AFP Certified Treasury Professional Questions + Answers

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Question 1 ( Topic 1 )
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


Answer : B

Question 2 ( Topic 1 )
An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as:
A. an equity warrant
B. a put option
C. a zero coupon bond
D. a subordinated debenture


Answer : A

Question 3 ( Topic 1 )
A company plans to issue additional equity within the next 12 months but needs to issue debt at a low interest rate now. Which of the following instruments would BEST meet this objective?
A. Convertible bonds
B. Private placement issue
C. Preferred stock
D. Subordinated debentures


Answer : A

Question 4 ( Topic 1 )
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


Answer : A

Question 5 ( Topic 1 )
Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?
A. Master note
B. Banker's acceptance
C. Indenture agreement
D. Note purchase agreement


Answer : A

Question 6 ( Topic 1 )
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.


Answer : A

Question 7 ( Topic 1 )
A call option for a company has an exercise price of $50. The stock is currently trading at
$60. At maturity, what should an investor who paid $3 for the option do?
A. Exercise the option and gain $7.
B. Exercise the option and gain $10.
C. Not exercise the option and lose $3.
D. Not exercise the option and lose $13.


Answer : A

Question 8 ( Topic 1 )
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.


Answer : D

Question 9 ( Topic 1 )
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?
A. Collar
B. Swap
C. Cap
D. Spot purchase


Answer : A

Question 10 ( Topic 1 )
On the basis of the following exchange rates,
which of the following currency amounts has the greatest value in U.S. dollars?
A. C$750,000
B. £850,000
C. €900,000
D. ¥5,000,000


Answer : B


Question 11 ( Topic 1 )
Which of the following is a characteristic of giro systems used in countries in Europe?
A. They operate through their postal systems.
B. They are primarily used for company-to-company payments.
C. They do not replace checks for the payment of bills.
D. They do not allow the use of direct debits and credits.


Answer : A

Question 12 ( Topic 1 )
Netting is used by which of the following as a cross-border payment technique?
A. European giro providers
B. Foreign subsidiaries of a company
C. Counterparties in a letter of credit transaction
D. TARGET participants


Answer : B

Question 13 ( Topic 1 )
In which of the following international cash management methods is title for goods transferred for intercompany sales?
A. Pooling
B. Internal factoring
C. Multilateral netting
D. Re-invoicing


Answer : D

Question 14 ( Topic 1 )
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.


Answer : C

Question 15 ( Topic 1 )
Account analysis statements should be examined for which of the following reasons?

I. To verify volumes processed -
II. To determine daily cash shortages
III. To verify the accuracy of bank service charges
IV. To ensure that company-initiated transactions have occurred
A. I and IV only
B. I and III only
C. II and III only
D. II and IV only


Answer : B

Question 16 ( Topic 1 )
An optimal concentration system minimizes all of the following EXCEPT:
A. administrative costs.
B. disbursement float.
C. excess balances.
D. transfer costs.


Answer : B

Question 17 ( Topic 1 )
A bank issues a letter of credit (L/C) and receives a request for payment under the L/C.
The buyer notifies the issuing bank not to make payment because there is a dispute over the quality of the merchandise. However, the documents received fully comply with the terms of the L/C. Which of the following statements is true?
A. The buyer may immediately return the merchandise and cancel the L/C.
B. The bank may delay payment until reimbursed by the buyer.
C. The bank may delay payment, provided the seller is notified of the dispute within three business days.
D. The bank must make payment and is entitled to immediate reimbursement from the buyer.


Answer : D

Question 18 ( Topic 1 )
The KEY decision in using CCD+ and CTX formats for B2B payments is:
A. whether to keep the payment and remittance information together or separate.
B. whether to use the Internet or an EDI spoke to transmit electronic payments.
C. whether to use an EDI or a UN/EDIFACT protocol to transfer the value electronically.
D. whether an evaluated receipts or paid-on-production technique is being used for the transfer.


Answer : A

Question 19 ( Topic 1 )
Which one of the following ties a user’s private key to a user’s public key?
A. A digital signature
B. A digital certificate
C. A digitized signature
D. A digital token


Answer : B

Question 20 ( Topic 1 )
A French company conducts business strictly within the euro zone (the EMU). Which type of risk is of LEAST concern?
A. Terrorist
B. Regulatory
C. Payment
D. Currency


Answer : D

Question 21 ( Topic 1 )
For a defined benefit plan,
A. plan assets equal plan liabilities.
B. plan assets can be less than plan liabilities.
C. plan assets are greater than plan equity.
D. plan assets always equal plan equity.


Answer : B

Question 22 ( Topic 1 )
A public corporation may value a defined contribution plan highly because it:
A. allows the corporation to capture plan investment surpluses.
B. allows proxy voting in favor of management.
C. shifts investment shortfall risk to employees.
D. defines allowed investments within the plan.


Answer : C

Question 23 ( Topic 1 )
Which of the following is MOST LIKELY to have a significant impact on the financial condition of an organization?
A. Defined benefit pension plans
B. Defined contribution pension plans
C. 401(k) plans
D. Tax-deferred annuities


Answer : A

Question 24 ( Topic 1 )
Company XYZ is now required to make electronic payments by its suppliers. To prevent an increase in costs, the company shoulD.
A. negotiate a change in payment timing with its suppliers.
B. institute a just-in-time inventory system.
C. negotiate a change in cash disbursement with its concentration bank.
D. institute a modified RSA system for its inventory.


Answer : A

Question 25 ( Topic 1 )
A companys capital structure includes $800,000,000 in total capital, of which $200,000,000 comes from debt. The firms after-tax cost of debt is 6%, and its cost of equity is 12%. The marginal tax rate is currently 40%. What is the companys weighted average cost of capital?
A. 9.9%
B. 10.3%
C. 10.5%
D. 10.8%


Answer : C

Question 26 ( Topic 1 )
The stock of a manufacturing company is priced so that its expected rate of return is below its required rate, as calculated by the Capital Asset Pricing Model (CAPM). Which of the following will occur in an efficient capital market?
A. Buying pressure for the firm’s stock will drive the price up.
B. Buying pressure for the firm’s stock will drive the price down.
C. Selling pressure for the firm’s stock will drive the price up.
D. Selling pressure for the firm’s stock will drive the price down.


Answer : D

Question 27 ( Topic 1 )
XYZ Company is considering selling treasury stock but is concerned about the amount of capital it will raise given the current high volatility of the stock market. What is the BEST strategy a firm can employ to reduce its uncertainty?
A. Hire an investment banker to underwrite the stock on a full underwriting basis.
B. Hire an investment banker to issue the stock using a master registration statement.
C. Hire an investment banker to underwrite the stock with no flotation costs.
D. Hire an investment banker to underwrite the stock on a best efforts basis.


Answer : A

Question 28 ( Topic 1 )
Company A is a large public company with annual revenue of $1.2 billion and high fixed costs. Its stock is listed on the New York Stock Exchange. Company B is a mid-sized company with annual revenue of $100 million and low fixed costs. Its stock is listed on the
NASDAQ. Which of the following statements is MOST LIKELY to be true when comparing
Company A and Company B?
A. Company A has greater reporting requirements and more marketable stock than Company B.
B. Company A has greater reporting requirements and less marketable stock than Company B.
C. Company B has greater reporting requirements and more marketable stock than Company A.
D. Company B has greater reporting requirements and less marketable stock than Company A.


Answer : A

Question 29 ( Topic 1 )
An investor concerned about taxes on dividend distributions will MOST LIKELY purchase stock on which of the following dates?
A. Ex-dividend date
B. Record date
C. Declaration date
D. Payment date


Answer : A

Question 30 ( Topic 1 )
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?
A. Declare a special dividend.
B. Reinvest cash into the company.
C. Declare a cash dividend.
D. Repurchase shares of outstanding stock.


Answer : D

Question 31 ( Topic 1 )
A company with constant earnings and excess cash is considering a significant stock repurchase plan. Which of the following is MOST LIKELY to occur?
A. Earnings per share will increase, and the number of shares outstanding will stay constant.
B. Earnings per share will decrease, and the number of shares outstanding will increase.
C. Earnings per share will increase, and the number of shares outstanding will decrease.
D. Earnings per share will decrease, and the number of shares outstanding will stay constant.


Answer : C

Question 32 ( Topic 1 )
Optimal dividend policy is one that does all of the following EXCEPT:
A. maintain adequate retained earnings for future growth.
B. maximize shareholder value.
C. distribute corporate income to investors.
D. balance tax shield benefits against agency costs.


Answer : D

Question 33 ( Topic 1 )
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?
A. 13.25%
B. 14.47%
C. 15.25%
D. 16.53%


Answer : B

Question 34 ( Topic 1 )
A company hires an investment firm to fully underwrite a new stock issuance. Which of the parties carries the MOST risk?
A. The public
B. The company
C. The company’s bond holders
D. The investment firm


Answer : D

Question 35 ( Topic 1 )
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


Answer : D

Question 36 ( Topic 1 )
With respect to the Sarbanes-Oxley Act, a company may avoid additional reporting requirements by:
A. issuing shares in an IPO.
B. providing an SSAE 16.
C. redeeming bond issues.
D. delisting its securities.


Answer : D

Question 37 ( Topic 1 )
Which of the following would be expected to happen on the ex-dividend date?
A. The stock is sold with the dividend attached.
B. The stock price drops.
C. The stock’s volume increases.
D. The stock’s dividend is paid.


Answer : B

Question 38 ( Topic 1 )
Regarding dividends, on which of the following dates would a company's current assets be reduced?
A. Declaration date
B. Ex-dividend date
C. Payment date
D. Record date


Answer : C

Question 39 ( Topic 1 )
In which of the following instances does the clientele effect come into play?
A. When a company announces its earnings forecast
B. When a company submits its 10-Q to the SEC
C. When a company declares a dividend
D. When a company increases its sales


Answer : C

Question 40 ( Topic 1 )
ASC Topic 815 (FAS 133) is applicable when accounting for which of the following?
A. Gain on an equity investment
B. Purchase of a bond investment
C. Market value of collateral
D. Purchase of a forward


Answer : D

Question 41 ( Topic 1 )
Which of the following would be MOST suitable for a risk-averse electronics manufacturer that uses copper in many of its components?
A. A put option on copper futures
B. A short position in copper futures
C. A floor option on copper futures
D. A costless collar using options on copper futures


Answer : D

Question 42 ( Topic 1 )
Which of the following is subject to transaction exposure?
A. A U.S. company’s foreign subsidiary in Japan has a receivable denominated in Yen.
B. A Japanese companys foreign subsidiary in the U.S. has a receivable denominated in Yen.
C. A U.S. company’s foreign subsidiary in Japan has a payable denominated in Yen.
D. A Japanese companys foreign subsidiary in the U.S. has a payable denominated in dollars.


Answer : B

Question 43 ( Topic 1 )
Which of the following is subject to translation exposure?
A. A German company with a subsidiary in Spain
B. A Spanish company with revenues in euros
C. A Japanese subsidiary in the United States with U.S. dollar liabilities
D. A U.K. company that exports goods to the United States


Answer : C

Question 44 ( Topic 1 )
Company XYZ is not sure which direction interest rates are headed. Which of the following would be MOST suitable?
A. An interest rate cap
B. An interest rate floor
C. An interest rate swap
D. An interest rate collar


Answer : D

Question 45 ( Topic 1 )
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.


Answer : C

Question 46 ( Topic 1 )
Which of the following is NOT a key area to consider when establishing treasury policies?
A. Equity method investments accounting
B. Medium-term financing
C. Management reporting
D. Foreign currency management


Answer : A

Question 47 ( Topic 1 )
The accounting requirement that a products selling costs be recorded in the same period as the products 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.


Answer : C

Question 48 ( Topic 1 )
Use the financial statement for XYZ Company in the exhibit to answer this question.
What is the cash flow from operating activities for the current year?
A. $(700,000)
B. $700,000
C. $900,000
D. $1,700,000


Answer : B

Question 49 ( Topic 1 )
The Governmental Accounting Standards Board (GASB) is the authoritative standard- setting body for which of the following?
A. Private universities
B. Healthcare organizations
C. Public works agencies
D. Publicly traded companies


Answer : C

Question 50 ( Topic 1 )
The fixed costs to manufacture widgets are estimated to be $54,000. The benefit (sales) of a widget is estimated to be $6.78 per unit, and the variable costs are estimated at $4.48 per unit. What is the estimated break-even point in units for the manufacture of widgets
(rounded to the nearest unit)?
A. 4,796
B. 7,965
C. 12,054
D. 23,478


Answer : D

Question 51 ( Topic 1 )
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%?
A. 8.7%
B. 9.6%
C. 10.0%
D. 10.9%


Answer : A

Question 52 ( Topic 1 )
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 companys overnight investment interest rate on a 365-day year basis?
A. 0.95%
B. 1.17%
C. 2.34%
D. 2.57%


Answer : B

Question 53 ( Topic 1 )
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.


Answer : D

Question 54 ( Topic 1 )
At the end of the year, ABC Companys 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):
A. favorable revenue variance and an unfavorable operating expenses variance.
B. favorable revenue variance and a favorable operating expenses variance.
C. unfavorable revenue variance and a favorable operating expenses variance.
D. unfavorable revenue variance and an unfavorable operating expenses variance.


Answer : C

Question 55 ( Topic 1 )
Which of the following is NOT a drawback to using ROI as a performance measure?
A. It may be misleading when cash flows are not evenly distributed over time.
B. It does not consider the profit generated by a project.
C. It does not include a charge for cost of capital.
D. It may lead to rejection of a positive NPV project.


Answer : B

Question 56 ( Topic 1 )
XYZ Company has one inventory supplier, and title to inventory is transferred to the company during the manufacturing process. Which of the following BEST describes XYZs relationship with its supplier?
A. Collateralized
B. Outsourced
C. Supplier-managed
D. Paid-on-production


Answer : D

Question 57 ( Topic 1 )
A company is starting a project to redesign its cash management information systems.
What would be an important tool in this effort?
A. ERP software
B. Treasury operations manual
C. Cash application
D. Treasury workstation


Answer : B

Question 58 ( Topic 1 )
The MOST common way that companies structure their treasury operations is as a:
A. cost center.
B. profit center.
C. shared service center.
D. in-house bank.


Answer : A

Question 59 ( Topic 1 )
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. Outsourcing
B. Benchmarking
C. Re-engineering
D. Restructuring


Answer : B

Question 60 ( Topic 1 )
A company sells products to customers on credit, generating accounts receivable. The company uses the accrual accounting method. Once the company collects good funds from its customers, what is the impact on the financial statements of the company?
A. Cash balance is not affected, and income is increased.
B. Cash balance is increased, and income is decreased.
C. Cash balance is increased, and income is not affected.
D. Cash balance is increased, and income is increased.


Answer : C

Question 61 ( Topic 1 )
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?
A. 56%
B. 58%
C. 61%
D. 64%


Answer : C

Question 62 ( Topic 1 )
A company has a line of credit and a bond trustee agreement with a bank. To prevent a decline in the companys bond rating from having a negative impact on the companys line of credit, the bank should have which of the following in place?
A. Code of conduct
B. Confidentiality agreement
C. Notional barrier
D. Risk profile


Answer : C

Question 63 ( Topic 1 )
ABC Company is a national retail company and uses XYZ Bank for its collections and payroll services. XYZ has recently experienced financial problems; what is the greatest risk to ABC Company?
A. Damage to their working relationship
B. Deterioration of service quality
C. Increase in service fees
D. Loss of assets


Answer : D

Question 64 ( Topic 1 )
A real estate development company has excess cash that it would like to invest in one of its properties:
-> Property A has shown an ROI of 40%, a residual income of $25,675, and an EVA of $32,678.
-> Property B has shown an ROI of 45%, a residual income of $27,635, and an EVA of $29,523.
-> Property C has shown an ROI of 55%, a residual income of $22,658, and an EVA of $30,678.
-> Property D has shown an ROI of 52%, a residual income of $19,675, and an EVA of $31,523.
In which property should the company invest?
A. Property A
B. Property B
C. Property C
D. Property D


Answer : A

Question 65 ( Topic 1 )
A deck furniture supply 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


Answer : D

Question 66 ( Topic 1 )
One of the advantages of raising capital through public offerings is that:
A. it reduces fluctuations in the price of capital.
B. it reduces the costs of managing reporting and disclosure.
C. large amounts of debt and equity can be raised at the risk-free rate.
D. large amounts of debt and equity can be raised at prevailing rates.


Answer : D

Question 67 ( Topic 1 )
In terms of capital structure, lease financing normally has the same effect as:
A. investing.
B. borrowing.
C. capitalizing.
D. lending.


Answer : B

Question 68 ( Topic 1 )
One reason for using a sale and lease-back arrangement in lease financing is to:
A. create an infusion of cash into the company.
B. benefit from tax advantages from depreciation.
C. account for income or costs in one period.
D. eliminate off-balance sheet debt.


Answer : A

Question 69 ( Topic 1 )
Convertible securities consist of preferred stock anD.
A. treasury stock.
B. common stock.
C. bonds.
D. tracking stock.


Answer : C

Question 70 ( Topic 1 )
A public companys risk profile is currently in balance. The managements mission statement is to minimize stock devaluation. However, it is forecasting a need for working capital in the short term. Which of the following solutions would BEST assist management in accomplishing its mission?
A. Redeem outstanding shares
B. Issue additional shares
C. Use debt financing
D. Pay out dividends


Answer : C

Question 71 ( Topic 1 )
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


Answer : B

Question 72 ( Topic 1 )
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.
A. 3, 4, 1, 2
B. 3, 4, 2, 1
C. 4, 3, 2, 1
D. 4, 3, 1, 2


Answer : A

Question 73 ( Topic 1 )
During the 1970s, many companies instituted dividend reinvestment plans (DRIPS). There are many benefits of this plan. What is the one negative aspect?
A. Reduces the expense of shareholder relations
B. Leads to an increase in the number of small shareholders
C. Does not allow automatic reinvestment of dividends
D. Leads to a reduction in the number of small shareholders


Answer : B

Question 74 ( Topic 1 )
Company A regularly modifies its capital structure by repurchasing stock. Which one of the following is a true statement?
A. Investors may feel that management is manipulating the stock price.
B. Stock repurchases are not an attractive alternative to dividend payments.
C. Partial disclosure to the SEC is required for repurchases.
D. Stock repurchases do not offer tax deferral advantages over dividends.


Answer : A

Question 75 ( Topic 1 )
What is the PRIMARY issue that management needs to consider when determining capital structure?
A. Maintaining control of ownership
B. Complying to rating agency and lender restrictions
C. Using common stock as a source of funds
D. Determining the mix of debt versus equity


Answer : D


Question 76 ( Topic 1 )
On which exchange is a company’s stock traded on the over-the-counter market?
A. AMEX
B. FINRA
C. NASDAQ
D. NYSE


Answer : C

Question 77 ( Topic 1 )
The Federal Reserve can increase the money supply by:
A. increasing the reserve requirement.
B. increasing the discount rate.
C. selling government securities.
D. purchasing government securities.


Answer : D

Question 78 ( Topic 1 )
A company transmits a payment file of ACH and Fedwire vendor payments to its financial institution to execute. Which article of the Uniform Commercial Code governs these payments?
A. Article 3
B. Article 4
C. Article 4A
D. Article 5


Answer : C

Question 79 ( Topic 1 )
A U.S. exporter sells goods to a foreign buyer in U.S. dollars and wants to guarantee that payment is made by the buyer. The exporter would MOST LIKELY require a(n):
A. bankers’ acceptance.
B. documentary collection.
C. letter of credit.
D. open account.


Answer : C

Question 80 ( Topic 1 )
A lender is evaluating the creditworthiness of a company that has high levels of operating leverage. In determining the debt capacity of the company, the bank would MOST LIKELY prefer a:
A. high total liabilities to total assets ratio.
B. high debt to tangible net worth ratio.
C. low long-term debt to capital ratio.
D. low times interest earned ratio.


Answer : C


Question 81 ( Topic 1 )
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%?
A. 5.04%
B. 5.30%
C. 5.58%
D. 6.40%


Answer : C

Question 82 ( Topic 1 )
When estimating the cost of capital, which of the following financial resources would probably NOT be included in the cost of capital calculation?
A. Common stock
B. Long-term debt
C. Preferred stock
D. Short-term debt


Answer : D

Question 83 ( Topic 1 )
A foreign company could raise capital in the United States using an:
A. ASP.
B. ADR.
C. ARC.
D. AVS.


Answer : B

Question 84 ( Topic 1 )
The goal of a successful investor relations program is to ensure:
A. achievement of the company’s earnings-per-share goal.
B. accurate preparation of financial statements.
C. on-time filing of reports.
D. effective two-way communication between a company, the financial community, and other constituencies.


Answer : D

Question 85 ( Topic 1 )
When a short-term loan is paid with a lump sum payment and the payment includes both interest and principal, the loan is often referred to as a:
A. single payment note.
B. material payment note.
C. balloon payment note.
D. commercial note.


Answer : A


Question 86 ( Topic 1 )
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.


Answer : A

Question 87 ( Topic 1 )
A distribution business has used several bank loans to finance its expansion plans. After a fire destroyed the companys facility and inventory, it went out of business due to the loss of revenue during the month it was closed. What type of insurance coverage should the company have had to prevent its demise?
A. Cost reimbursement
B. Property
C. General liability
D. Business interruption


Answer : D

Question 88 ( Topic 1 )
From a buyers perspective, which of the following types of float would be eliminated if checks were replaced by electronic payment methods?
A. Collection
B. Invoicing
C. Disbursement
D. Lockbox


Answer : C

Question 89 ( Topic 1 )
Future treasury operations will be affected MOST significantly by consolidation of which of the following?
A. Competitors
B. Subsidiaries
C. Commercial banking industry
D. Procurement cards


Answer : C

Question 90 ( Topic 1 )
Which of the following is a ratio that is often used by commercial banks to measure a companys 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


Answer : B

Question 91 ( Topic 1 )
Assume the cost of an ACH transaction is $0.80, the charges for a wire transfer are $30.00, the monthly account maintenance fee is $10.00, and the company earns interest at an annual rate of 1.825% on overnight investments. What is the break-even point where the interest earned on overnight investments offsets the incremental wire costs?
A. $3,840
B. $5,840
C. $284,000
D. $584,000


Answer : D

Question 92 ( Topic 1 )
When a project has an initial cash outflow with cash inflows in subsequent years, what decision model is most applicable to use to evaluate the adequacy of the project?
A. Monte Carlo
B. Net present value
C. Payback period
D. Profitability index


Answer : B

Question 93 ( Topic 1 )
What is the MOST appropriate rate used as the discount rate in calculating NPV?
A. Marginal cost of capital
B. IRR
C. Cost of debt
D. Internal transfer rate


Answer : A

Question 94 ( Topic 1 )
What kind of budget forecasts the cost for investing activities?
A. Operating budget
B. Sales budget
C. Maintenance budget
D. Capital budget


Answer : D

Question 95 ( Topic 1 )
In developing an operating budget, the first and MOST critical step is?
A. Get management approval.
B. Generate a sales budget.
C. Establish cost allocations.
D. Determine capital structure.


Answer : B

Question 96 ( Topic 1 )
What must be measured and monitored to ensure that a company has adequate liquidity?
A. Net receivables
B. Stock price
C. Short-term borrowing obligations
D. Net working capital


Answer : D

Question 97 ( Topic 1 )
Which of the following is NOT a short-term cash forecasting technique?
A. Income statement forecast
B. Distribution forecast
C. Receipts and disbursements forecast
D. Accounts receivable balance pattern forecast


Answer : A

Question 98 ( Topic 1 )
The assistant treasurer of a company uses variance analysis comparing actual cash flows with projected cash flows and finds actual is less than forecasted. Which of the following would cause this variance?
A. Pro forma income statement
B. Weighted average cost of capital
C. Capital budget forecast
D. Delayed accounts receivable collection


Answer : D

Question 99 ( Topic 1 )
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


Answer : B

Question 100 ( Topic 1 )
Which agency implements monetary policy through purchases and sales of treasury securities?
A. Federal Deposit Insurance Corporation

B. Fannie Mae -
C. Office of the Comptroller of the Currency

D. Federal Reserve -


Answer : D Topic 2, Volume B

Question 101 ( Topic 2 )
The treasurer of a corporation is negotiating with one of his/her suppliers to allow the corporation to have 30 days to pay the suppliers invoices. The treasurer is arranging:
A. short-term financing.
B. revolving credit agreement.
C. factoring of receivables.
D. uncommitted line of credit.


Answer : A

Question 102 ( Topic 2 )
A company is looking for a way to finance their inventory. What is the BEST funding match?
A. Long-term private placement
B. Short-term debt
C. Equity issuance
D. Stock split


Answer : B

Question 103 ( Topic 2 )
A company has negotiated a credit facility with the following terms:
-> $5,000,000 line of credit
-> $3,000,000 average borrowing
-> 30 basis point commitment fee on the unused portion of the line
-> Interest rate on advances is 1-month LIBOR plus 4%
-> 1-month LIBOR is currently 2%
What is the annual interest rate on the line of credit?
A. 6.0%
B. 6.2%
C. 9.0%
D. 9.3%


Answer : B

Question 104 ( Topic 2 )
A company has negotiated a credit facility with the following terms:
-> $5,000,000 line of credit
-> $3,000,000 average borrowing
-> 30 basis point commitment fee on unused portion of line
-> Interest rate on advances is 1-month LIBOR plus 4%
-> 1-month LIBOR is currently 2%
-> Compensating balance requirement of 20% on the outstanding borrowings
What is the effective annual borrowing rate for the line of credit?
A. 6.0%
B. 6.2%
C. 7.8%
D. 9.3%


Answer : C

Question 105 ( Topic 2 )
Which of the following statements is typically true about a net settlement system?
A. It significantly reduces the total cost of transfers.
B. Participants obtain improved payment terms from suppliers.
C. Receivables and payments are continuously settled 1-to-1.
D. An independent third party determines the settlement dates.


Answer : A

Question 106 ( Topic 2 )
As an internal control tool, what does the matching of an invoice to the original purchase confirm?
A. The placement of the order
B. The fulfillment of the order
C. The execution of the order
D. The payment of the order


Answer : A

Question 107 ( Topic 2 )
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


Answer : A

Question 108 ( Topic 2 )
A large U.S. company is planning to fund its Canadian subsidiary. Currently, the Canadian dollar is trading at CAD 1.25 per U.S. dollar, and the U.S. dollar is expected to depreciate in the near term. To manage this FX exposure, what technique should the company implement?
A. Leading
B. Re-invoicing
C. Lagging
D. Multicurrency accounts


Answer : A

Question 109 ( Topic 2 )
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?
A. Internal factoring
B. Re-invoicing
C. Bilateral netting
D. Multilateral netting


Answer : A

Question 110 ( Topic 2 )
The principal roles of corporate finance include which one of the following combination of functions?
A. Maintaining liquidity and optimizing cash
B. Capital budgeting and financial risk management
C. Establishing credit terms and collection policies
D. Shareholder relations and dividend decisions


Answer : B

Question 111 ( Topic 2 )
Which function involves evaluating alternative projects in relation to one another and in relation to the company's cost structure?
A. Capital budgeting
B. Corporate forecasting
C. Financial planning
D. Financial risk management


Answer : A

Question 112 ( Topic 2 )
Disbursement float includes which of the following three float time intervals?
A. Mail, processing, and availability float
B. Mail, invoicing, and availability float
C. Mail, processing, and clearing float
D. Mail, invoicing, and clearing float


Answer : C

Question 113 ( Topic 2 )
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.


Answer : A

Question 114 ( Topic 2 )
The auditors of a private college are examining and auditing the colleges financial statements. The statements are not presented in accordance with GAAP. What should the auditors do?
A. Issue a standard unqualified opinion.
B. Not render an opinion.
C. Base their opinion on GASB standards.
D. Issue an adverse opinion.


Answer : D

Question 115 ( Topic 2 )
Banks often control information flow, records and assets, therefore it is critical that banks have:
A. backup systems and disaster recovery procedures.
B. controlled disbursement procedures.
C. standard formats for electronic submission.
D. timetables for service implementation.


Answer : A

Question 116 ( Topic 2 )
Which of the following could be considered a weakness of a forecast derived by regression analysis?
A. More than one factor may affect the event being measured.
B. Seasonality cannot be incorporated into the forecast.
C. A large amount of data is required.
D. It is only valid for long-term forecasting.


Answer : C

Question 117 ( Topic 2 )
Under the standards of corporate governance adopted in 2002, an independent director must:
A. meet with management in regular executive sessions.
B. have been with the organization for at least five years.
C. have no material relationship with the organization.
D. be one of three directors on the nominating committee.


Answer : C

Question 118 ( Topic 2 )
Company X, a US 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.


Answer : A

Question 119 ( Topic 2 )
The CFO of a growing company has decided that it would be prudent to insure the company against potential loss from dishonest acts of employees. The treasurer has been given the responsibility of selecting and negotiating the type and amount of protection required. Afteranalyzing the overall risk to the company, the treasurer decides that the greatest exposure to this type of risk is within the cash management function of the company. The MOST appropriate type of protection would be:
A. fidelity.
B. crime.
C. blanket.
D. fiduciary.


Answer : A

Question 120 ( Topic 2 )
A company has large, ongoing short-term financing requirements with a maximum horizon of 250 days. It has a good credit rating and would like to use the least expensive source of short-term debt to finance its needs. The Treasurer might recommend which of the following?
A. Commercial paper with a backup line of credit
B. Asset sales through factoring of receivables
C. A committed line of credit with compensating balances
D. A single payment note secured by marketable securities


Answer : A

Question 121 ( Topic 2 )
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?
A. Rating agency charges, credit enhancement costs, and dealer fees
B. Discount, broker fees, and commitment fees
C. Dealer fees, compensating balances, and participation fees
D. Commissions, rating agency charges, and broker fees


Answer : A

Question 122 ( Topic 2 )
Treasury policies should be approved by the:
A. audit committee.
B. controller.
C. board of directors.
D. external auditors.


Answer : C

Question 123 ( Topic 2 )
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.


Answer : A

Question 124 ( Topic 2 )
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.


Answer : A

Question 125 ( Topic 2 )
Unrealized holding gains and losses arise when trading securities are:
A. marked-to-market and are reported under current income.
B. marked-to-market and are reported under retained earnings.
C. offset by the gains and losses of the item being hedged.
D. recorded on the anniversary date of the purchase.


Answer : A

Question 126 ( Topic 2 )
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:
A. the use of positive pay.
B. the use of controlled disbursement.
C. automated reconciliation services.
D. reverse positive pay.


Answer : A

Question 127 ( Topic 2 )
When evaluating a FSP during the RFP process, a company should place a high value on a FSPs financial strength when the provider:
A. is located in a remote location.
B. holds assets for the company.
C. processes high dollar value transactions.
D. processes international transactions.


Answer : B

Question 128 ( Topic 2 )
The first step in the financial institution and financial services provider (FSP) selection process should be:
A. selecting a pool of available candidates.
B. identifying the critical product or service specifications.
C. establishing a grading mechanism.
D. evaluating the cost of switching providers.


Answer : B

Question 129 ( Topic 2 )
Consolidation and specialization in the financial services industry have made financial institution and financial service provider selection a(n):
A. more important decision process for a treasurer.
B. less critical decision process for a treasurer.
C. easier decision process for a treasurer.
D. unimportant decision process for a treasurer.


Answer : A

Question 130 ( Topic 2 )
Which of the following statements BEST applies when evaluating fees in an RFP for bank services?
A. Flexible credit terms are the most important consideration.
B. Ability of financial institution to customize services is critical.
C. A proforma account analysis statement captures all pricing and compensation detail.
D. Accurate evaluation and comparison of the proforma account analysis statements are critical.


Answer : D


Question 131 ( Topic 2 )
When evaluating candidates who have responded to an RFP for banking services, a highly leveraged company will probably apply a higher weighting to:
A. flexible credit terms at competitive rates.
B. the ability to customize services.
C. the cost of switching providers.
D. the adequacy of internal controls.


Answer : A

Question 132 ( Topic 2 )
An evaluated receipts settlement would be MOST commonly used in an environment where:
A. the cash conversion cycle is typically long.
B. inventory turns over rapidly.
C. volumes involved are small.
D. the supplier sends an invoice.


Answer : B

Question 133 ( Topic 2 )
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?
A. The review of internal resources takes greater importance.
B. The infrastructure linking the parties’ systems must be considered.
C. The disaster recovery sites of both parties must be in the same location.
D. The systems used by both parties must be compatible.


Answer : B

Question 134 ( Topic 2 )
A regional physicians group is looking for an alternative to liability insurance to help protect against potential future liability claims. Which method would BEST serve its need to protect against catastrophic losses?
A. Casualty insurance
B. A risk retention group
C. Non-insurance
D. Self-insurance


Answer : B

Question 135 ( Topic 2 )
As a result of the Sarbanes-Oxley Act, what new entity was established to sanction firms and individuals for audit violations?
A. The Sarbanes-Oxley Review and Assessment Board
B. The Accounting Controls Advisory Board
C. The Public Company Accounting Oversight Board
D. The Auditing Review Board


Answer : C

Question 136 ( Topic 2 )
Under Section 404 of the Sarbanes-Oxley Act, management must state its responsibility for which of the following?
A. Knowledge of the penalties for noncompliance
B. Selection of auditors who are knowledgeable about Sarbanes-Oxley requirements
C. Establishment and maintenance of adequate internal controls for financial reporting
D. Accuracy and completeness of financial statements


Answer : C

Question 137 ( Topic 2 )
A treasury employee of Company XYZ is privy to financial reporting information yet to be released to the public. He knows that year-end earnings exceed last years and would be viewed as positive to the investment community. He casually mentions to a relative that now would be a good time to buy the stock of Company XYZ. Which section of the treasury code of ethics would typically be violated by such a disclosure?
A. Employee conduct
B. External activities
C. Conflict of interest
D. Confidential information


Answer : D

Question 138 ( Topic 2 )
A company is concerned that investor dissatisfaction could lead to a rapid change in its board membership. To prevent this, which of the following strategies should the company employ?
A. Grant shareowners preemptive rights for new shares.
B. Give shareowners cumulative voting rights.
C. Stagger the election of its directors.
D. Allow shareowners to vote by proxy.


Answer : C

Question 139 ( Topic 2 )
A publicly traded company is looking to fund its next project with the issuance of stock. The companys stock is primarily held by a small group of investors. The company is concerned that issuing stock may upset these investors because it would dilute their holdings. Which of the following strategies would help address the investors concern?
A. Grant the investors cumulative voting rights.
B. Grant the investors pre-emptive rights to the new issue.
C. Allow the investors to cast their votes by proxy at the next shareowners meeting.
D. Offer to stagger the election of directors.


Answer : B

Question 140 ( Topic 2 )
The goal of investor relations is to:
A. ensure that a company’s securities achieve a fair valuation in the marketplace.
B. ensure equity analysts have all available company information at any point in time.
C. maintain the company’s stock listing on the NYSE.
D. make sure all shareholders cast a vote at the annual meeting.


Answer : A

Question 141 ( Topic 2 )
A company expects the U.S. dollar to depreciate in value compared to the British pound.
The company will have a British pound payment to make in five months. The company would MOST LIKELY buy:
A. a U.S. dollar call.
B. a U.S. dollar put.
C. a British pound call.
D. a British pound put.


Answer : C

Question 142 ( Topic 2 )
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):
A. decrease in earned surplus.
B. decrease in stockholders’ equity.
C. increase in capital surplus.
D. increase in retained earnings.


Answer : D

Question 143 ( Topic 2 )
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.


Answer : C

Question 144 ( Topic 2 )
If the Federal Reserve Board increased the discount rate, you would expect:
A. long-term bonds to increase more in price than short-term bonds.
B. short-term bonds to decrease more in price than long-term bonds.
C. long-term bonds to decrease more in price than short-term bonds.
D. that there would be no effect on either long- or short-term bond prices.


Answer : C

Question 145 ( Topic 2 )
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


Answer : C

Question 146 ( Topic 2 )
The exchange of a fixed interest rate cash flow for a floating interest rate cash flow with both interest rates in the same currency is an example of:
A. a vanilla swap.
B. an interest rate option.
C. a basis-rate swap.
D. an interest rate cap.


Answer : A

Question 147 ( Topic 2 )
A company with a relatively poor credit rating borrows most of its funds with short maturities. They may want to change its exposure to interest rates to more correctly reflect the long-term nature of the projects it is funding. Or, they may believe that long-term interest rates are going to rise, causing it to seek protection against the impact of higher interest rates on its balance sheet. Which of the following would be a solution?
A. Forward contract
B. Interest rate swap
C. Currency option
D. Futures contract


Answer : B

Question 148 ( Topic 2 )
A put option gives the holder the right to:
A. buy the underlying stock at the strike price.
B. sell the underlying stock at the strike price.
C. sell short shares of the underlying stock at the strike price.
D. buy long shares of the underlying stock at the strike price.


Answer : B

Question 149 ( Topic 2 )
A call option is said to be in-the-money when the market price of the underlying security is:
A. lower than the strike price.
B. same as the strike price plus premium.
C. higher than the strike price.
D. same as the strike price minus premium.


Answer : C

Question 150 ( Topic 2 )
When projecting the closing cash position, a cash manager must estimate which of the following?
A. ACH credits
B. Lockbox receipts
C. Checks in the process of collection
D. Clearings on non-controlled disbursement accounts


Answer : D

Question 151 ( Topic 2 )
In an organization with personnel limitations, which of the following strategies should be considered to mitigate cash management system risk?
A. Outsourcing
B. Verification
C. Matching
D. Hedging


Answer : A

Question 152 ( Topic 2 )
Some treasury management systems are capable of initiating investment purchases and loan drawdowns automatically. The automating of these transactions is related to which of the following treasury management functions?
A. Payment management
B. Liquidity management
C. International trade management
D. Capital budget management


Answer : B

Question 153 ( Topic 2 )
When using the Internet to access auction markets, companies may use certificate authorities to reduce their exposure to which of the following types of risk?
A. Credit
B. Valuation
C. Counterparty
D. Foreign exchange


Answer : C

Question 154 ( Topic 2 )
A large, nation-wide, retailer of plumbing fixtures is considering implementing ACH technology to improve its accounts receivable processing. Which of the following pre- authorized ACH transactions can the company use for this application?
A. ARC (Accounts Receivable Conversion)
B. CIE (Customer-Initiated Entry)
C. TEL (Telephone-Initiated Entry)
D. WEB (Internet-Initiated Entry)


Answer : B

Question 155 ( Topic 2 )
A treasurer has been advised that his privately held company has just lost its largest customer, which will have a 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.


Answer : B

Question 156 ( Topic 2 )
A treasurer is monitoring the yield curve through a service provider (like Reuters) and notices that it is moving from downward sloping to upward sloping. Based on this information, the treasurer should consider:
A. a commercial paper program.
B. a short-term borrowing facility.
C. interest rate collars.
D. a variable rate long term facility.


Answer : C

Question 157 ( Topic 2 )
An accounts payable manager has been mandated to accept all trade discount opportunities with an effective cost of discount above 25%. An invoice has been presented and approved for payment with terms of 3/5, net 30 days. What is the difference between the effective cost of discount offered, and the 25% rate set by the company?
A. 14%
B. 17%
C. 20%
D. 22%


Answer : C

Question 158 ( Topic 2 )
For a retirement plan to be qualified under ERISA, employer and employee contributions must be:
A. invested to maximize portfolio return.
B. placed in a separate fund held by a third party.
C. placed with a professional investment manager.
D. invested to provide a defined benefit for plan participants.


Answer : B

Question 159 ( Topic 2 )
Which of the following is an important component of corporate governance?
A. The existence of a large number of institutional investors
B. The activities of independent outside auditors
C. The existence of a matrix management structure
D. The level of compliance with GAAP


Answer : B

Question 160 ( Topic 2 )
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.


Answer : B

Question 161 ( Topic 2 )
The “agency problem” refers to:
A. management’s use of a fiduciary agent for stockholders.
B. a large and active institutional investor base acting on behalf of individual investors.
C. stockholders who allow management to take actions that will benefit management.
D. the internal audit function reporting to the audit committee of the board instead of to management.


Answer : C

Question 162 ( Topic 2 )
To strengthen outside auditor independence with regard to publicly held companies, the
Sarbanes-Oxley Act requires that:
A. employment of staff from companies accounting firms be approved in advance by the audit committees.
B. companies change accounting firms for audit services at least every seven years.
C. accounting firms supply audit work papers annually to the SEC for their clients.
D. the lead audit partner and audit review partner be rotated every five years.


Answer : D

Question 163 ( Topic 2 )
The combination of difference in condition (DIC) insurance and umbrella insurance:
A. transfers risk to a company’s captive insurance subsidiary.
B. replaces the coverage provided by basic property and liability insurance.
C. supplements the coverage provided by basic property and liability insurance.
D. provides payments to a company in the event it is unable to pursue a line of business due to an unforeseen event.


Answer : C

Question 164 ( Topic 2 )
A company’s credit agreements or loan covenants may require:
A. minimum ratings for insurance carriers.
B. high deductible levels and risk retention in order to minimize premium payments.
C. outsourcing of the claims approval and payment process to an insurance company.
D. risk management staff to work directly with underwriters to reduce commission payments.


Answer : A

Question 165 ( Topic 2 )
The measurement of the significance of any loss exposure depends on:
A. loss type and loss prevention.
B. loss response and loss control.
C. loss probability and loss history.
D. loss frequency and loss type.


Answer : D

Question 166 ( Topic 2 )
Two critical factors in determining an operational risk management strategy for a company are:
A. organizational culture and technology.
B. industry standards and competition.
C. technology and data security.
D. physical security and the number of manual processes.


Answer : A

Question 167 ( Topic 2 )
The MOST effective way to reduce the internal risk of technology as it relates to critical treasury functions is to:
A. implement an integrated accounts payable module as part of an automated general ledger package.
B. secure complex spreadsheets with formula protection and multi-level password access.
C. back up complex spreadsheets from PCs onto a local area network server daily.
D. replace complex spreadsheets with certified treasury systems.


Answer : D

Question 168 ( Topic 2 )
One of the KEY risks associated with a companys use of financial institutions is the possibility that:
A. frequent account management turnover at an institution will disrupt the companys operations.
B. an institutions operations will put the company in violation of the Gramm-Leach-Bliley Act.
C. an institution will inadvertently share the companys confidential data with its competitors.
D. the institution will fail, which will have a financial impact on the company.


Answer : D

Question 169 ( Topic 2 )
Which of the following is NOT a method multinational companies (MNC) use to repatriate capital?
A. Internal factoring
B. Dividends
C. Transfer pricing
D. Management fees


Answer : A

Question 170 ( Topic 2 )
A multinational company (MNC) that operates a shared service center charges its foreign subsidiaries a management fee. This management fee may need to be:
A. manipulated to locate profits in low-tax countries.
B. paid through a third-party intermediary.
C. negotiated with the host government.
D. significantly taxed by the host government.


Answer : C

Question 171 ( Topic 2 )
A multinational company may use which of the following to locate profits in subsidiaries in low-tax countries?
A. Dividends
B. Transfer pricing
C. Management fees
D. Intracompany loans


Answer : B

Question 172 ( Topic 2 )
A U.S.-based electronics company that buys components from one of its foreign subsidiaries at a price above market is likely to:
A. be paid large dividends by the subsidiary.
B. be sheltering profits in a low-tax country.
C. need tax consultants to act as intermediaries.
D. make payment with an intracompany loan.


Answer : B

Question 173 ( Topic 2 )
One of the PRIMARY ways the Fed addresses systemic risk is by:
A. assigning passwords and PINs to identify authorized users of its Fedwire system.
B. establishing intra-day credit limits for ACH originators.
C. setting minimum reserve requirements for its member banks.
D. setting daylight overdraft limits for its member banks.


Answer : D

Question 174 ( Topic 2 )
Which of the following payment types is at the greatest risk for fraud?
A. Wire transfers
B. Credit cards
C. Checks
D. ACHs


Answer : C

Question 175 ( Topic 2 )
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:
A. daylight overdraft line.
B. letter of credit.
C. revolving line of credit.
D. net debit cap.


Answer : A