CTP Certified Treasury Professional Questions and Answers

A consumer’s personal check written to pay an electronics store charge-account bill is returned three times by the depositor’s bank as NSF. What process is being used?

To arrive at the closing cash position, a cash manager must add the expected settlements in the collection and concentration accounts and deduct the projected disbursement totals from the:

The interest costs on commercial paper are determined by all of the following EXCEPT the:

Treasury policies and procedures should outline roles and responsibilities for which of the following activities?

What is the Weighted Average Cost of Capital for XYZ Company, assuming the following:

• The pre-tax cost of long term debt is 8%
• The cost of equity is 11%
• The marginal tax rate is 33%
• Total liabilities = $75,000
• Long term debt = $50,000
• Owners equity = $75,000

Which of the following ASC X12 transactions is used to confirm the receipt and compliance of transmitted sets?

A company pays its vendors with the following methods:

• 2,600 checks, averaging $1,000 each, issued on the 15th of the month
• 1,000 ACH payments, averaging $2,000 each, on Wednesdays
• 500 ACH payments, averaging $500 each, on the first Monday of the month
• 10 wires on the last day of the month for approximately $260,000 each

If the company has a daylight overdraft agreement, which of the above presents the highest single-day credit risk for the bank if the company enters bankruptcy?

For days’ sales outstanding to be a meaningful method for evaluating the effectiveness of a company's receivable collections, it is usually compared to the:

ABC Company is an energy-holding company which owns a number of regulated power utilities that have monopolies in different regions. The majority of the holding company’s income is realized from investment portfolios. The company has done well and is going to report its overall performance to the public. What performance evaluation processes should management use to measure portfolio performance?

Fluctuations in interest rates and the availability of funds are more significant risks for companies that rely on:

Company ABC has expanded its banking relationships due to international growth. ABC cannot figure out why its collection float amongst its international customers is longer than its domestic customers. Additionally, ABC is incurring significant costs related to the receipt and processing of these customer payments. ABC is MOST LIKELY experiencing issues related to:

Which of the following services allows a single account to be used by a company with multiple units?

Which one of the following is true of capital repatriation for multinational companies?

A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.

Which of the following is LEAST important when a cash manager determines a company's short-term cash position?

Multi-divisional or multi-subsidiary companies have opportunities to optimize their working capital position and overall liquidity by doing which of the following?

ABC Company has recently moved away from paper-based invoicing systems and has begun implementing e-commerce solutions. Realizing that its e-commerce implementation may have a negative impact on the float of its trading partners, ABC can do which of the following to help address this concern?

A short-term bank line with $20 million of unused capacity and an investment in an overnight money market fund are both forms of which liquidity requirement?

ABC Company offers trade terms of 2/10 NET 30. For several reasons, ABC has decided to eliminate the requirement for a letter of credit from one of its customers. If ABC puts the customer on open book credit, what is the MOST LIKELY outcome?

Which of the following techniques would MOST accurately predict a company's daily cash position?

When will a depositor receive ledger and collected credit for a western check deposited at 2:00 P.M. Wednesday?

Ledger Credit - Collected Credit

A company that has facilities in different states and wants to control funding and facilitate check cashing would use which of the following?

If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?

A disclaimer opinion is required on a set of financial statements when:

A firm’s air conditioning unit breaks down unexpectedly and must be replaced immediately. What type of liquidity requirement is this an example of?

If a company’s pension plan offered its executives the right to contribute a greater percentage of their salary to the plan than the percentage offered to other employees, it would be at risk of violating the ERISA nondiscrimination rule related to what?

The PRIMARY difference between money market instruments and capital market instruments is that capital market instruments are securities that are:

The delay between the time a check is deposited and the time the company's account is credited with collected funds is known as:

A company employs several short-term credit facilities at any one time to meet its liquidity needs and has consistently demonstrated the ability to service this debt as required. However, because of a temporary breach of a financial covenant of one agreement, all of the company’s credit facilities were declared in default. All the credit agreements must have had which of the following types of clause?

Operational risk is defined as the risk of direct or indirect losses resulting from external events or failure of internal resources. As treasury departments maintain legacy systems that must be integrated into more complex technology, one would expect that:

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?

MICR encoding errors may be detected by all of the following TMS modules EXCEPT:

For newly issued debt, a company’s effective cost of debt is a function of yield to maturity and:

The discount rate for a T-bill with a face value of $200,000, 182 days to maturity, and a selling price of $194,375 would be:

A comprehensive payables service can do all of the following EXCEPT:

The mix of long-term debt and equity refers to a company’s:

Which of the following are examples of covenants in loan agreements?

I. Financial ratios

II. Corporate resolutions

III. Borrower limitations

IV. Borrower obligations

Which of the following could be considered a weakness of a forecast derived by regression analysis?

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?

Disbursement float includes which of the following three float time intervals?

Which of the following payment types is at the greatest risk for fraud?

Which function involves evaluating alternative projects in relation to one another and in relation to the company's cost structure?

At the end of the year, ABC Company’s 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):

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 company with constant earnings and excess cash is considering a significant stock repurchase plan. Which of the following is MOST LIKELY to occur?

On the basis of the following exchange rates,

which of the following currency amounts has the greatest value in U.S. dollars?

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?

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?

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 U.S. company’s pension plan is managed by an investment management firm, headquartered outside the United States. The investment management firm outsources the accounting for the plan to an organization on the Office of Foreign Assets Control (OFAC) sanctions lists and the firm does not advise the U.S. company of this fact. A financial loss in the pension plan is later realized due to the mismanagement of funds. When establishing its contract with the firm to protect itself from losses in the pension plan, the company should have:

Senior management at ABC Company plans to make a large capital expenditure to bolster its infrastructure exactly one year from now. Their primary concern is to preserve the current capital position until the expected cash outlay. The majority of the cash at ABC Company is held in treasury notes, but management would like to also invest some of the money into corporate bonds and money market funds. Which investment objective BEST suits the needs of ABC Company?

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?

An analyst at Davis Company uses the tax payment (TXP) banking convention for payment of state taxes. The analyst is preparing to pay $650,000 in taxes to the state where Davis Company is domiciled. What payment method will the analyst use to make the tax payment?

Bank A is to pay Bank B $6,000,000 for 10 transactions that occurred throughout the day. Bank B is to pay Bank C $8,000,000 for 13 transactions that occurred throughout the day. Bank B is to pay Bank A $5,000,000 for 17 transactions that occurred throughout the same day. These banks operate using a gross settlement system. How many transactions will occur between these banks to settle the payments?

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?

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 company determines that no combination of risk control or financing techniques will produce an adequate, risk-adjusted rate of return on manufacturing a new product. It decides to discontinue the product line. This is an example of:

Establishing the authority to open bank accounts is the responsibility of:

Two critical factors in determining an operational risk management strategy for a company are:

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?

ASC Topic 815 (FAS 133) is applicable when accounting for which of the following?

A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the average rate on local government bond investments is 2.5%. What would be the BEST method for the company to repatriate local profits?

An analysis of variances from expected cash flows is used to:

Which of the following objectives of treasury management refers to a company’s ability to meet current and future financial obligations in a timely, efficient, and cost-effective manner?

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?

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?

In an international banking system, what role is commonly carried out by a large group of clearing banks?

Which of the following statements are true about collected balances?

I. They can be lower than ledger balances.

II. They are influenced by the bank's availability schedule.

III. They exclude negative account balances.

IV. They may generate an earnings credit.

In developing treasury policies and procedures, which activity requires key controls to be in place?

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. After analyzing 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:

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?

As an internal control tool, what does the matching of an invoice to the original purchase confirm?

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:

One of the PRIMARY ways the Fed addresses systemic risk is by:

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:

An investor concerned about taxes on dividend distributions will MOST LIKELY purchase stock on which of the following dates?

Which of the following would be expected to happen on the ex-dividend date?

An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:

What kind of budget forecasts the cost for investing activities?

Which of the following is a ratio that is often used by commercial banks to measure a company’s leverage and does not include the effect of assets that are difficult to value or are NOT easily converted to cash?

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?

Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT:

Which of the following are KEY issues to be considered when establishing a shared service center (SSC)?

I. Selecting the location

II. Comparing an SSC structure to outsourcing of a process

III. Choosing and implementing the technology for SSC

IV. Choosing the collection bank

If a bank has a 10% reserve requirement, a 31-day month, and an earnings credit rate of 6.5%, which of the following is the approximate level of collected balances required to support $1.00 worth of bank service charges?

Which of the following would MOST LIKELY cause a decrease in a company's deposited checks availability?

A company may choose to use a derivative to reduce risk on which of the following types of exposure?

I. Currency

II. Interest rate

III. Commodity price

A new retail chain has decided to offer 3 payment methods: cash, cards and checks. It was determined that card payments would be the biggest sales driver and projects have been scheduled accordingly. To be in line with this strategy, which of the following should be the priority?

The earnings allowance rate applied to collected balances is usually determined by which of the following rates?

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?

Which of the following global cash concentration methods would be MOST appropriate for a company with operations in the United States, Germany, Mexico, and Japan?

Which report is MOST LIKELY to be a current-day information report?

On a daily basis, the cash manager is responsible for all of the following EXCEPT:

A company has made an investment of $30,000, which matures in 180 days and pays $800 in interest. Which of the following is the effective annual yield?

Which of the following can be exercised only on the expiration date?

Which of the following is a typical overnight use of excess cash?

A pizza restaurant chain maintains separate accounts at bank branches near each of their 1,067 restaurants to handle the deposit of cash received. Early each morning, the company’s point-of-sale system electronically transmits collection totals from the previous day to its main computer. ACH debits are then initiated to concentrate the funds from the local accounts to the concentration account the following day. Recently, several of the ACH debits have been returned for insufficient funds because deposits weren’t being taken to the bank on a timely basis by the local employees. Without increasing staff at the restaurants, what could Treasury do to prevent this from happening and avoid overdrafts at the local banks?

A large multinational company recently implemented new processes to automate its treasury operations. If these changes were the direct result of comparing the company's practices with those of other companies, the activities could be considered an example of which of the following?

I. Liquidating

II. Re-engineering

III. Benchmarking

IV. Forecasting

Under a loan agreement, which of the following could be an event of default?

I. Nonpayment of interest when due

II. A material adverse change in the condition of the borrower

III. A debt-to-equity ratio above the limit specified

IV. Shortening the cure period by half

XYZ Company has decided to purchase a close competitor. This acquisition would make XYZ Company the 4th largest in its industry allowing it better purchasing power and greater distribution channels. After completing the M&A analysis, it is determined that the combined companies would produce a 40% increase in revenue, reduce manufacturing costs by 30%, but would increase current liabilities by 27%. Which of the following would keep the acquisition from happening?

Company ABC experienced a loss in the past when an employee in the treasury department was able to transfer $1.5 million to a personal account offshore. The company is working with a security agent to prevent this from happening in the future. ABC also accepts a large number of checks as payment. The agent has suggested upgrades to ABC’s payment process. What step should be taken to help mitigate this type of risk in the future?

Economists are forecasting a rise in gas prices within the next 3 months. Charged with the task of establishing a risk mitigation approach for the company, the CRO has determined that the company has considerable exposure to fluctuations in gas prices. In coming to this conclusion, the CRO:

A U.S. bank is actively trying to establish its operations in an emerging market country, but is not experiencing much success due to differences in the business culture. To gain some market share, an executive of the bank decides to give the son of a local dignitary a highly paid position in the organization. Furthermore, the dignitary is a person of interest on various terror watch lists. Sanctions can be placed on the bank because the executive did NOT establish compliance with which of the following?

The Treasury Manager is forecasting sales based on historical data. It was observed that sales decreased sharply in December last year, normally a high sales volume period. Further investigation indicated that a severe winter storm was experienced across the Southeastern United States. How should this event be classified in the forecast when considering the sales trends?

The regional offices of ABC Company implemented a system that would allow the employees to pass information between regions in a secure fashion. This system requires that all offices have the same key in order to read messages sent electronically. Which e-commence security type is MOST LIKELY being used?

While revising the investment policy, the CFO performs a sensitivity analysis for the company’s cash flow from investments, and identifies that increasing the maximum dollar value for bond purchases will improve returns by 10% on average, all other variables being equal. What issue will the CFO now need to address in the investment policy?

Which of the following capital budgeting methods ignores the time value of money?

MCA, Inc. upgraded the Treasury workstation that had been in place for two years and used data from that 24-month period to develop a new short-term forecast. A trend factor was applied to controlled disbursements of 97% on a month-by-month basis and the variance to actual disbursements is less than 1%. Which of the following model validation techniques was utilized?

All treasury policies should be approved by:

A manufacturing company's long-term capital structure is 30% debt and 70% equity, its cost of equity is 10%, its average cost of debt is 8%, and the marginal tax rate is 34%. If the company has invested total capital of $567,865 in its production unit and the unit's operating profit is $79,856, what is the economic value added (EVA) of the unit?

Making payments through electronic payments networks can be a part of a treasury management system’s functionality, but it is subject to numerous constraints. Which of the following is a true statement of those constraints?

A manager has prepared an analysis of five investment alternatives. Prior to selecting which alternative to invest funds in, the manager calculated the anticipated return for all options. The manager is only going to invest in one alternative. The four investments that are not chosen are:

An institutional investor has purchased an investment that provides a fixed rate of return with some potential for delays in payments. The return is 70% tax deductible for this particular investor. What type of investment was MOST LIKELY purchased?

Which of the following would be considered insurance risk management services?

Based on the above information,

if the company uses the trade-off theory in considering its WACC, how will it finance its growth?

Company XYZ has an underfunded defined benefit plan. Company XYZ is required to provide filings for this plan to all of the following EXCEPT:

Company XYZ is in its first year of operations. The company culture is conservative, and it has $500 million to invest in short-term investments. The company has a growth rate of 25% and is looking to issue an IPO in the near future. The investment manager is in the process of creating a short-term investment policy which must be approved by the board of directors. An item that should be included in the policy is:

Which of the following options would be BEST suited for a firm that wishes to pay no premium?

The controller is developing a financial plan that includes an operating budget and a financial budget. Which of the following statements is true?

Company ABC, with a current debt rating of BBB- from Standard & Poor’s, is negotiating a new revolving credit agreement with its lenders. The company anticipates closing on a small acquisition within a year of executing this new agreement and would like maximum flexibility to determine its capital structure. The company is MOST concerned about the lenders’ inclusion of A.

Kensley Biscuit Company Ltd. decides to invest £125,000 in new packaging equipment to help it keep up with increased demand. As a result of this investment, the company’s annual profit improves by £11,763. If Kensley’s cost of capital is 8.25% and its corporate tax rate is 42%, what is its residual income (RI) from the investment?

Two months after a government overthrow, the new Minister of Industry and Culture took over the country’s largest steel company and compensated the owners at 50% of book value. What is the government’s action called?

The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY:

One example of increased use of electronic payments for retail businesses to convert customer checks to cash at the counter more quickly is:

BEA Company has determined its breakeven dollar amount for concentrating remote funds is $550.00. BEA Company has a daily earnings rate of 6% and gains one day of accelerated funds. If a wire costs BEA $35.00 dollars, what is the cost of an electronic funds transfer for BEA Company?

Company ABC has undergone substantial system enhancements in order to take advantage of B2B efficiencies. To encourage its trading partners, ABC has offered a 1.5% discount to those who allow ABC to debit their bank account electronically on the day the product is delivered. The greater number of trading partners who agree to this arrangement, the greater improvement Company ABC will see in its:

The credit management function is responsible for:

Which of the following is a negotiable time draft?

A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company's effective interest rate be reduced?

A banker's acceptance can be described as all of the following EXCEPT:

Which of the following statements is true about lockbox network systems?

The future value of $60 invested at 8% compounded per year for three years is:

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

Systemic risk can be caused by which of the following?

The renegotiation of trade payment terms in an e-commerce environment should include which of the following?

A high-yield, non-investment-grade security is commonly referred to as which of the following?