FIN302 CTP Certification Exam Review
Latest
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. - ANSWER -B 4.B.2
A cash manager at a retailer forecasts a positive collected cash position for the end of
the current day. The company has an overdraft facility at 10%, a separate investment
account earning 8% before taxes, an earnings credit rate of 8% and an outstanding
single payment note at 9.5% maturing in 1 week. This month's bank service fees are
expected to exceed the earnings credit. Which of the following intra-day options would
be the MOST economically positive for the company?
(A) Leave the funds in the account.
(B) Redeem the single payment note.
(C) Prepay administrative expenses.
(D) Transfer funds to the investment account. - ANSWER -A 2.A.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 - ANSWER -D 4.C.1
When a short-term loan is paid with a lump sum payment and the payment includes
both interest and principal, the loan is often referred to as a:
(A) single payment note.
(B) material payment note.
(C) balloon payment note.
(D) commercial note. - ANSWER -A 3.B.3
The Company J portfolio consists of two stocks, 65% of Stock A with a return of 7.63%
and 35% of Stock B with a return of 3.89%. What is the Company J portfolio return?
,(A) 1.86%
(B) 5.10%
(C) 6.32%
(D) 18.57% - ANSWER -C 4.D.8
What does a company with a restrictive current asset investment strategy typically
have?
(A) High financing costs
(B) Low accounts receivable balances
(C) High inventory levels
(D) Low tax liabilities - ANSWER -B 3.A.5
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?
(A) Long-term debt to capital
(B) Debt to tangible net worth
(C) Total liabilities to total assets
(D) Cash flow to total debt - ANSWER -B 3.A.2
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 - ANSWER -D 1.A.3
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?
(A) Exposure Horizon
(B) Diversification
(C) Liquidity
(D) Safety - ANSWER -D 5.C.2
,What is the earnings credit the company is receiving for this month?
(A) $416.10
(B) $4,160.96
(C) $449.38
(D) $457.71 - ANSWER -A 1.D.4
Using the information provided for question 10, what would the earnings credit change
to if the company negotiated a 50% decrease in deposit float ?
(A) $4,577.05
(B) $457.71
(C) $449.38
(D) $503.48 - ANSWER -B 1.D.4
The treasurer of a corporation is negotiating with one of his/her suppliers to allow the
corporation to have 30days to pay the supplier's invoices. The treasurer is arranging:
(A) short-term financing.
(B) revolving credit agreement.
(C) factoring of receivables.
(D) uncommitted line of credit. - ANSWER -A 2.B.6
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?
(A) Credit
(B) Valuation
(C) Counterparty
(D) Foreign exchange - ANSWER -C 5.B.3
A company can pay their supplier by check or by electronic transfer. If the difference
between the value dateof 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% - ANSWER -B 2.A.3
Which of the following is a tool that companies use to obtain a quantitative rating of a
financial institution's level of service?
, (A) Relationship review
(B) Score card
(C) Service agreement
(D) CAMELS rating - ANSWER -B 1.D.3
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 - ANSWER -C 5.B.2
A French exporter sells goods to a foreign buyer in euros and wants to guarantee that
payment is made by the buyer. The exporter would MOST LIKELY require a(n):
(A) bankers' acceptance.
(B) documentary collection.
(C) letter of credit.
(D) open account. - ANSWER -C 4.B.3
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by
the company is referred to as:
(A) preemptive right.
(B) right of first refusal.
(C) existing ownership right.
(D) prevention of dilution right. - ANSWER -A 1.F.2
After a recent review of its insurance policies, a petroleum products company
determines it needs to re-evaluate its risk exposure to potentially reduce its insurance
premiums. The company has operated in two locations for 20 years but only produces
and stores petroleum at one location. In doing so, the risk manager determine the
following exposures:
*The number of employee workers compensation claims due to injuries while loading
trucks has increased 25% in the past 12 months.
*The primary tank used for petroleum storage is 13 years old and standard life of tanks
of this model is 20 years.
*There is only one road into the current petroleum storage facility.
Latest
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. - ANSWER -B 4.B.2
A cash manager at a retailer forecasts a positive collected cash position for the end of
the current day. The company has an overdraft facility at 10%, a separate investment
account earning 8% before taxes, an earnings credit rate of 8% and an outstanding
single payment note at 9.5% maturing in 1 week. This month's bank service fees are
expected to exceed the earnings credit. Which of the following intra-day options would
be the MOST economically positive for the company?
(A) Leave the funds in the account.
(B) Redeem the single payment note.
(C) Prepay administrative expenses.
(D) Transfer funds to the investment account. - ANSWER -A 2.A.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 - ANSWER -D 4.C.1
When a short-term loan is paid with a lump sum payment and the payment includes
both interest and principal, the loan is often referred to as a:
(A) single payment note.
(B) material payment note.
(C) balloon payment note.
(D) commercial note. - ANSWER -A 3.B.3
The Company J portfolio consists of two stocks, 65% of Stock A with a return of 7.63%
and 35% of Stock B with a return of 3.89%. What is the Company J portfolio return?
,(A) 1.86%
(B) 5.10%
(C) 6.32%
(D) 18.57% - ANSWER -C 4.D.8
What does a company with a restrictive current asset investment strategy typically
have?
(A) High financing costs
(B) Low accounts receivable balances
(C) High inventory levels
(D) Low tax liabilities - ANSWER -B 3.A.5
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?
(A) Long-term debt to capital
(B) Debt to tangible net worth
(C) Total liabilities to total assets
(D) Cash flow to total debt - ANSWER -B 3.A.2
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 - ANSWER -D 1.A.3
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?
(A) Exposure Horizon
(B) Diversification
(C) Liquidity
(D) Safety - ANSWER -D 5.C.2
,What is the earnings credit the company is receiving for this month?
(A) $416.10
(B) $4,160.96
(C) $449.38
(D) $457.71 - ANSWER -A 1.D.4
Using the information provided for question 10, what would the earnings credit change
to if the company negotiated a 50% decrease in deposit float ?
(A) $4,577.05
(B) $457.71
(C) $449.38
(D) $503.48 - ANSWER -B 1.D.4
The treasurer of a corporation is negotiating with one of his/her suppliers to allow the
corporation to have 30days to pay the supplier's invoices. The treasurer is arranging:
(A) short-term financing.
(B) revolving credit agreement.
(C) factoring of receivables.
(D) uncommitted line of credit. - ANSWER -A 2.B.6
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?
(A) Credit
(B) Valuation
(C) Counterparty
(D) Foreign exchange - ANSWER -C 5.B.3
A company can pay their supplier by check or by electronic transfer. If the difference
between the value dateof 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% - ANSWER -B 2.A.3
Which of the following is a tool that companies use to obtain a quantitative rating of a
financial institution's level of service?
, (A) Relationship review
(B) Score card
(C) Service agreement
(D) CAMELS rating - ANSWER -B 1.D.3
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 - ANSWER -C 5.B.2
A French exporter sells goods to a foreign buyer in euros and wants to guarantee that
payment is made by the buyer. The exporter would MOST LIKELY require a(n):
(A) bankers' acceptance.
(B) documentary collection.
(C) letter of credit.
(D) open account. - ANSWER -C 4.B.3
The right of stockholders to purchase, on a pro-rata basis, any new shares issued by
the company is referred to as:
(A) preemptive right.
(B) right of first refusal.
(C) existing ownership right.
(D) prevention of dilution right. - ANSWER -A 1.F.2
After a recent review of its insurance policies, a petroleum products company
determines it needs to re-evaluate its risk exposure to potentially reduce its insurance
premiums. The company has operated in two locations for 20 years but only produces
and stores petroleum at one location. In doing so, the risk manager determine the
following exposures:
*The number of employee workers compensation claims due to injuries while loading
trucks has increased 25% in the past 12 months.
*The primary tank used for petroleum storage is 13 years old and standard life of tanks
of this model is 20 years.
*There is only one road into the current petroleum storage facility.
