Question 1

Company A is a large public company with annual revenue of $1.2 billion and high fixed costs. Its stock is listed on the New York Stock Exchange. Company B is a mid-sized company with annual revenue of $100 million and low fixed costs. Its stock is listed on the NASDAQ. Which of the following statements is MOST LIKELY to be true when comparing Company A and Company B?

Options :

A : Company A has greater reporting requirements and more marketable stock than Company B

B : Company A has greater reporting requirements and less marketable stock than Company B.

C : Company B has greater reporting requirements and more marketable stock than Company A.

D : Company B has greater reporting requirements and less marketable stock than Company A.

Answer: A

Question 2

Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?

Options :

A : Master note

B : Banker-s acceptance

C : Indenture agreement

D : Note purchase agreement

Answer: A

Question 3

The issue of corporate governance in publicly traded companies arises from:

Options :

A : the separation of shareholder ownership and management control.

B : the conflict between the interests of bond holders and equity holders.

C : the secrecy surrounding the proceedings of board of directors meetings.

D : the inherent conflict of interest that exists when accounting firms are paid to provide audit services.

Answer: A

Question 4

ABC Company has recently moved away from paper-based invoicing systems and has begun implementing e-commerce solutions. Realizing that its e-commerce implementation may have a negative impact on the float of its trading partners, ABC can do which of the following to help address this concern?

Options :

A : Change the payment discount terms for the trading partners.

B : Allow the trading partners to use the company-s e-commerce solution.

C : Negotiate larger order quantities from the trading partners.

D : Agree to a uniform data transfer protocol for all trading partners

Answer: A

Question 5

ABC Company, a publicly held U.S. multinational, owns several manufacturing plants in Latin America as well as several ships to transport its products globally. 60% of its sales are from its euro-based subsidiaries. The company uses various derivative instruments to mitigate exposure to fluctuations in fuel prices and FX rates. The hedging deals are longterm and placed withmany counterparties. ABC Company is also a net borrower and has a syndicated credit facility in place. Which of the following actions to mitigate counterparty risk would MOST benefit the company?

Options :

A : Eliminate specific AAA rated counterparties.

B : Adopt a third-party custodian for investments.

C : Implement or adjust single counterparty balance limits.

D : Add to the number of counterparties to increase diversification.

Answer: C

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