Term
A company has subsidiaries in the United States (U.S.), United Kingdom (U.K.), Germany and Japan. The U.S. subsidiary sends invoices to the U.K, and German subsidiaries and pays invoices to the U.K, German and Japanese subsidiaries. A re-invoicing center would affect the U.S. subsidiary in which of the following ways?
a.) Eliminate all currency exposures
b.) Eliminate currency exposures for transactions to the U.K. and Germany but not one-way transactions to Japan
c.) Eliminate currency exposures for transactions to Japan but not two-way U.K. and German transactions
d.) Reduce currency exposures to the net amount owed or due to the U.S. subsidiary |
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Definition
a.) Eliminate all currency exposures
Chapter 7 |
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Term
Reverse positive pay service includes which of the following?
a.) Bank notification to the issuing company of items to be returned
b.) Transmission by a company of a file of items it has issued to the payor bank
c.) A financial institution report with check numbers of yet-to-be-paid checks
d.) Imaging of checks already paid by the payor bank |
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Definition
c.) A financial institution report with check numbers of yet-to-be-paid checks
Chapter 6 |
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Term
Which of the following is an advantage of short-term debt over long-term debt?
a.) Can be used in a maturity matching strategy in which short-term financing is used to finance permanent current assets
b.) Can have lower interest rates when the yield curve is downward-sloping
c.) Can guarantee that a certain level of financing will be available if current assets expand quickly
d.) Can adjust financing to level of current assets to avoid excess financing |
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Definition
d.) Can adjust financing to level of current assets to avoid excess financing
Chapter 6 |
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Term
Which of the following financing strategies uses some short-term financing to support a portion of permanent current assets?
a.) Spontaneous
b.) Conservative
c.) Aggressive
d.) Maturity matching |
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Definition
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Term
A company's cash turnover has gone from 5.24 to 6.08 over the course of the year. What does this imply?
a.) The company uses its cash more efficiently, as it can re-spend each of its dollars more times per year
b.) The company uses its cash more effectively as each of its dollars generates a greater volume of business per year
c.) The company has reduced its cost of goods sold because its production inputs require less cash on average
d.) The company has increased its sales levels as it has more dollars available on average |
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Definition
a.) The company uses its cash more efficiently, as it can re-spend each of its dollars more times per year
Chapter 7 |
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Term
Internal transfers of funds among a company’s operating units to provide sufficient cash for disbursements is an example of which of the following type of operating cash flows?
a.) Cash outflows
b.) Cash inflows
c.) Concentration/funding flows
d.)Liquidity management flows |
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Definition
c.) Concentration/funding flows
Chapter 7 |
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Term
A netting system can be used for all of the following EXCEPT
a.) intra-company transactions.
b.) giro payments.
c.) foreign exchange transactions.
d.) third-party payments or receipts. |
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Definition
b.) giro payments.
Chapter 7 |
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Term
Which of the following is a company MOST LIKELY to use when exporting to an unknown counterparty?
a.) Open account
b.) Cash terms
c.) Letter of credit
d.) Collection letter |
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Definition
c.) Letter of credit
Chapter 6 |
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Term
Collection float for check-based payments is defined as the delay between the time the payor
a.) mails the check and the payee receives the available funds.
b.) prepares the check and the payee deposits the check.
c.) mails the check and the payee deposits the check.
d.) mails the check and the check is charged to the payor's account. |
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Definition
a.) mails the check and the payee receives the available funds.
Chapter 7 |
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Term
Using a letter of credit may result in
a.) credit rating substitution.
b.) diversification.
c.) reduced marketability.
d.) collateralization. |
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Definition
a.) credit rating substitution.
Chapter 6 |
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Term
A business wants to encourage adoption of electronic payment methods by giving them an equivalent cost to the buyer as that of a check. If the opportunity cost of funds is 11 percent and float-neutral terms would allow electronic payment to be made 3 days later than by check, what is the equivalent discount that could be offered for immediate electronic payment?
a.) 0.02 percent
b.) 0.1 percent
c.) 0.2 percent
d.) 1 percent |
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Definition
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Term
Which of the following is a method of treasury reengineering that determines payment amounts based on quantities actually received multiplied by the agreed-upon price on the purchase order?
a.) Evaluated Receipts Settlement (ERS)
b.) Electronic bill presentment and payment (EBPP)
c.) Paid-on-production
d.) Electronic invoice presentment and payment (EIPP) |
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Definition
a.) Evaluated Receipts Settlement (ERS)
Chapter 7 |
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Term
A bank issues a negotiable short-term instrument to finance the import of goods for a company. This instrument requires that the bank take responsibility for paying a draft issued in connection with a letter of credit. What type of trade service is being offered?
a.) Letter of credit confirmation
b.) Commercial paper
c.) Banker's acceptance
d.) Documentary collection |
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Definition
c.) Banker's acceptance
Chapter 6 |
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Term
A company makes most of its working capital payments by accessing a short-term line of credit with an adjustable rate (base rate is LIBOR). Assuming the organization can tolerate a fluctuating opportunity cost, which of the following should the organization use as its opportunity cost for working capital decisions?
a.) Weighted average cost of capital (WACC)
b.) Short-term borrowing rate
c.) Short-term investing rate
d.) London Interbank Offered Rate (LIBOR) |
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Definition
b.) Short-term borrowing rate
Chapter 7 |
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Term
The time from the deposit of a check in a bank account until the funds can be used by the payee is known as
a.) processing float.
b.) collection float.
c.) availability float.
d.) mail float. |
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Definition
c.) availability float.
Chapter 7 |
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Term
Which of the following will help convince both buyers and sellers to adopt electronic payments over paper-based payments?
Select all that apply.
a.) The buyer delays electronic payment to compensate for float
b.) The seller makes the electronic payment due the day a payment would need to be mailed
c.) The buyer decreases collection float for electronic payments
d.) The seller offers a discount if the buyer agrees to instant electronic debits |
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Definition
a.) The buyer delays electronic payment to compensate for float
d.) The seller offers a discount if the buyer agrees to instant electronic debits
Chapter 7 |
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Term
Which of the following allows businesses to safely do away with a significant paper-based control, thus increasing the speed of business transactions?
a.) Electronic Signatures in Global and National Commerce Act
b.) Expedited Funds Availability Act
c.) Interstate Banking and Branching Efficiency Act
d.) Gramm-Leach-Bliley Act |
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Definition
a.) Electronic Signatures in Global and National Commerce Act
Chapter 7 |
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Term
When a payor lengthens disbursement float, the
a.) payor's longer disbursement float will decrease liquidity.
b.) payee's disbursement float will also be lengthened.
c.) payee's collection float will be lengthened.
d.) payor's collection float will be shortened. |
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Definition
c.) payee's collection float will be lengthened.
Chapter 7 |
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Term
Which of the following is calculated as end-of-period accounts receivable (A/R) divided by average daily credit sales for that period?
a.) Cash turnover
b.) A/R balance pattern
c.) Days Sales Outstanding (DSO)
d.) Customer aging schedule |
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Definition
c.) Days Sales Outstanding (DSO)
Chapter 7 |
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Term
All of the following are reasons that electronic invoice presentment and payment (EIPP) has grown slowly EXCEPT
a.) there are a very large number of formats and procedures for B2B billing.
b.) most users have to go to multiple vendors or sites to gather all billing information.
c.) the traditional B2B payment model allows a single payment for multiple invoices.
d.) the international standard format for B2B bills has not yet been adopted for invoices. |
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Definition
d.) the international standard format for B2B bills has not yet been adopted for invoices.
Chapter 7 |
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Term
External information sources used to assist a company in determining the creditworthiness of a credit applicant include which of the following?
Select all that apply.
a.) Credit application completed by the applicant
b.) Trade references
c.) Financial statements
d.) NACHA |
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Definition
b.) Trade references
c.) Financial statements
Chapter 6 |
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Term
Which of the following are advantages of a cross-border cash management netting system?
Select all that apply.
a.) Improved cash forecasting
b.) Reduced wire transfers
c.) Minimized setup costs
d.) Reduced foreign exchange transactions |
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Definition
a.) Improved cash forecasting
b.) Reduced wire transfers
d.) Reduced foreign exchange transactions.
Chapter 7 |
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Term
The process of matching and applying a customer's payment against outstanding invoices is known as
a.) credit application.
b.) payment processing.
c.) receivable matching.
d.) cash application. |
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Definition
d.) cash application
Chapter 6 |
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Term
Which of the following begins in the payment for materials part of the cash flow cycle, continues through the sale of the goods and ends when accounts receivable are collected?
a.) Cash conversion cycle
b.) Days’ receivables
c.) Days’ payables
d.) Days’ inventory |
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Definition
a.) Cash conversion cycle
Chapter 7 |
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Term
How are the percentages in receivables balance patterns established?
a.) Using a cash conversion efficiency analysis
b.) Using a distribution forecast
c.) Using a company's collection history
d.) Using cash forecasting |
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Definition
c.) Using a company's collection history
Chapter 7 |
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Term
Under a relaxed current asset investment strategy, a company will have which of the following in comparison to a restrictive strategy?
a.) Relatively high investment returns if they also have a large investment in current assets
b.) Less risk if they also have a larger investment in current assets
c.) Low levels of accounts receivable
d.) Low levels of current assets relative to sales |
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Definition
b.) Less risk if they also have a larger investment in current assets
Chapter 6 |
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Term
A company has a relatively high current ratio. Which of the following is a possible detractor for this position?
a.) There is a high risk that such a company will have trouble paying off its debts
b.) There is a high cost associated with having too much liquidity
c.) There is a high cost associated with having too much current debt
d.) There is a high risk that such a company will have liquidity problems |
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Definition
b.) There is a high cost associated with having too much liquidity
Chapter 6 |
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Term
All of the following are true of implementing e-commerce using standard ASC X12 formats EXCEPT
a.) it facilitates JIT inventory management, a key objective of working capital management.
b.) it allows smaller trading partners to avoid using the Internet for transfer of value.
c.) it eliminates manual processes such as matching.
d.) it significantly reduces cycle time since e-commerce transactions have no mail time delays. |
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Definition
b.) it allows smaller trading partners to avoid using the Internet for transfer of value.
Chapter 7 |
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Term
A company makes a purchase under credit terms of 1/10 net 30. At which of the following investment rates should the company be indifferent about taking the discount and paying on day 10 or forgoing the discount and paying on day 30?
a.) 12%
b.) 18%
c.) 25%
d.) 37% |
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Definition
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Term
A company has $78,000 in cost of goods sold for a period that also had an average of 2 days of mail float, for $15,000 in ending accounts payable. What is this company’s days’ payables for this period?
a.) 5.2 days
b.) 7.2 days
c.) 70.2 days
d.) 72.2 days |
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Definition
c.) 70.2 days
Days' Payapbles = Accounts Payable X Cost of Goods Sold x 365
Chapter 7 |
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Term
Which of the following is an advantage of a centralized A/P and disbursement system?
a.) Potential reduction in payment delays, helping relationships with payees
b.) Improved ability to concentrate excess cash
c.) Improved relationships with vendors because of direct interactions
d.) Greater autonomy for local managers |
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Definition
b.) Improved ability to concentrate excess cash
Chapter 6 |
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Term
Which of the following acts amends the Truth in Lending Act by allowing charge account customers to use the same defenses against banks and credit card companies that they could already use against merchants?
a.) Fair Debt Collection Practices Act
b.) Fair Credit Reporting Act
c.) Equal Credit Opportunity Act
d.) Fair Credit Billing Act |
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Definition
d.)Fair Credit Billing Act
Chapter 6 |
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