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Free Questions › CTP › Corporate Liquidity Management
Free CTP Corporate Liquidity Management Practice Questions & Answers
150 exam-style Corporate Liquidity Management questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 31
A 90-day Treasury bill with a face value of $1,000,000 is purchased for $985,000. What is its bank discount yield (360-day basis)?
Select an option first.
Correct answer: D — 6.00%
Explanation: Bank discount yield = (discount / face) x (360 / days) = ($15,000 / $1,000,000) x (360 / 90) = 0.015 x 4 = 6.00%. The discount yield uses face value and a 360-day year, unlike the bond-equivalent yield which would use price and 365 days.
Question 32
For a 90-day Treasury bill with face value $1,000,000 purchased at $985,000, what is the bond-equivalent yield (365-day basis)?
Select an option first.
Correct answer: D — 6.18%
Explanation: Bond-equivalent yield = (discount / price) x (365 / days) = ($15,000 / $985,000) x (365 / 90) = 0.0152284 x 4.0556 = 6.18%. It exceeds the 6.00% discount yield because it divides by the lower purchase price and annualizes over 365 days.
Question 33
A firm issues 60-day commercial paper with a face value of $5,000,000 at a discount rate of 4% (360-day basis). What net proceeds does the issuer receive?
Select an option first.
Correct answer: A — $4,966,667
Explanation: Proceeds = Face x (1 - discount rate x days/360) = $5,000,000 x (1 - 0.04 x 60/360) = $5,000,000 x (1 - 0.0066667) = $5,000,000 x 0.9933333 = $4,966,667. The $33,333 difference from face is the interest cost embedded in the discount.
Question 34
A treasurer invests $10,000,000 in a 7-day repo at a repo rate of 3.5% (360-day basis). How much interest is earned?
Select an option first.
Correct answer: B — $6,805.56
Explanation: Interest = principal x rate x days/360 = $10,000,000 x 0.035 x 7/360 = $6,805.56. Using a 360-day money market convention, the short 7-day term produces a small absolute return despite the sizable principal.
Question 35
A negotiable CD of $1,000,000 pays 5% interest and matures in 180 days (360-day basis). How much interest is paid at maturity?
Select an option first.
Correct answer: C — $25,000
Explanation: Interest = principal x rate x days/360 = $1,000,000 x 0.05 x 180/360 = $25,000. Because 180 days is exactly half of a 360-day year, the investor earns half of the 5% annual coupon. The $50,000 answer wrongly ignores the fractional term.
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Question 36
A firm collects 20% of sales in the month of sale, 50% in the following month, and 30% two months after sale. Sales were $100,000 (January), $120,000 (February), and $150,000 (March). What are March cash collections?
Select an option first.
Correct answer: D — $120,000
Explanation: March collections = 20% x March + 50% x February + 30% x January = 0.20 x $150,000 + 0.50 x $120,000 + 0.30 x $100,000 = $30,000 + $60,000 + $30,000 = $120,000. Each prior month's sales contribute according to the fixed collection pattern.
Question 37
Using a simple 3-month moving average, forecast next month's cash receipts if the last three months were $90,000, $100,000, and $110,000.
Select an option first.
Correct answer: B — $100,000
Explanation: 3-month moving average = ($90,000 + $100,000 + $110,000) / 3 = $300,000 / 3 = $100,000. A simple moving average weights each of the three most recent periods equally to produce the next forecast.
Question 38
A firm begins the week with $50,000 in cash, expects receipts of $120,000, and expects disbursements of $140,000. What is the projected ending cash balance?
Select an option first.
Correct answer: A — $30,000
Explanation: Ending cash = beginning cash + receipts - disbursements = $50,000 + $120,000 - $140,000 = $30,000. Because disbursements exceed receipts by $20,000, the opening balance is drawn down accordingly.
Question 39
A notional pool contains three accounts with balances of +$500,000, -$300,000, and +$200,000. What is the net notional position on which interest is calculated?
Select an option first.
Correct answer: C — $400,000
Explanation: Net notional position = $500,000 - $300,000 + $200,000 = $400,000. Notional pooling offsets the credit and debit balances to a single net figure for interest, so the company earns/pays interest on the $400,000 net rather than on gross balances.
Question 40
A company has one account with a +$500,000 credit balance earning 1% and another with a -$300,000 overdraft costing 6%. If notional pooling offsets the $300,000 overdraft against the credit balance, what is the approximate annual interest benefit versus running the accounts separately?
Select an option first.
Correct answer: A — $15,000
Explanation: Offsetting avoids overdraft interest of $300,000 x 6% = $18,000, but the $300,000 of credit balance used for offset no longer earns 1% = $3,000. Net benefit = $18,000 - $3,000 = $15,000 per year, the classic gain from netting a high-cost debit against a low-yield credit.
Question 41
The spot EUR/USD rate is 1.1000 and the 3-month forward rate is 1.1050. What is the approximate annualized forward premium on the euro?
Select an option first.
Correct answer: C — 1.82%
Explanation: Annualized premium = (Forward - Spot)/Spot x (12/months) = (1.1050 - 1.1000)/1.1000 x (12/3) = 0.004545 x 4 = 1.82%. The euro trades at a forward premium because it costs more USD for future delivery, annualized over the 3-month tenor.
Question 42
A U.S. company has a receivable of EUR 2,000,000 and the current spot rate is 1.10 USD per EUR. What is the receivable worth in U.S. dollars at spot?
Select an option first.
Correct answer: A — $2,200,000
Explanation: USD value = EUR 2,000,000 x 1.10 USD/EUR = $2,200,000. Because the rate is quoted as dollars per euro, you multiply the euro amount by the rate. Dividing would apply only if the quote were euros per dollar.
Question 43
A U.S. firm books a receivable of GBP 1,000,000 when the rate is 1.20 USD/GBP but collects when the rate is 1.15 USD/GBP. What is the transaction gain or loss in dollars?
Select an option first.
Correct answer: D — $50,000 loss
Explanation: Booked value = GBP 1,000,000 x 1.20 = $1,200,000; collected value = GBP 1,000,000 x 1.15 = $1,150,000. The dollar receipt fell by $50,000, a transaction loss, because the pound weakened against the dollar before settlement.
Question 44
A factor advances 80% of a $500,000 pool of receivables and charges a 2% fee on the face amount. How much cash does the seller receive as the initial advance?
Select an option first.
Correct answer: D — $400,000
Explanation: Initial advance = 80% x $500,000 = $400,000. The advance rate is applied to the receivables' face value; the 2% ($10,000) fee and the remaining 20% reserve are settled separately, not netted from the stated advance amount.
Question 45
A supplier offers terms of 2/10, net 30. What is the approximate annualized cost of forgoing the discount and paying on day 30 (using a 365-day year)?
Select an option first.
Correct answer: C — 37.2%
Explanation: Cost = (discount / (1 - discount)) x (365 / (pay days - discount days)) = (2/98) x (365/20) = 0.020408 x 18.25 = 37.2%. Forgoing a 2% discount to delay payment only 20 extra days is very expensive on an annualized basis.
Question 46
Under bilateral netting, Subsidiary A owes Subsidiary B $300,000 while Subsidiary B owes Subsidiary A $200,000. What single net settlement occurs?
Select an option first.
Correct answer: C — A pays B $100,000
Explanation: Netting the two positions leaves A owing B $300,000 - $200,000 = $100,000, settled with a single payment from A to B. This replaces two gross transfers totaling $500,000 with one net $100,000 payment.
Question 47
A multilateral netting center reduces total gross intercompany settlements of $1,000,000 to net settlements of $250,000. What percentage reduction in settlement volume was achieved?
Select an option first.
Correct answer: D — 75%
Explanation: Reduction = (gross - net)/gross = ($1,000,000 - $250,000)/$1,000,000 = $750,000/$1,000,000 = 75%. Multilateral netting typically slashes cross-border payment volume and the associated FX and transfer costs by this kind of margin.
Question 48
A parent makes a $5,000,000 intercompany loan to a foreign subsidiary at 5% annual interest, and the host country imposes a 10% withholding tax on interest paid to the parent. What net interest does the parent receive per year?
Select an option first.
Correct answer: B — $225,000
Explanation: Gross interest = $5,000,000 x 5% = $250,000; withholding tax = 10% x $250,000 = $25,000; net = $250,000 - $25,000 = $225,000. Withholding tax on cross-border interest reduces the parent's net receipt and is a key repatriation consideration.
Question 49
A company's book (general ledger) cash balance is $100,000. Outstanding checks total $15,000 and deposits in transit total $8,000. What is the bank statement balance after reconciliation?
Select an option first.
Correct answer: B — $107,000
Explanation: Bank balance = book balance + outstanding checks - deposits in transit = $100,000 + $15,000 - $8,000 = $107,000. Outstanding checks have reduced the book balance but not yet the bank's, while deposits in transit have raised the book balance ahead of the bank.
Question 50
An account shows a ledger balance of $200,000, of which $30,000 represents deposited funds still subject to float (not yet collected). What is the available balance?
Select an option first.
Correct answer: A — $170,000
Explanation: Available balance = ledger balance - uncollected float = $200,000 - $30,000 = $170,000. Only collected funds are available for use, so the float amount is excluded until it clears.
Question 51
A firm has current assets of $600,000 and current liabilities of $300,000. What is its current ratio?
Select an option first.
Correct answer: D — 2.0
Explanation: Current ratio = current assets / current liabilities = $600,000 / $300,000 = 2.0. A ratio of 2.0 indicates the firm has twice the current assets needed to cover its short-term obligations.
Question 52
A firm has current assets of $600,000 including $200,000 of inventory, and current liabilities of $300,000. What is its quick (acid-test) ratio?
Select an option first.
Correct answer: C — 1.33
Explanation: Quick ratio = (current assets - inventory) / current liabilities = ($600,000 - $200,000) / $300,000 = $400,000 / $300,000 = 1.33. The quick ratio strips out inventory, the least liquid current asset, giving a more conservative liquidity measure than the current ratio.
Question 53
With accounts receivable of $150,000 and annual credit sales of $1,095,000, what is the days sales outstanding (DSO), using 365 days?
Select an option first.
Correct answer: A — 50 days
Explanation: DSO = (accounts receivable / annual sales) x 365 = ($150,000 / $1,095,000) x 365 = 50 days. Equivalently, sales per day are $1,095,000/365 = $3,000, and $150,000 / $3,000 = 50 days of receivables outstanding.
Question 54
With inventory of $100,000 and annual cost of goods sold of $730,000, what is the days inventory outstanding (DIO), using 365 days?
Select an option first.
Correct answer: A — 50 days
Explanation: DIO = (inventory / COGS) x 365 = ($100,000 / $730,000) x 365 = 50 days. COGS per day is $730,000/365 = $2,000, so $100,000 of inventory represents 50 days of sales at cost.
Question 55
With accounts payable of $60,000 and annual cost of goods sold of $730,000, what is the days payable outstanding (DPO), using 365 days?
Select an option first.
Correct answer: B — 30 days
Explanation: DPO = (accounts payable / COGS) x 365 = ($60,000 / $730,000) x 365 = 30 days. With COGS per day of $2,000, $60,000 of payables equals 30 days, indicating the firm takes about a month to pay suppliers.
Question 56
A company has DSO of 50 days, DIO of 50 days, and DPO of 30 days. What is its cash conversion cycle (CCC)?
Select an option first.
Correct answer: C — 70 days
Explanation: CCC = DSO + DIO - DPO = 50 + 50 - 30 = 70 days. The cash conversion cycle measures the time between paying suppliers and collecting from customers; 70 days means cash is tied up in operations for that period.
Question 57
A firm has current assets of $600,000 and current liabilities of $300,000. What is its net working capital?
Select an option first.
Correct answer: C — $300,000
Explanation: Net working capital = current assets - current liabilities = $600,000 - $300,000 = $300,000. Working capital is expressed as a dollar amount (unlike the current ratio, which is the same inputs divided rather than subtracted).
Question 58
A treasurer with a very short investment horizon and a strong need for principal safety and liquidity chooses Treasury bills over commercial paper despite the lower yield. The best justification is that T-bills offer:
Select an option first.
Correct answer: C — Superior credit quality and a deeper, more liquid secondary market
Explanation: T-bills carry the full faith and credit of the government and trade in the deepest, most liquid money market, making them ideal when safety and immediate liquidity dominate return considerations. They typically yield less than CP, and while T-bill interest is exempt from state and local (not federal) tax, that is not the primary liquidity rationale.
Question 59
A treasurer structures a short-term portfolio by staggering maturities across 30, 60, 90, and 120 days rather than concentrating in one maturity. The primary purpose of this 'laddering' strategy is to:
Select an option first.
Correct answer: A — Manage reinvestment and interest-rate risk while preserving periodic liquidity
Explanation: Laddering spreads maturities so a portion of the portfolio comes due regularly, smoothing reinvestment risk if rates move and providing recurring liquidity without selling securities early. It does not eliminate credit risk nor remove the need for forecasting.
Question 60
A treasurer needs a forecast to manage daily liquidity and same-day funding decisions. Why is the adjusted-net-income (indirect) method poorly suited for this task?
Select an option first.
Correct answer: B — It lacks the daily timing granularity needed for operational cash decisions
Explanation: The indirect method starts from projected net income and adjusts for non-cash items and balance-sheet changes, producing period-level estimates without the day-by-day timing that operational liquidity management requires. It is better suited to longer-horizon planning than to same-day funding.
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