AAT L4 Cash & Treasury Management

Question 1

The primary objective of treasury management is to:

Accepted Answer

Manage the organisation's liquidity, funding, and financial risk to ensure it can meet obligations and optimise financial performance

Answer

Maximise short-term interest income

Answer

Minimise all external borrowing

Answer

Prepare the annual financial statements

Question 2

Working capital is defined as:

Accepted Answer

Current assets minus current liabilities

Answer

Long-term assets minus long-term liabilities

Answer

Total equity minus total debt

Answer

Non-current assets minus non-current liabilities

Question 3

The cash operating cycle (cash conversion cycle) is calculated as:

Accepted Answer

Inventory days + receivables days − payables days

Answer

Inventory days only

Answer

Payables days − receivables days

Answer

Receivables days + payables days

Question 4

An organisation with a very short cash conversion cycle compared to industry peers would typically:

Accepted Answer

Require less working capital financing and be more efficient

Answer

Be more likely to experience liquidity problems

Answer

Have higher inventory levels than competitors

Answer

Be unable to offer credit to customers

Question 5

Which of the following is a short-term source of finance for a business's working capital?

Accepted Answer

Bank overdraft facility

Answer

5-year bank term loan

Answer

Issue of new ordinary shares

Answer

10-year fixed-rate bond

Question 6

Centralised treasury management means:

Accepted Answer

All cash, borrowing, and risk management is managed centrally at group level to optimise liquidity and reduce costs

Answer

Each subsidiary manages its own cash and funding independently

Answer

Each country has its own treasury function

Answer

Treasury is managed by the CFO personally without support