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CTP Test Questions > Questions > Flashcards

Questions Flashcards

1
Q 
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
A

C. Public works agencies

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2
Q

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.

A

B. plan assets can be less than plan liabilities.

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3
Q

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%

A

B. 1.17%

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4
Q 
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
A

A. Ex-dividend date

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5
Q

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

A. Property A

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6
Q

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

A

C. When a company declares a dividend

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7
Q 
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
A

D. Net working capital

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8
Q

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.

A

C. matching principle.

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9
Q 
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
A

D. An interest rate collar

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10
Q

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.

A

A. negotiate a change in payment timing with its suppliers.

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11
Q

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

A

D. Paid-on-production

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12
Q

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.

A

D. Repurchase shares of outstanding stock.

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13
Q 
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
A

D. Re-invoicing

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14
Q

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.

A

C. low long-term debt to capital ratio.

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15
Q

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

A

A. Convertible bonds

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16
Q 
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

A. preemptive right.

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17
Q

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

A

B. Leads to an increase in the number of small shareholders

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18
Q 
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
A

B. Cash before delivery

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19
Q 
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
A

A. Master note

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20
Q

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%

A

A. 8.7%

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21
Q 
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.
A

A. cost center.

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22
Q 
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
A

A. an equity warrant

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23
Q

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.

A

B. The stock price drops.

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24
Q 
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.
A

C. corporate strategy.

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25
Q

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.

A

A. Company A has greater reporting requirements and more marketable stock than Company B.

26
Q

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.

A

D. effective two-way communication between a company, the financial community, and other constituencies.

27
Q 
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.
A

D. cash flows at future points in time.

28
Q

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.

A

C. Earnings per share will increase, and the number of shares outstanding will decrease.

29
Q

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.

A

B. A Japanese companys foreign subsidiary in the U.S. has a receivable denominated in Yen

30
Q

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

A

B. I and IV only

31
Q

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

A

D. Short-term debt

32
Q

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

A

D. Federal Reserve

33
Q

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

A

C. Notional barrier

34
Q 
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
A

A. Equity method investments accounting

35
Q

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

A

B. Regression analysis

36
Q 
A foreign company could raise capital in the United States using an:
A. ASP.
B. ADR.
C. ARC.
D. AVS.
A

B. ADR.

37
Q

A put option on a company’s stock has an exercise price of $20. On the delivery date, the
stock is trading at $24 per share. What should the investor who has paid $2 for the option
do?
A. Not exercise the option and lose $2.
B. Not exercise the option and lose $6.
C. Exercise the option and gain $2.
D. Exercise the option and gain $4.

A

A. Not exercise the option and lose $2.

38
Q

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

A

D. Stock-out

39
Q

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

A

A. Collar

40
Q

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

A

A. 3, 4, 1, 2

41
Q

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.

A

B. It does not consider the profit generated by a project.

42
Q

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

A

D. 23,478

43
Q

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

A

B. Treasury operations manual

44
Q

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

A

C. Use debt financing

45
Q

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.

A

D. balance tax shield benefits against agency costs.

46
Q

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

A

D. Loss of assets

47
Q

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

A

B. Net present value

48
Q 
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
A

D. Purchase of a forward

49
Q

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.

A

C. start leading receivables from the German subsidiary.

50
Q 
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
A

D. Currency

51
Q

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.

A

C. Cash balance is increased, and income is not affected.

52
Q

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

A

B. Debt to tangible net worth

53
Q 
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.
A

D. delisting its securities.

54
Q

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.

A

A. single payment note.

55
Q

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.

A

A. They operate through their postal systems.

56
Q

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.

A

A. whether to keep the payment and remittance information together or separate.

57
Q 
An optimal concentration system minimizes all of the following EXCEPT:
A. administrative costs.
B. disbursement float.
C. excess balances.
D. transfer costs.
A

B. disbursement float.

58
Q

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.

A

C. shifts investment shortfall risk to employees.

59
Q

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%

A

C. 10.5%

60
Q

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

A. sinking fund

CTP Test Questions (1 decks)

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