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Your Path to Success: How to Pass the AFP CTP Certified Treasury Professional Exam

Questions 21

Financial ratios may provide an inaccurate forecast of a company's performance because they are:

Options:

A.

difficult to incorporate into statistical forecasting.

B.

economic rather than accounting values.

C.

sensitive to seasonal cash flows.

D.

based on snapshots of the company's activity.

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Questions 22

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

Options:

A.

material deviations from GAAP occur.

B.

the auditor is not independent.

C.

the financial statements may be misleading.

D.

the financial statements are fairly stated.

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Questions 23

The term "factoring" refers to a:

Options:

A.

mathematical formula used in calculating bond prices.

B.

short-term financing method.

C.

reduction of bank fees related to volume.

D.

Federal Reserve Open Market Committee activity.

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Questions 24

If the Federal Reserve wanted to stimulate a sluggish economy, it could do so by:

Options:

A.

increasing reserve requirements.

B.

buying U.S. government securities in the open market.

C.

selling U.S. government securities in the open market.

D.

increasing margin requirements.

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Questions 25

A company is considering issuing debt in a market environment in which there is a larger than normal spread between high- and low-risk investments. Among several factors, what are the concerns regarding investor behavior that the treasurer will MOST need to consider?

Options:

A.

Matching maturity

B.

Availability of collateral

C.

Capital structure

D.

Flight to quality

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Questions 26

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?

Options:

A.

Precautionary

B.

Strategic

C.

Opportunity

D.

Transaction

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Questions 27

XYZ Company has decided to transition the responsibility for its hedging activities from the local offices to the head office; however, the local offices will continue to choose their own depository banks. Under the new structure, XYZ’s treasury operations will be:

Options:

A.

centralized.

B.

combined.

C.

decentralized.

D.

shared service center.

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Questions 28

A company's lockbox bank, which processes 24 hours per day, has a 6:00 P.M. ledger credit cutoff and grants same-day availability on checks drawn on Bank B that are received by 10:00 P.M. Which of the following ledger and collected credit postings would result from a Bank B check received at 11:00 P.M. on Tuesday?

Options:

A.

Ledger credit Tuesday, collected credit Wednesday

B.

Ledger credit Tuesday, collected credit Thursday

C.

Ledger credit Wednesday, collected credit Wednesday

D.

Ledger credit Wednesday, collected credit Thursday

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Questions 29

Compared to a letter of credit, a documentary collection is:

Options:

A.

less costly and offers less protection.

B.

less costly and offers more protection.

C.

more costly and offers less protection.

D.

more costly and offers more protection.

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Questions 30

A major toy retailer operates 65 stores throughout the Midwest. Which of the following collection methods is MOST LIKELY to be used by this company?

Options:

A.

Field deposit

B.

Preauthorized debit

C.

Direct deposit

D.

Wholesale lockbox

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Questions 31

Which of the following is true about disbursement ZBAs?

Options:

A.

Their funding requirements are known early in the day.

B.

They are funded by intra-bank transfer.

C.

They are pre-funded from a master account.

D.

They are not recommended in a decentralized environment.

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Questions 32

Since the inception of ABC Company's pension plan, 1,500 employees qualified and were paid pensions of $500 million after retirement, of which 700 employees were those who earned $110,000 or more and received $200 million in pension benefits. When the company filed for bankruptcy in 2010, the IRS claimed back taxes from the company stating that the pension plan was not qualified under ERISA. On what basis was the IRS MOST LIKELY making its claim?

Options:

A.

Adequate funds were not available to meet the plan's obligations.

B.

Pension benefits were not safeguarded when the pension plan was terminated.

C.

The company failed to remit its PBGC premiums.

D.

The plan did not meet the minimum coverage requirements.

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Questions 33

An art history museum has recently finished renovating its new location. Before the move, the treasurer considers purchasing additional insurance to protect the art during transit. What form of additional insurance should the treasurer choose?

Options:

A.

Special multi-peril (SMP)

B.

Business interruption

C.

General liability

D.

Difference in conditions (DIC)

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Questions 34

In this situation, the net earnings credit amount for the month would show:

CTP Question 34

Options:

A.

a deficiency of $1,725.

B.

an excess of $1,425.

C.

an excess of $1,850.

D.

an excess of $2,100.

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Questions 35

Company XYZ has stable cash flows and sizable assets. The board of directors compared its WACC with its own industry’s averages and determined that it may be at a competitive disadvantage. In order to become more competitive, what action will XYZ MOST LIKELY take?

Options:

A.

Issue new debt and repurchase common shares.

B.

Issue more common shares and retire debt.

C.

Reduce the dividend for a few quarters.

D.

Issue preferred shares with convertible warrants.

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Questions 36

Which of the following is a purpose of the Check 21 Act?

Options:

A.

Grant legal status for digital signatures

B.

Foster innovation in the ACH payment system

C.

Facilitate check truncation

D.

Improve check imaging and archiving

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Questions 37

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:

Options:

A.

days’ inventory.

B.

cash flow to total debt.

C.

days’ payables.

D.

cash turnover ratio.

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Questions 38

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:

Options:

A.

decrease mail float as a result of applying payments in-house.

B.

ensure that payments are correctly applied to the customer’s account.

C.

reduce the processing float since payments are mailed directly to the customer.

D.

lower overall costs since in-house processing is cheaper than third-party processing.

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Questions 39

Private companies usually go public by making an initial public offering. What is the term for offering subsequent shares in the market?

Options:

A.

Common

B.

Underwritten

C.

Regulated

D.

Seasoned

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Questions 40

Which of the following is a true statement about operating leverage?

Options:

A.

The higher the company’s fixed costs are, the lower its operating leverage.

B.

The higher the company's fixed costs are, the higher its operating leverage.

C.

The lower the company's fixed costs are, the higher its operating leverage.

D.

The higher the company's variable costs are, the higher its operating leverage.

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