder preemptive rights

What is the premium (price) for an oil contract, if the following conditions are met? -LIBOR rate is 5% -Out of the money cost is $3 -Strike price is $4 -In the money price of $1 -Speculative premium of $2 A. $3 B. $5.25 C. $7 D. $7.35

C. $7

After several internal discussions about treasury management systems (TMSs), ABC Co has determined that it has no need for customization but it does want a backup for high priority capabilities. The co wants to reduce its IT costs and resources but still have IT support with in-depth knowledge of solutions available. These parameters will MOST LIKELY result in what kind of TMS? A. An ERP module TMS B. An integrated TMS C. A hosted ASP TMS D. Development of its own TMS

C. A hosted ASP TMS

Co. XYZ is conservative when investing in their ST portfolio. XYZ is looking to add the following money market instruments in their own country: a reverse re-purchase agreement, a floating-rate note, and a negotiable certificate of deposit. What types of investment risks are associated with these instruments? A. Credit and price risk B. Liquidity and price risk C. Default and liquidity risk D. Default, liquidity, and price risk

C. Default and liquidity risk

Which of the following is a purpose of the Check 21 Act? A. Grant legal status for digital signatures B. Foster innovation in the ACH payment system C. Facilitate check truncation D. Improve check imaging and archiving

C. Facilitate check truncation

Which of the following would be true for a company with high operating leverage? A. Its COGS does not increase as revenues increase B. It has high variable costs per unit sold C. If revenues increase marginally, it can achieve a large % increase in profits D. Its semi-variable costs do not have a fixed cost component

C. If revenues increase marginally, it can achieve a large % increase in profits

A retail brokerage firm is MOST like which of the following types of institutions? A. captive finance company B. Factoring companies C. Investment banks D. insurance companies

C. Investment banks

Co. ABC needs external capital to finance a new product line. Its operating leverage is high, and its revolving credit agreement contains a ratings trigger. What will Co ABC MOST LIKELY do to finance its new product line? A. issue convertible debentures B. Issue long-term notes C. Issue common stock D. Use retained earnings

C. Issue common stock

A-Plus Company has made arrangements for a new insurance broker to provide products to its employees. Historically, A-Plus Company's employees made insurance payments via payroll deduction, but the new broker will be collecting payments from employees directly. What will the broker MOST LIKELY use to minimize collection float? A. ARC B. CCD C. PPD D. RCK

C. PPD

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? A. Common stock B. Sinking fund debenture C. Preferred stock D. Bonds with warrants

C. Preferred stock

Co. XYZ has an underfunded defined benefit plan. Co XYZ is required to provide filings for this plan to all of the following EXCEPT: A. the Department of Labor B. the Pension Benefit Guaranty Corporation C. the SEC D. plan participants

C. The SEC

Which of the following is generally NOT a benefit of financial risk management? A. The likelihood of financial distress decreases B. Greater predictability of future cash flows C. The opportunity to take advantage of market inefficiencies D. Enhanced borrowing advantage in credit markets

C. The opportunity to take advantage of market inefficiencies

ABC Ltd. uses a third party lockbox provider to collect and clear paper receivables. A customer disputes the price charged for a binding machine and issues a check to ABC Ltd. for 50% of the balance due, noting "paid in full" on the face of the check. The third party provider does not bring the check to ABC's attention prior to depositing it. Which regulation allows ABC to attempt to collect the remaining balance? A. UCC Article 2 - Clearing of Checks B. Federal Reserve Regulation CC C. UCC Article 3 - Negotiable Instruments D. UCC Article 4 - Bank Deposits and Collections

C. UCC Article 3 - Negotiable Instruments

Loss exposures related to treasury management may include which of the following? A. Excessive product recalls B. PBGC violations C. Deterioration of investment principal D. Bank consolidations

C. deterioration of investment principal

A co. w/ high operating leverage reduces its average cost per unit by 20% as its sales volume increases by 40% annually. This is an example of: A. low fixed costs B. low variable costs C. economies of scale D. equal distribution of fixed and variable costs per item

C. economies of scale

Two months after a government overthrow, the Minister of Industry and Culture took over the country's largest step company and compensated owners at 50% of book value. What is the government's action called? A. Consolidation B. Deregulation C. Expropriation D. Nationalization

C. expropration

An asset-based lender has decided to provide a loan to a company. In order to protect 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? A. book value of inventory B. delinquency payment record C. lien search findings D. age of receivables

C. lien search findings

Securities sold by companies in an IPO are: A. a specific type of security sold by a public company for the first time B. debt securities sold on the open market C. public securities sold by a private company for the first time D. securities sold by a private company to a limited number of investors

C. public securities sold by a private company for the first time

A co. is filing for bankruptcy protection and is concerned about the welfare of its sizable retiree population. Under ERISA, it is obligated to perform which of the following actions regarding its defined benefit plan? A. use proceeds from asset sales to fund the plan liability B. Convert the plan to a portable, hybrid vehicle C. Record a distress termination with the PBGC D. File a 5500 report (BKY) amendment with the DOL

C. record a distress termination with the PBGC

Which of the following actions would the CFO of a Canadian MNC MOST LIKELY take to repatriate profits from its international subsidiaries? A. re-invoicing B. multilateral netting C. unbundle cash flows D. pooling

C. unbundle cash flows

A dealer is selling securities to a client. What is the yield/price at which the dealer will sell? A. Bid price B. After-tax price C. Market price D. Ask price

D. Ask

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 conditions? A. The process is easy for the payee but very intensive manually for the payor B. Negotiation of trade terms is required, but float terms are excluded C. Remittance detail, whether a lot or a little, can be easily included with all payment forms D. Collecting payment-routing details, and populating these into the software, is a significant task

D. Collecting payment-routing details, and populating these into the software, is a significant task

An art history museum has recently finished renovating its new location. Before the move, the treasurer considers purchasing additional insurance to protect the art during transit. Which form of additional insurance should the treasurer choose? A. Special multi-peril (SMP) B. Business interruption C. General liability D. Difference in conditions (DIC)

D. Difference in Condition

ABC Corp 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 Corp's AP? A. Bank alerts payee that check is unmatched B. ABC Co utilizes the holder in due course defense C. Image remains stored on ABC Corp's network for future customer inquiries D. No-pay decision is communicated to the bank

D. No-pay decision is communicated to the bank

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 loses on future fraudulent payments. What type of risk-financing technique is the bank using? A. Crime insurance B. Self-insurance C. Risk retention D. Risk transfer

D. Risk transfer

Private companies usually go public by making initial public offerings. What is the term for offering subsequent shares in the market? A. Common B. Underwritten C. Regulated D. Seasoned

D. Seasoned

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? A. Purchasing cards B. Checks C. Travel cards D. Stored value cards

D. Stored value cards

The controller is developing a financial plan that includes an operating budget and a financial budget. Which of the following statements is true? A. the financial budget is used to determine the operating activity level the company can support B. The two budgets do not have any impact on each other C. The operating budget is developed to determine the staffing level needed for operations D. The financial budget is impacted by the company's sources and uses of cash

D. The financial budget is impacted by the company's sources and uses of cash

Co. 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 the number of partners who agree to this arrangement the greater improvement Co. ABC will see in its: A. days' inventory B. cash flow to total debt C. days' payables D. cash turnover ratio

D. cash turnover ratio

ABC Co., 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: A. EFT costs B. C2C levels C. value added networks D. inventory levels

D. inventory levels

Which of the following is true of return on investment (ROI)? A. it includes a charge for the cost of capital in a project B. it is commonly used to calculate after-tax profitability C. it may cause management to accept a project with positive NPV D. it is calculated as profit per dollar of invested capital

D. it is calculated as profit per dollar of invested capital

Co. XYZ is in its first year of operations. The company culture is conservative, and it has $500M to invest in its ST investments. The co. has a growth rate of 25% and is looking to issue an IPO in the near future. The investment manager is in the process of creating a ST investment policy which must be approved by the board of directors. An item that should be included in the policy is: A. methods of monitoring compliance with the SEC B. maximum dollar amount of MBS C. internal controls for the ERP D. methods of monitoring compliance w/ policies, procedures and internal controls

D. methods of monitoring compliance with policies, procedures, and internal controls

Which of the following is NOT true for both bankers' acceptance and trade acceptances? A. They are both used to finance the shipment of goods B. They both may be sold to an investor at a discount prior to maturity C. They are both less expensive forms of financing than loans D. They both transfer the buyer's credit risk to a third party

D. they both transfer the buyer's credit risk to a third party