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XYZ Company is considering the purchase of a security that generates a tax equivalent yield of 10% and a tax exempt yield of 7.1%. What is XYZ's marginal investment tax rate?
Merchant XYZ has total credit card sales of $20,000 for one day with an average ticket of $200. The merchant’s interchange reimbursement fees are 2% and transactions fees are $0.05. This merchant receives net settlement. Which of the following is the value of the deposit for that day?
A small import/export company, XYZ Company, has recently set up an account with a German firm. The contract between the companies states that XYZ is to be paid as soon as all documents are in order showing that the transaction terms have been met. Which of the following forms of payment drafts would be MOST appropriate for XYZ?
A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.
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?
XYZ Company is a U.S. based company that has just issued some euro-denominated bonds in London. The bonds have a duration of 10 years at a rate of 3.5% with a par value of EUR 50 million. An FX swap contract was created on the date of the issuance in EUR/USD, with a spot rate of 1.2908 and a forward rate of 1.1102. This bond is subject to what type of risk?
XYZ Company is a fairly new and high growth company funded by venture capital. Which of the following performance measures is it MOST LIKELY to use?
A customer buys a laptop for $850 and a CD for $13. Only items with sale price of $15 and greater are subject to value added tax (VAT). Assuming VAT of 8.5%, how much tax does the customer incur at the point of sale?
There are 31 calendar days in the month, and the opportunity cost of funds is 9%.
What is the annual cost of float for the batches listed?
Which of the following investment instruments would provide a company with the greatest liquidity and least risk?
Which of the following institutions would be regulated by the Office of the Comptroller of the Currency (OCC)?
An airline has entered into an agreement with its partners to offset receivables and payables for a specified period of time and to transmit or receive the difference via funds transfer at the end of the period. This is an example of:
A utility company is evaluating whether or not it should build a new plant. The process of reviewing the quantitative and qualitative factors are an example of which finance function?
A manufacturing company has no liquidity and needs to purchase additional inventory in 60 days. Which of the following would have helped the company plan for this situation?
Which of the following is considered an important factor when selecting a financial service provider?
A company transfers funds from its remote accounts by ACH with a one-day settlement and is notified of a same-day credit of $100,000 in one of its accounts. A wire transfer costs $27.75 incrementally. Assuming a 360-day year, which of the following is the minimum rate of interest that must be earned on these funds to justify the cost of a wire transfer?
The treasury analyst at RST Corporation has been asked to forecast cash levels for the company’s year-end balance sheet. The analyst has been given the following information:
What should the analyst project as the upcoming year-end cash balance?
The role of the depository bank in the check-clearing process is typically which of the following?
All of the following are reasons to use a confirmed irrevocable letter of credit EXCEPT concern about:
The relationship between debt and equity in a company's capital structure is called:
The year-end income statement for a company is presented in Table 1. The balance sheet is presented in Table 2.
What is the company's return on equity?
The earnings allowance rate applied to collected balances is usually determined by which of the following rates?
Merchant MNO’s sales for the day total $20,000. Fifty percent are credit cards, split between Card Red and Card Blue respectively, at 65% and 35% of the card volume. The average ticket is $50. Fees paid are 2% for Card Red and 2.5% for Card Blue and a fee of $0.05 per transaction. What are the fees that MNO will pay to the issuing banks?
The process by which a bank or insurance company guarantees the debt obligation of a borrower is referred to as credit:
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 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?
An evaluated receipts settlement would be MOST commonly used in an environment where:
In an organization with personnel limitations, which of the following strategies should be considered to mitigate cash management system risk?
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 call option is said to be “in-the-money” when the market price of the underlying security is:
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 company has negotiated a credit facility with the following terms:
What is the effective annual borrowing rate for the line of credit?
A treasury manager expects the price of a commodity to be highly volatile between the time of option purchase and exercise. Which option style would provide the greatest flexibility?
The first step in the financial institution and financial services provider (FSP) selection process should be:
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?
Which of the following statements is typically true about a net settlement system?
Which function involves evaluating alternative projects in relation to one another and in relation to the company's cost structure?
A U.S.-based electronics company that buys components from one of its foreign subsidiaries at a price above market is likely to:
Banks often control information flow, records and assets, therefore it is critical that banks have:
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 public company’s risk profile is currently in balance. The management’s 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?
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?
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?
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 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?
An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as:
A company with constant earnings and excess cash is considering a significant stock repurchase plan. Which of the following is MOST LIKELY to occur?
In evaluating alternative capital investments, a company should consider qualitative factors such as:
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as:
A company’s capital structure includes $800,000,000 in total capital, of which $200,000,000 comes from debt. The firm’s after-tax cost of debt is 6%, and its cost of equity is 12%. The marginal tax rate is currently 40%. What is the company’s weighted average cost of capital?
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?
Which of the following factors is NOT used by a cash manager to estimate a target compensating balance?
Which of the following are interest-bearing instruments?
I. Certificates of deposit
II. Treasury bills
III. Treasury notes
IV. Banker's acceptances
Which of the following are basic security issues to be considered in evaluating a treasury management system?
I. Data recovery
II. Anti-virus protection
III. Database access controls
IV. Data integration
A grocery store chain would be likely to use all of the following services EXCEPT:
When investing in commercial paper, the investor's primary consideration should be which of the following?
A portfolio manager would like to purchase U.S. 50 million of 10-year notes 3 months from now, but has heard news that the Federal Reserve will start a purchasing program of longer term treasuries that will include 10-year notes. The purchase program would likely cause a lowering of market interest rates. The manager would also like to avoid having to use margin on a daily basis. To remove the price risk that may be associated with the Federal Reserve purchasing program, the portfolio manager would MOST LIKELY enter into an:
A cash manager is determining the threshold over which cash concentrations will be done by wire. An ACH transaction costs $0.50. A wire costs $12.00. Funds are available 2 days quicker by wire and the opportunity cost of funds is 5%. What threshold should the cash manager use?
A U.S. financial institution expects to grow at an exponential rate to become one of the largest companies in the country. It wants to hire the best talent in the industry and is willing to pay excessive compensation. In order to achieve the high growth, it is planning on charging hidden fees on mortgages, credit cards etc. Further, it wants to engage in risky practices pertaining to over-the-counter derivatives, asset-backed securities and hedge funds. The financial institution has hired an outside law firm to determine if it is feasible to escape unwanted regulation and oversight from various government entities. Which of the following regulations prohibits the financial institution from engaging in the described practices?
ABC Company’s Treasury department outsourced its overnight investment duties to XYZ Money Management. XYZ placed the funds received from ABC into corporate commercial paper, which has recently gone into default after numerous ratings downgrades. The investment policy of ABC Company states that all investments must be in investment grade commercial paper; however, the agreement gives XYZ the ability to make exceptions with the approval of the Treasurer of ABC Company. The Treasurer was never notified of the ratings downgrades. What role or responsibility, if any, was violated with regards to the investment policy?
A treasury manager has $5 million that is not needed for 6 months. The treasury manager has decided to invest the funds in a liquid instrument, using the current portion of a 5-year AA rated corporate bond that is subject to U.S. Securities and Exchange Commission (SEC) regulations. In what market would the treasury manager purchase this investment?
The Treasury Manager of a privately held company is looking to finance new equipment that has a useful life of 5 years. What type of financing would the Treasury Manager MOST LIKELY employ to finance the equipment?
Company XYZ is a high technology company. It is planning on acquiring another company in the high technology sector. Company XYZ does not have enough cash to acquire the company and is planning on financing the acquisition through a bond offering. Which of the following measures is company XYZ MOST LIKELY to use in its analysis of operating profits considering it is a high debt transaction?
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:
The Treasurer at ABC Company currently uses an in-house company-processing lockbox center. The Treasurer has asked for an analysis to determine the major advantage of using a traditional check/mail-based lockbox system. ABC receives 287,000 payments per month and hired seven additional staff members to process the payments in-house. Additionally, $389,000 was invested in the equipment used to process the payments and NSF checks have decreased 7% since using the in-house center. The equipment’s current market value is equal to its book value. What major advantage should the analysis indicate?
Which of the following capital budgeting methods ignores the time value of money?
XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments. What type of bond should XYZ Company issue?
Which institution or accord was approved in 2009 to strengthen the regulatory capital framework for banks by focusing on minimum capital requirements, supervisory review and market discipline?
XYZ Holdco has multiple credit facilities with a bank under a borrowing agreement that includes certain covenants. A fire has destroyed the manufacturing plant owned by ABC, one of the XYZ subsidiaries that is part of the credit facilities. All loans, including the ABC loan, are up to date and being repaid as required. However, after the fire, the bank notified XYZ that it was in default. Which one of the following covenants is MOST LIKELY a term of the borrowing agreement?
Which of the following would be true for a company with high operating leverage?
A company is evaluating its employee healthcare expense and payroll applications. If the company wishes to provide maximum convenience to its employees, which payment method is the BEST choice?
What do MOST companies try to maintain due to the signaling effect and clientele effect?
XYZ Inc. has limited cash flow, total liabilities to total assets greater than 52%, and a high WACC. To help meet the goal of lowering their WACC, the company plans to issue several million dollars of private equity to the chairman of the board. If the company proceeds with this plan, the company may:
A small for-profit, start-up company is designing a retirement plan with the goal of minimizing costs and operating income volatility while providing a qualified retirement savings vehicle. Which of the following would be the BEST choice?
A company has decided to manage its short-term investment portfolio in-house. It is looking for enhanced capital gains as well as the ability to sell the instruments on the secondary market at a premium. The investment manager has forecasted the interest rates shown below:
Which investment strategy should be employed by the company?
Equity section of Fisher, Inc. Financial Statement
If an investor paid $1,400.00 (excluding fees) for 75 shares of common stock, what was the market value of Fisher, Inc. at the time of purchase?
A company is experiencing the following long-term trend on a month-over-month basis:
With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company?
What is the reserve-requirements provision of the Federal Reserve Act of 1913 known as?
What document serves as the basic account or service authorization, empowering a representative of a business to enter into agreements for financial services?
Which of the following types of risk would an investor who does NOT receive payments on a security under the original terms be subject to?
Recently LEW Utilities, a local utility company, began using the company processing center method to process customer payments. Prior to this change, it used its local depository bank’s lockbox to process the payments. The PRIMARY advantage of the new method is to:
Based on the above information,
if the company uses the trade-off theory in considering its WACC, how will it finance its growth?
An analyst is performing a lease versus buy analysis on a corporate jet. In the evaluation, a cost is relevant if it is:
Which of the following actions would the CFO of a Canadian multinational conglomerate MOST LIKELY take to repatriate profits from its international subsidiaries?
A company that is considering using a central lockbox for collections has conducted an initial study and determined the following:
What will be the annual net dollar benefit to the company if it uses a lockbox?
A company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?
When will a depositor receive ledger and collected credit for a western check deposited at 2:00 P.M. Wednesday?
Ledger Credit - Collected Credit
The MOST important tool the Federal Reserve Board has for influencing the amount of reserves in the banking system is:
A company seeking an insured investment would avoid investing surplus cash in a:
The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:
An international company with multiple divisions has several types of common stock. The company spun off a new division that is growing very quickly and needs additional funding, but the parent does not want additional ownership investment or additional voters. The company would MOST LIKELY issue what kind of stock?
To monitor financial institution service quality, a company would use all of the following measures EXCEPT:
A privately held company is planning to issue an IPO. If the company decides to do so, which of the following will MOST LIKELY result?
A review of a company's risk management strategy would include all of the following EXCEPT:
The executive management of a utility company would like to determine if it would be more cost effective to hire a third-party provider to handle its bill processing functions, which are currently internally operated. What formal selection method should the company use to obtain proposed solutions and detailed pricing from potential vendors?
A U.S. company has a secured committed line of credit of $5.5 million and has an available balance of $4 million. The company successfully transmitted a $5.5 million wire transfer instruction out to the bank via SWIFT. The bank contacted the company and informed it that the wire transfer would not be processed. What is the MOST LIKELY reason the bank gave the company?
A multinational corporation with many FSPs requires a TMS that can display extensive and complex information in an effective manner. The corporation will be looking for a TMS with what functionality?
Treasury policies and procedures should outline roles and responsibilities for which of the following activities?
Banks offer image exchange as a means to accelerate deposits for their customers. If a customer seeks to take advantage of this service, what should the customer implement?
A company in a distressed financial condition may choose to use which of the following services to entice suppliers to continue to sell to it on open terms?
What government legislation holds the CEO of a public company personally liable for the information in financial reports?
Which of the following is the MOST accurate statement regarding the passage of the Sarbanes-Oxley Act?
Company A has operated a Pension Plan since 1985. Despite a recent surge in asset values, the plan remains significantly underfunded. With the passage of the Pension Protection Act of 2006, Company A will be need to:
Which of the following is NOT one of the three goals of a disbursement system?
A trader of ABC Bank executed and audited his own trades. Assigning these two functions to the same person introduced which one of the following risks to the bank?
Companies that seek out other companies that have successfully redesigned their operations are engaging in a process called:
MICR encoding errors may be detected by all of the following TMS modules EXCEPT:
The lockbox receipt records for one 30-day month are provided below. The opportunity costs are 10%.
What is the annual cost of float rounded to the nearest dollar?
Each of the following statements is true of both defined benefit plans and defined contribution plans EXCEPT:
A telecommunications company has decided to sell its call center hosting division. This is an example of what type of financial decision?
A bank's reserve requirement on demand deposits is 10%, and its earnings credit rate is 6%. If a company uses bank services amounting to $2,600 and has an excess of $550 in earnings credit, what is the average collected balance in the account based on a 30-day month?
T-bill discount rate = 5.85%
T-bill face value = $100,000
Initial term = 90 days
If the U.S. Treasury was considering issuing a 91-day T-bill at the same time as this T-bill, what discount rate would cause both instruments to have the same purchase price?
TESTED 01 May 2024