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

Scenario analysis evaluates cash positions under multiple defined circumstances (e.g., best case, base case, worst case) to assess liquidity resilience.

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

When the current cash balance falls below the optimal target, the treasurer should borrow or liquidate investments to bring the balance back to the target level.

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

The Baumol model assumes cash is used at a constant rate, making it analogous to an economic order quantity model applied to cash management.

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

In the Miller-Orr model, the firm invests excess cash when the balance hits the upper control limit, reducing it back to the return point.

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

Macroeconomic indicators like interest rate trends affect borrowing costs, investment yields, and customer payment behavior, all critical to long-term liquidity planning.

(CCM) Certified Cash Manager Practice Test

(CCM) Certified Cash Manager Practice Test

CCM Cash Forecasting and Liquidity Management 2