(Topic 4) Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep…

The correct answer is C. Policy approvals and exception management. ABC Company's Treasury department outsourced its overnight investment duties to XYZ Money Management. XYZ placed the funds received from ABC into corporate commercial paper, which has recently gone into default after numerous ratings downgrades. The investment policy of ABC…

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Question

(Topic 4)

Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company?

Options

AExposure horizon monitoring
BValuation of investment vehicles
CPolicy approvals and exception management
DNo violation occurred

How the community answered

(18 responses)

A
6% (1)
B
11% (2)
C
78% (14)
D
6% (1)

Explanation

ABC Company's Treasury department outsourced its overnight investment duties to XYZ Money Management. XYZ placed the funds received from ABC into corporate commercial paper, which has recently gone into default after numerous ratings downgrades. The investment policy of ABC Company states that all investments must be in investment grade commercial paper; however, the agreement gives XYZ the ability to make exceptions with the approval of the Treasurer of ABC Company. The Treasurer was never notified of the ratings downgrades. What role or responsibility, if any, was violated with regards to the investment policy?

Topics

#operating leverage#fixed costs#cost structure#investment policy controls

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