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Treasury Management First Exam
A main characteristic of a company with regional offices using a centralized treasury function is: - correct answer High level of control "In order to be defined as independent, a corporate director: " - correct answer Cannot have a material relationship with the company "EML Inc., which has $600 million in outstanding debt, is preparing to issue commercial paper in excess of $100 million within the next six months. The new assistant treasurer has recently spent time getting to know the issuing and paying agent, the rating agency analyst, and the legal counsel, and has been following the financial markets. What is this is an example of? " - correct answer External collaboration The MOST common way that companies structure their treasury operations is as a(n): - correct answer Cost center Checks and balances with regards to Treasury activities are important because - correct answer Treasurers deal with the cash of the company in all aspects The Quantitative Easing done by the Federal Reserve duirng the great recession used which monetary policy tool? - correct answer Buying bonds by the Federal Open Market Operations of the Fed The Glass Steegal Act was basically repealed through which act of Congress? - correct answer Allowing Financial Holding Companies The Monetary Control Act of 1980 assisted in loosening the economy by - correct answer Reducing float in the payment system Breaking the buck refers to - correct answer Not permitting MMF to go below $1 NAV in most circumstances
"In case of bankruptcy, what is the order of payment for the following: 1-Bankruptcy Trustee, 2-Senior Debt, 3- Common Shareholders, 4-Taxes owed, 5-Subordinated bond holders" - correct answer "A. 2, 1, 4, 5, 3" A retail brokerage firm is MOST like which one of the following types of financial institutions? - correct answer Investment banks The type of underwriting that is most risky to the company putting out the public offering - correct answer Best Efforts Underwriting All of these are attributes of Jumbo CDs except - correct answer CDs must be held to maturity What is the service a commercial bank traditionally does NOT make money from? - correct answer Underwriting security issued to the public "When utilizing a Factor to sell your receivables, all could be true except" - correct answer They must be sold without recourse back to the selling company Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT: - correct answer Inventory Examples of fixed assets include which of the following? I. Inventory II. Treasury bills III. Forklift IV. Goodwill - correct answer III only The matching principle in regards to accrual accounting is - correct answer Recognize the expenses incurred to generate earned revenues "When it comes to Audit Opinions, firms would like " - correct answer Unqualified
"In evaluating alternative capital investments, a company should consider qualitative factors such as: " - correct answer Corporate strategy "A company is experiencing the following long-term trend on a month-over-month basis: Sales are increasing by $100,000, a 15% increase. Accounts receivable are increasing by $5,000, a 1% increase. Accounts payable are increasing by $20,000, a 4% increase. Labor expenses are increasing by $40,000, a 3% increase. With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company? " - correct answer Repaying short-term debt Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company? - correct answer High operating leverage 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 - correct answer I and IV only "Company ABC is a restaurant chain that has enjoyed a surge in customers dining with not much of a profitability increase in the last couple of years. Following a bad restaurant review, customer traffic deteriorated with not much change in profitability. Which of the following BEST describes the cost structure of the company? " - correct answer Low operating leverage All of the following are advantages of using traditional financial ratios for analysis EXCEPT: - correct answer They usually reflect accounting rather than economic values Using the info below what is the Days Inventory (DI)? Annual Revenue $158,000. Annual Cost of Goods Sold $92,400. Cash Flow from Operations $850.
Ending Inventory $23,600. Ending Accounts Receivable $19,300. Ending Accounts Payable $16,950.00 - correct answer $93. Using the info below what is the Days Receivables (DR)? Annual Revenue $158,000. Annual Cost of Goods Sold $92,400. Cash Flow from Operations $850. Ending Inventory $23,600. Ending Accounts Receivable $19,300. Ending Accounts Payable $16,950.00 - correct answer $44. Using the info below what is the Days Payables (DP)? Annual Revenue $158,000. Annual Cost of Goods Sold $92,400. Cash Flow from Operations $850. Ending Inventory $23,600. Ending Accounts Receivable $19,300. Ending Accounts Payable $16,950.00 - correct answer $66. What does a company with a restrictive current asset investment strategy typically have? - correct answer Low accounts receivable balances Examples of traditional factors used in making a credit decision include which of the following? I. Capacity II. Capital III. Compliance IV. Character - correct answer I, II, and IV only "A company is interested in lowering its overall banking costs, managing netting, pooling, re-invoicing, and centralizing FX exposure at headquarters. Which of the
"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? " - correct answer 15 days "Using the above information, what is the cash turnover for the company?" - correct answer 5.3 times "The company currently calculates its Days Receivables at 42 days, its Days Payables at 31 days, and its Days Inventory at 58 days. What is the cash conversion cycle for the company?" - correct answer 69 days 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? - correct answer Commodity 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? - correct answer The hedged gains and losses are reported in comprehensive income XYZ Company has a well established commercial paper (CP) program that they use to fund operations. The company is expanding by purchasing a new factory. The CFO is worried about the time and expense needed to issue long-term debt and decides to use the funds they raise in the CP market to pay for the purchase of the factory. This strategy will be successful if: - correct answer The yield curve remains upward sloping "A put option on a company s stock has an exercise price of $20. On the delivery date, the stock is trading at $24 per share. What should the investor who has paid $2 for the option do? " - correct answer Not exercise the option and lose $ "Upon entering into an interest rate swap with a notional principal of $10,000,000, what is the initial amount of money the counterparties must exchange at the beginning of the swap?" - correct answer $
"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? " - correct answer In- house banking "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? " - correct answer In- house banking
