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CTP · Question #355
(Topic 4) XYZ Company experienced a substantial monetary loss due to over exposure to one particular sector of the stock market. The Treasurer had invested in companies tied to five different…
The correct answer is C. Cash shortages are being forecasted due to seasonality. Why would a company establish a short-term credit facility?
Manage Risk
Question
- (Topic 4)
XYZ Company experienced a substantial monetary loss due to over exposure to one particular sector of the stock market. The Treasurer had invested in companies tied to five different sectors, but violated the company investment policy by exceeding a 10% limit for any sector. In developing its investment policy, what should XYZ Company have considered to prevent this scenario?
Options
- AShort-term interest rates are expected to rise.
- BThe company would like to improve bank relationships.
- CCash shortages are being forecasted due to seasonality.
- DThere is an anticipated failure of the company's main depository bank.
How the community answered
(29 responses)- A7% (2)
- B17% (5)
- C72% (21)
- D3% (1)
Explanation
Why would a company establish a short-term credit facility?
Topics
#investment policy#concentration risk#sector limits#portfolio diversification
Community Discussion
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