1 Company ABC has a concentrated investor base consisting primarily of large institutional shareholders. It would like to increase its number of smaller shareholders using the most cost-effective method of raising capita
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1 Company ABC has a concentrated investor base consisting primarily of large institutional shareholders. It would like to increase its number of smaller shareholders using the most cost-effective method of raising capital available. What should Company ABC do to accomplish this goal?
(A) Issue preferred stock.
(B) Implement a dividend reinvestment plan.
(C) Issue warrants.
(D) Implement a stock repurchase plan.
3 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
8 Which of the following can be considered key responsibilities of daily cash management? I. Overseeing compensation for bank services
II. Management of short-term borrowing and investing
III. Projecting future cash shortages and surpluses
(A) I only
(B) I and II only
(C) II and III only
(D) I, II, and III
14 A company can pay their supplier by check or by electronic transfer. If the difference between the value date of the payment methods is 4 days from the company's perspective, what discount should the supplier offer them to get the company to pay on the same day as they did when they paid by check (rounded to the nearest 100th percent)? Assume no difference in the cost of the payment method, an opportunity cost of 8%, and float neutrality.
(A) 2.00%
(B) 0.09%
(C) 0.87%
(D) 0.02%
0.08 / 365 = 2.19178
= 2.19178 X 4 ( days )
= 8.7671 ( Round )
= 9 %
16 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
18 The right of stockholders to purchase, on a pro-rata basis, any new shares issued by the company is referred to as:
preemptive right.
(B) right of first refusal.
(C) existing ownership right.
(D) prevention of dilution right.
26 Examples of traditional factors used in making a credit decision include which of the following?
I. Capacity
II. Capital
III. Compliance
IV. Character
(A) IV only
(B) I and III only
(C) I, II, and IV only
(D) I, II, III, and IV
36 ABC Company offers a discount of 2/10, net 30 to its customers. ABC factored its accounts receivables with an outside vendor, under a "with recourse" arrangement. What impact might this have on the company?
(A) Increase days sales outstanding.
(B) Improve cash conversion cycle.
(C) Reduce bad debt expense.
(D) More customers may take the discount. ...is the answer because factoring speeds up the cash cycle
37 The treasury manager of a chain of clothing stores wants to develop a medium-term forecast. Management plans to open two new stores, and anticipates same-store sales to increase by 15%. Which of the following items can be predicted with the highest degree of certainty?
(A) Taxes on stock options
(B) New product sales
(C) Fixed bond interest payment
(D) Refranchising proceeds ...bond interest payments are 100% predicable.
39 The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY:
(A) enter into a short-term floating rate agreement.
(B) obtain long-term fixed interest rate debt.
(C) roll-over short-term debt at each maturity.
(D) obtain a long-term floating rate agreement. ...use idle cash to pay down short-term debt and save the interest cost.
42 Which of the following is a source of short-term financing?
(A) Bond issuance
(B) Factoring of accounts receivable
(C) Issuance of common stock
(D) Retaining profits
46 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?
(A) Financing working capital requirements
(B) Repaying short-term debt
(C) Reducing labor costs
(D) Factoring accounts receivable
53 Company X, a Singapore 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:
political risk.
(B) physical security risk.
(C) financial institution risk.
(D) property risk.
56 Loss exposures related to treasury management may include which of the following?
(A) Excessive product recalls
(B) PBGC violations
(C) Deterioration of investment principal
(D) Bank consolidations ...happens, this does fall under the responsibility of the treasury manager to address and fix.
59 Company Q has average daily credit sales of $15,875.00. The daily cash sales are $8,750.00. The AR ending balance for June 30 is $387,500.00. What is the average days' sales outstanding for Company Q?
24.41
(B) 0.04
(C) 15.74
(D) .06 -..to see how well you are collecting on AR, you omit the cash sales from the calculation.
387500 / 15875 = 24.41
67 A merchant presents 2 different batches of credit card transactions for processing, each batch has the same dollar value and number of transactions, but the fees are different. Which of the following explains why?
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