CTP Online Practice Questions and Answers

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 company with a relatively poor credit rating borrows most of its funds with short maturities. They may want to change its exposure to interest rates to more correctly reflect the long-term nature of the projects it is funding. Or, they may believe that long-term interest rates are going to rise, causing it to seek protection against the impact of higher interest rates on its balance sheet. Which of the following would be a solution?

A. Forward contract

B. Interest rate swap

C. Currency option

D. Futures contract

The "agency problem" refers to:

A. management's use of a fiduciary agent for stockholders.

B. a large and active institutional investor base acting on behalf of individual investors.

C. stockholders who allow management to take actions that will benefit management.

D. the internal audit function reporting to the audit committee of the board instead of to management.

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.

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?

A. Payable through

B. Sight

C. Time

D. Preauthorized

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

A. Payment system operators

B. Bank regulators

C. Lenders of last resort

D. Government debt issuers

A retail company is performing a risk analysis on its accepted payment types. Cash is the primary form of payment for this retailer. What is the PRIMARY issue with cash payment systems?

A. Weight of cash

B. Cost of processing

C. Security and integrity

D. Cash-based accounting practices

Treasury uses which of the following internal sources of information in its daily operations?

A. Product development plans

B. Information technology budgets

C. Marketing reports

D. Sales and purchasing summaries

A New York company wishes to use its treasury management system to send US funds to its London UK subsidiary. Which one of the following enables the same day settlement of funds transfer?

A. Automated Clearing House

B. Correspondent accounts with the Federal Reserve

C. Bankers Automated Clearing Service

D. Clearing House for Interbank Payment Systems

Which of the following is LEAST likely to appear on an account analysis?

A. Service charges

B. Average float balance

C. Earnings allowance rate

D. Money market rate