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Certified Treasury Professional Questions 251–255 (page: 52)

Updated On: 9-Feb-2026

When company profits are high, what is the MOST LIKELY way management will prefer to finance growth?

  1. By borrowing funds
  2. By retaining earnings
  3. By investing in current assets
  4. By issuing stock

Answer(s): B



When a company announces a significant and unexpected dividend increase, it signals to the market that management expects:

  1. earnings in future periods will be higher than in past periods.
  2. earnings in future periods will be lower than in past periods.
  3. earnings in future periods will not change.
  4. to split the stock in future periods.

Answer(s): A



Usually, corporations receiving dividends from another corporation can exclude 70 percent of dividend payments from income for tax purposes as long as the stock is owned for at least:

  1. 30 days.
  2. 45 days.
  3. 60 days.
  4. 90 days.

Answer(s): B



Company ABC, with a current debt rating of BBB- from Standard & Poor’s, is negotiating a new revolving credit agreement with its lenders. The company anticipates closing on a small acquisition within a year of executing this new agreement and would like maximum flexibility to determine its capital structure. The company is MOST concerned about the lenders’ inclusion of a.

  1. ratings trigger.
  2. growth rate covenant.
  3. change in control covenant.
  4. limit on internal financing.

Answer(s): A



What do MOST companies try to maintain due to the signaling effect and clientele effect?

  1. A stable policy of retained earnings
  2. A stable dividend policy
  3. A consistent payment date
  4. A dividend reinvestment plan

Answer(s): B



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