Midterm
A main characteristic of a company with regional offices using a centralized treasury function is: A. High level of control B. Increased borrowing costs C. Centrally determined depository accounts D. Increased operating costs
A. High level of control
"In case of bankruptcy, what is the order of payment for the following: 1-Bankruptcy Trustee 2-Senior Debt 3- Common Shareholders 4-Taxes owed 5-Subordinated bond holders" A. 2, 1, 4, 5, 3 B. 1, 2, 3, 4, 5 C. 2, 1, 5, 4, 3 D. 1, 2, 4, 5, 3
A. 2, 1, 4, 5, 3
"Upon entering into an interest rate swap with a notional principal of $10,000,000, what is the initial amount of money the counterparties must exchange at the beginning of the swap? " A. $0 B. $5,000,000 C. The future value of $10,000,000 D. $10,000,000 discounted
A. $0
"Earnings Credit calculation: Assumptions Average ledger balance $1,500,000 Deposit Float $250,000 Reserve Requirement 10% Earnings Credit Rate 45 bps Service Charges for the month $12,500 Days in the Month 30. What is the earnings credit the company is receiving for this month? " A. $416.10 B. $4,160.96 C. $449.38 D. $457.71
A. $416.10
"Using the above information, what is the cash turnover for the company? " A. 5.3 times B. 7.7 times C. 24.3 times D. 2.7 times
A. 5.3 times
The Glass Steegal Act was basically repealed through which act of Congress? A. Allowing Financial Holding Companies B. Abolishing Regulation Q in the Dodd Frank Act C. Allowing for the Fed to price its services through the Monetary Control Act D. Passing of Sarbanes Oxley
A. Allowing Financial Holding Companies
All of these are attributes of Jumbo CDs except A. CDs must be held to maturity B. They are negotiable instruments with a secondary market C. The minimum denomination is $100,000 D. The funds invested are exposed to bankruptcy risk over the FDIC amount
A. CDs must be held to maturity
The MOST common way that companies structure their treasury operations is as a(n): A. Cost center B. Profit center C. Shared service center D. In-house bank
A. Cost center
Examples of fixed assets include which of the following? I. Inventory II. Treasury bills III. Forklift IV. Goodwill A. III only B. I and III only C. I, II, and IV only D. I, III, and IV only
A. III only
"A company is interested in lowering its overall banking costs, managing netting, pooling, re-invoicing, and centralizing FX exposure at headquarters. Which of the following options will accomplish this? " A. In-house banking B. Shared service center C. Company processing center D. Automated clearing house
A. In-house banking
"MCA, Inc. upgraded the treasury workstation that had been in place for two years and used data from that 24-month period to develop a new short-term forecast. A trend factor was applied to controlled disbursements of 97% on a month-by-month basis and the variance to actual disbursements is less than 1%. Which of the following model validation techniques was utilized? " A. In-sample validation B. Documentation validation C. Ongoing validation D. Comparison validation
A. In-sample validation
Establishing the authority to open bank accounts is the responsibility of: A. The board of directors B. The CFO C. The treasurer D. The board of governors
A. The board of directors
An increasing number of multinational companies have adopted formal multilateral netting systems for which of the following reasons? A. To facilitate management of foreign exchange transactions B. To improve check clearing times C. To standardize payment routes and banking channels D. To eliminate duplicate payments to vendors
A. To facilitate management of foreign exchange transactions
You have a collected balance of $1,031,260 and the earnings credit is 60 bps for a 30 day month. Assuming a reserve requirement of 10%, what are your earnings credits for the month? A. $4,577.05 B. $457.71 C. $449.38 D. $503.48
B. $457.71
"Company R has an AR collection pattern of 8% in the current month, 47% in the first month, 30% in the second month, 10% in the third month, and 5% in the fourth month. If AR for July is $598,000, what amount of cash do they expect to collect in October? " A. $281,060 B. $59,800 C. $179,400 D. $47,840"
B. $59,800
"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 receivable period? " A. 5 days B. 15 days C. 20 days D. 40 days
B. 15 days
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? A. Long-term debt to capital B. Debt to tangible net worth C. Total liabilities to total assets D. Cash flow to total debt
B. Debt to tangible net worth
"EML Inc., which has $600 million in outstanding debt, is preparing to issue commercial paper in excess of $100 million within the next six 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 is an example of? " A. Benchmarking with peers B. External collaboration C. Decentralized control D. Risk transfer
B. External collaboration
What does a company with a restrictive current asset investment strategy typically have? A. High financing costs B. Low accounts receivable balances C. High inventory levels D. Low tax liabilities
B. Low accounts receivable balances
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? A. Simple moving average B. Regression analysis C. Accounts receivable balance pattern D. Contingency forecasting
B. Regression analysis
Which of the following is a tool that companies use to obtain a quantitative rating of a financial institution s level of service? A. Relationship review B. Score card C. Service agreement D. CAMELS rating
B. Score card
All of the following are advantages of using traditional financial ratios for analysis EXCEPT: A. They can easily be computed from the information found in publicly available financial reports B. They usually reflect accounting rather than economic values C. They can be used to view historical trends and availability over time D. They allow comparisons to be made between like companies
B. They usually reflect accounting rather than economic values
Using the info below what is the Days Receivables (DR)? Annual Revenue $158,000.00 Annual Cost of Goods Sold $92,400.00 Cash Flow from Operations $850.00 Ending Inventory $23,600.00 Ending Accounts Receivable $19,300.00 Ending Accounts Payable $16,950.00 A. $2,988.08 B. $298.50 C. $44.59 D. $76.24
C. $44.59 DR = receivables x 365 / revenue
Using the info below what is the Days Inventory (DI)? Annual Revenue $158,000.00 Annual Cost of Goods Sold $92,400.00 Cash Flow from Operations $850.00 Ending Inventory $23,600.00 Ending Accounts Receivable $19,300.00 Ending Accounts Payable $16,950.00 A. $446.32 B. $1,429.07 C. $93.23 D. $508.20
C. $93.23 DI = inventory x 365 / COGS
"The company currently calculates its Days Receivables at 42 days, its Days Payables at 31 days, and its Days Inventory at 58 days. What is the cash conversion cycle for the company? " A. 131 days B. 15 days C. 69 days D. 47 days
C. 69 days
The type of underwriting that is most risky to the company putting out the public offering A. Full Underwriting B. Guaranteed Underwriting C. Best Efforts Underwriting D. Total Underwriting
C. Best Efforts Underwriting
The Quantitative Easing done by the Federal Reserve duirng the great recession used which monetary policy tool? A. Decrease the reserve requirement B. Decrease the reserve requirement C. Buying bonds by the Federal Open Market Operations of the Fed D. Printing of money
C. Buying bonds by the Federal Open Market Operations of the Fed
An airline wants to lock in the price of the jet fuel it needs to purchase to satisfy the peak in-season demand for travel. The airline wants to manage its exposure to fluctuations in fuel prices. What type of exposure is this? A. Translation B. Delivery C. Commodity D. Speculative
C. Commodity
"In evaluating alternative capital investments, a company should consider qualitative factors such as: " A. Projected cash flows B. Estimated economic returns C. Corporate strategy D. Estimated costs
C. Corporate strategy
"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? " A. Pay vendors in advance B. Decrease the days payable C. Extend payables deferral period D. Revise credit policy to be more lenient
C. Extend payables deferral period
"The treasury manager of a chain of clothing 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? " A. Taxes on stock options B. New product sales C. Fixed bond interest payment D. Re-franchising proceeds
C. Fixed bond interest payment
Examples of traditional factors used in making a credit decision include which of the following? I. Capacity II. Capital III. Compliance IV. Character A. IV only B. I and III only C. I, II, and IV only D. I, II, III, and IV
C. I, II, and IV only
A retail brokerage firm is MOST like which one of the following types of financial institutions? A. Captive finance companies B. Factoring companies C. Investment banks D. Insurance companies
C. Investment banks
Breaking the buck refers to A. The Federal Reserve issuing more dollars in teh economy B. The allowance of MMF to have a NAV less than $1 C. Not permitting MMF to go below $1 NAV in most circumstances D. Not allowing stocks and bonds to go below $1 in value
C. Not permitting MMF to go below $1 NAV in most circumstances
The matching principle in regards to accrual accounting is A. Recognize revenues when they are paid B. Recognize revenues when they are earned C. Recognize the expenses incurred to generate earned revenues D. Recognize expenses paid to support revenues earned
C. Recognize the expenses incurred to generate earned revenues
The Monetary Control Act of 1980 assisted in loosening the economy by A. Allowing MMF to compete with checking accounts B. Allowing more competition among banks C. Reducing float in teh payment system D. Having the Federal Reserve charge for its services
C. Reducing float in the payment system
Using the info below what is the Days Payables (DP)? Annual Revenue $158,000.00 Annual Cost of Goods Sold $92,400.00 Cash Flow from Operations $850.00 Ending Inventory $23,600.00 Ending Accounts Receivable $19,300.00 Ending Accounts Payable $16,950.00 A. $262.15 B. $93.23 C. $39.16 D. $66.96
D. $66.96 DP = AP x 365 / COGS
Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company? A. Low contribution margin B. High financial leverage C. Low variable costs D. High operating leverage
D. High operating leverage
"A daily short-term forecast and variance analysis for LMN, Inc. is updated with relevant trends and actual data every Monday. Upon review, the treasurer assessed that sales were higher than forecasted, inventory was up and yields being earned on excess cash were lower. The MOST important reason for this cash forecast process is: " A. Financial control B. Managing costs C. Capital budgeting D. Liquidity management
D. Liquidity management
"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? " A. Low variable costs B. Economies of scale C. Low financial leverage D. Low operating leverage
D. Low operating leverage
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: A. An interest rate swap is used B. A credit default swap is employed C. A commodities future is purchased D. The yield curve remains upward sloping
D. The yield curve remains upward sloping
"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? " A. Not exercise the option and lose $2 B. Not exercise the option and lose $6 C. Exercise the option and gain $2 D. Exercise the option and gain $4
A. Not exercise the option and lose $2
What is the service a commercial bank traditionally does NOT make money from? A. Spread between investing and borrowing B. Underwriting security issued to the public C. Fees on payment transactions D. The spread on currency transactions
B. Underwriting security issued to the public
A company enters into a cash flow hedge to offset fluctuations in the value of foreign currency transactions occurring in two years. How should the company record the gains and/or losses on the cash flow hedge in the current year? A. The hedged gains and losses are reported in comprehensive income B. The hedged gains and losses are reported in current period income C. The hedged gains and losses are reported in current period income together with the offsetting gains and losses of the foreign currency D. The hedged gains and losses are reported in comprehensive income together with the offsetting gains and losses of the foreign currency
A. The hedged gains and losses are reported in comprehensive income
"When it comes to Audit Opinions, firms would like " A. Unqualified B. Adverse C. Disclaimed D. Qualified with explanation
A. Unqualified
Which is NOT a source of cash for a company? A. Depreciation expense B. An increase in Accounts Receivables C. A decrease in Inventory D. Paying your bills later
B. An increase in Accounts Receivables
"A company is based in the United States and has an operating subsidiary in Germany. With a stable U.S. dollar and a depreciating euro, the company s cash manager may elect to: " A. Pool excess funds in the United States to offset German deficits B. Implement a dollar-based multilateral netting system C. Start leading receivables from the German subsidiary D. Establish a multicurrency account in the United States
C. Start leading receivables from the German subsidiary
Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT: A. Debt B. Interest expense C. Shareholder s equity D. Inventory
D. Inventory
"Company Q has average daily credit sales of $15,875.00. The daily cash sales are $8,750.00. The AR ending balance for June 30 is $387,500.00. What is the average days sales outstanding for Company Q? " A. 24.41 B. 0.04 C. 15.74 D. 0.06
A. 24.41
"In order to be defined as independent, a corporate director: " A. Cannot have owned preferred stock shares in the company B. Cannot have a material relationship with the company C. Cannot meet regularly with executive management outside of board meetings D. Cannot have been an employee with the company during the past three years
B. Cannot have a material relationship with the company
Which of the following trade payment methods virtually eliminates the seller s credit risk? A. Bankers acceptance B. Cash before delivery C. Countertrade D. Consignment
B. Cash before delivery
Which of the following are important uses of variance analysis in comparing actual cash flows with projected cash flows? I. Identifying unanticipated changes in inventory II. Enhancing short-term investment income III. Validating a capital budget IV. Identifying delays in accounts receivable collections A. I and II only B. I and IV only C. II and IV only D. I, II, III, and IV
B. I and IV only
"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? " A. Increase days sales outstanding B. Improve cash conversion cycle C. Reduce bad debt expense D. More customers may take the discount
B. Improve cash conversion cycle
"A company is experiencing the following long-term trend on a month-over-month basis: Sales are increasing by $100,000, a 15% increase. Accounts receivable are increasing by $5,000, a 1% increase. Accounts payable are increasing by $20,000, a 4% increase. Labor expenses are increasing by $40,000, a 3% increase. With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company? " A. Financing working capital requirements B. Repaying short-term debt C. Reducing labor costs D. Factoring accounts receivable
B. Repaying short-term debt
"When utilizing a Factor to sell your receivables, all could be true except" A. You will sell the receivables at a discount off of face amount B. They must be sold without recourse back to the selling company C. Factors can have recourse back to the selling company if customers do not pay D. Factoring can assist in raising cash for a company
B. They must be sold without recourse back to the selling company
An international company would establish a re-invoicing center for which of the following reasons? A. To reduce its international balance reporting charges B. To manage the foreign exchange exposure of its foreign subsidiaries C. To take advantage of interest-bearing demand deposits D. To bring transaction exposures more closely in line with economic exposures
B. To manage the foreign exchange exposure of its foreign subsidiaries
Checks and balances with regards to Treasury activities are important because A. Treasurers have a certification that must be upheld B. Treasurers deal with the cash of the company in all aspects C. The auditors will review all treasury activities and ensure ethical behavior D. Ethics are actually not paramount for treasury staff
B. Treasurers deal with the cash of the company in all aspects
"A cash manager at a retailer forecasts a positive collected cash position for the end of the current day. The company has an overdraft facility at 10%, a separate investment account earning 8% before taxes, an earnings credit rate of 8% and an outstanding single payment note at 9.5% maturing in 1 week. This month s bank service fees are expected to exceed the earnings credit. Which of the following intra-day options would be the MOST economically positive for the company? " A. Leave the funds in the account B. Redeem the single payment note C. Prepay administrative expenses D. Transfer funds to the investment account
A. Leave the funds in the account
