XYZ Corporation is presently a short-term borrower and uses a revolving line of credit with an interest rate of
7%. The Treasurer would like to reduce interest expense and increase liquidity without renegotiating the line of credit. Which of the following projects should the Treasurer support in order to achieve this objective as quickly as possible?

• A.Store operations believes that an increase in inventory levels will raise sales as the corporation eventually becomes known for its wide selection.
• B.One large store is being remodeled. When complete, it should generate sufficient additional sales within one year to cover the capital expenditure and produce a positive return on investment.
• C.Purchasing is trying to extend terms from net 30 to net 60 with one of their primary vendors. The vendor will agree if XYZ concentrates purchases with them.
• D.Accounts receivable is spending capital to improve its collection system. With the faster collections that will result, it anticipates recovering the outflows over a two-year period.

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Racklyn Paint Company, a new paint and construction company, has vendor payables of $2 million due periodically over the next 3 months; payroll payable to its crews of $500K each month; a mortgage of $4.4 million with a fixed rate of 6.0%; and an equipment loan of $5 million with a bank at a 30-day LIBOR plus 150 bp payment of $100K due monthly. Racklyn receives their first contract valued at $12 million with half of the contract value due at the time of contract and final payment upon completion. Racklyn expects the job to last 6 months. Which option would be the BEST use of Racklyn Paint Company's cash?

• A.Prepay a portion of the equipment loan to minimize interest rate risk.
• B.Pay current payables and invest any excess cash in a money market account earning 1.5%.
• C.Pay off the mortgage and invest remaining funds in a 6-month CD at 2.5%.
• D.Invest $4 million in a CD at 2.5% for 3 months.

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The Treasurer for XYZ Manufacturing, Inc. recently exchanged a portion of its euro holdings into U.S. dollars to purchase gas futures contracts. This was done in anticipation of an assumed rise in gas prices due to the continued weakening of the U.S. dollar. Which of the following types of risk is being mitigated?

• A.Foreign exchange
• B.Sovereign
• C.Commodity price
• D.Operational

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Which report is MOST LIKELY to be a current-day information report?

• A.Controlled disbursement totals
• B.Loan transaction detail
• C.Multibank balance report
• D.Debit/credit transaction listing

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A company agrees to pay JPY10,000,000 for a shipment from Japan. At the time the purchase order is placed the exchange rate is JPY168/US$. At the time of payment the exchange rate is JPY163/US$. What is the net effect on the dollar cost of the shipment if the transaction has NOT been hedged?

• A.An increase of $1,825
• B.A decrease of $1,825
• C.An increase of $5,000
• D.A decrease of $5,000

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