CCM Cash Forecasting and Liquidity Management 2

Question 1

Which technique spreads cash inflows and outflows across multiple scenarios to test how liquidity holds up under different assumptions?

Accepted Answer

Scenario analysis

Answer

Variance analysis

Answer

Trend extrapolation

Answer

Ratio analysis

Question 2

A company uses a target cash balance model. If the optimal cash balance is $2 million and the current balance is $500,000, the treasurer should:

Accepted Answer

Borrow or liquidate investments to raise cash to the target

Answer

Invest the surplus in short-term securities

Answer

Accelerate accounts payable payments

Answer

Reduce the credit line immediately

Question 3

The Baumol model for optimal cash balance assumes which of the following?

Accepted Answer

Cash is used at a steady, predictable rate

Answer

Cash outflows are random and unpredictable

Answer

Inflation has a major impact on cash needs

Answer

Receivables collection is the primary variable

Question 4

In the Miller-Orr cash management model, what triggers a decision to invest excess cash in short-term securities?

Accepted Answer

Cash balance rises to the upper control limit

Answer

Cash balance falls to the lower control limit

Answer

Cash balance reaches the return point

Answer

Net income exceeds a threshold

Question 5

Which of the following is a primary external factor that a cash manager must incorporate into a long-term liquidity forecast?

Accepted Answer

Macroeconomic indicators such as interest rate trends

Answer

Individual employee performance reviews

Answer

Internal IT system upgrade schedules

Answer

Departmental office supply budgets

Question 6

A company has a days sales outstanding (DSO) of 55 days and days payable outstanding (DPO) of 30 days, with days inventory outstanding (DIO) of 25 days. What is the cash conversion cycle?

Accepted Answer

50 days

Answer

60 days

Answer

80 days

Answer

110 days

Question 7

Which cash forecasting horizon is typically used for strategic planning purposes such as capital expenditure decisions?

Accepted Answer

Long-term forecast (1-5 years)

Answer

Daily forecast (1-7 days)

Answer

Short-term forecast (1-13 weeks)

Answer

Medium-term forecast (1-12 months)