Fin 302 Final

101.). Which two of the following are optimal uses for short-term excess cash? I. II. III. IV. (A) (B) (C) (D) Pay down credit lines.Make overnight investments. Repurchase stock.Make capital expenditures. I and III and III II and III II and Iv

a

122.)An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a: (A) sinking fund. (B) balloon payment. (C) mortgage. (D) zero-coupon bond.

a

123.)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

126.)Which of the following is true when a company purchases goods using trade credit from suppliers? (A) The buyer incurs no added cost if it pays on time. (B) The supplier will charge interest to the buyer. (C) The buyer should record this as a long-term liability. (D) The supplier places a lien on the goods sold until payment.

a

139.)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

18.)The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as: (A) preemptive right. (B) right of first refusal. (C) existing ownership right. (D) prevention of dilution right.

a

74.)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

67.)A merchant presents 2 differentbatches 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) Use of a different terminal (B) Goods or services sold(C) Type of card accepted(D) Time of batch closure

c

84.)The rate of interest commercial banks charge their best credit rated customers is called the: (A) discount rate. (B) call rate. (C) prime rate. (D) real interest rate.

c

152.)Capital budgeting is defined as the: (A) determination of the optimal level of debt versus equity. (B) process of evaluating alternative investment projects. (C) provision of sufficient borrowing facilities to meet transaction requirements. (D) addition of capital to the firm which results in a cash inflow.

b

3.)Which of the following BEST describes an advantage of a company going public? (A) Increased management control (B) Increased public disclosure (C) Increased managerial flexibility (D) Increased liquidity

d

8.)Which of the following can be considered key responsibilities of daily cash management? Overseeing compensation for bank services Management of short-term borrowing and investing Projecting future cash shortages and surpluses (A) I only (B) I and II only (C) II and III only (D) I, II, and III

d

94.)Company A has $1,375,000.00 that it plans to invest for three years at an interest rate of 4%, with all interest paid at maturity. How much interest will the company receive at the end of the third year? (A) $16,566.09 (C) $55,000 (B) $165,000 (D) $171,688

d

99.)In a typical swap transaction, two parties agree to exchange: (A) notional principal amounts.(B) amortization schedules.(C) maturity dates of obligations(D) cash flows at future points in time.

d

129.)A $100,000 T-bill currently sells for $98,600 and matures in 90 days. What is the discount rate for this investment? (A) 5.51% (B) 5.57% (C) 5.60% (D) 5.68%

c

53.)Company X, a Singapore based multi- national, is exploring the option of locating a subsidiary in another country where there has been some historical risk of expropriation of local assets of foreign corporations. Therefore, as part of the risk assessment process the company must specifically quantify the: (A) political risk.(B) physical security risk. (C) financial institution risk. (D) property risk.

a

59.)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) .06

a

87.)A company wants to gather daily balance reporting from its international subsidiaries' bank accounts. Which of the following systems would allow the company's bank to gather the balance positions from the local banks? (A) SWIFT (B) CHIPS (C) Giros (D) EDI

a

1.) Company 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 Company ABC do to accomplish this goal? (A) Issue preferred stock. (B) Implement a dividend reinvestment plan. (C) Issue warrants. (D) Implement a stock repurchase plan

b

100.)Company R has an AR balance 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

111.)Company T pays $12.00 for a wire and $2.00 for an ACH transaction. They receive a wire one day sooner than they do an ACH and they earn 1.75% on the funds. What is the break-even amount for a wire instead of an ACH? (A) $246,114.29 (C) $2,085.71 (B) $208,571.43 (D) $20,857.14

b

128.)In order to increase liquidity, ABC Motor Company bundled its customers' installment payments and resold them to other investors. This is known as: (A) factoring. (B) securitization. (C) reclassification. (D) secondary distribution.

b

133.)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? (A) Consolidation (B) Deregulation (C) Expropriation (D) Nationalization

c

135.)A treasurer has been advised that his privately held company has just lostits largest customer, which will havea significant impact on earnings. The treasurer applies an aggressive working capital strategy. Presently, the yield curve is upward sloping. Given this information, the treasurer should ensure that the company has: (A) short-term non-committed lines. (B) short-term committed lines. (C) long-term non-committed lines. (D) long-term committed lines.

b

136.)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

42.)Which of the following is a source of short-term financing? (A) Bond issuance (B) Factoring of accounts receivable (C) Issuance of common stock (D) Retaining profits

b

148.)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: (A) full disclosure principle. (B) historical cost principle. (C) matching principle. (D) revenue recognition principle.

c

16.)An airline wants to lock in the priceof 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

79.)Securities sold by companies in an initial public offering (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

89.)The company currently calculatesits 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

127.)A furniture company maintains a large inventory during the summer sales season. One of the PRIMARY benefits of this approach is that the company avoids which of the following costs? (A) Holding (B) Opportunity (C) Order (D) Stock-out

d

137.)Which of the following are important uses of variance analysis in comparing actual cash flows with projected cash flows? Identifying unanticipated changes in inventory Enhancing short-term investment income Validating a capital budget Identifying delays in accounts receivable collections (A) I and II only (C) II and IV only (B) I and IV only (D) I, II, III, and IV

b

14.)A company can pay their supplier by check or by electronic transfer. If the difference between the value dateof the payment methods is 4 days from the company's perspective, what discount should the supplier offer them to get the company to pay on the same day as they did when they paid by check (rounded to the nearest 100th percent)? Assume no difference in the cost of the payment method, an opportunity cost of 8%, and float neutrality. (A) 2.00% (B) 0.09% (C) 0.87% (D) 0.02%

b

157.)A company in the market to purchasea treasury management system (TMS) 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. This dimension of the RFP is measuring what type of risk? (A) Reputational risk (B) Supplier risk(C) Technology risk (D) Financial risk

b

36.)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

39.)The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY: (A) enter into a short-term floating rate agreement. (B) obtain long-termfixed interest rate debt. (C) roll-over short-term debt at each maturity. (D) obtain a long-term floating rate agreement.

b

46.)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

70.)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

91.)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 duringthe past three years.

b

93.)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

103.)Company 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 Company 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

124.)Why would a company establish a short-term credit facility? (A) Short-term interest rates are expected to rise. (B) The company would like to improve bank relationships. (C) Cash shortages are being forecasted due to seasonality. (D) There is an anticipated failure of the company's main depository bank.

c

56.)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

26.)Examples of traditional factors used in making a credit decision include which of the following? Capacity Capital Compliance Character (A) IV only (B) I and III only (C) I, II, and IV only (D) I, II, III, and IV

c

147.)A treasury professional is deciding between two investment opportunities. The first is a taxable security in the amount of $2,000,000 with a yieldof 3.6%. The second is a tax-exempt security for the same amount with a yield of 2.85%. Both securities have the same maturity and a similar risk profile. The marginal income tax rate is 35%. What is the taxable equivalent yield for the tax exempt security? (A) 5.54% (C) 1.15% (B) 4.38% (D) 4.15%

b

37.)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) Refranchising proceeds

c