CCM Cash Forecasting and Liquidity Management 3

Question 1

A company establishes a minimum liquidity buffer equal to 30 days of operating expenses. If monthly operating expenses are $3 million, what is the required liquidity buffer?

Accepted Answer

$3,000,000

Answer

$1,500,000

Answer

$2,000,000

Answer

$3,500,000

Question 2

Which type of credit facility provides the most reliable committed access to liquidity for a corporation during a market stress event?

Accepted Answer

Revolving credit facility

Answer

Commercial paper program

Answer

Uncommitted credit line

Answer

Overnight repo agreement

Question 3

When a firm pools subsidiary cash balances into a central account to optimize overall liquidity, this is called:

Accepted Answer

Cash concentration or pooling

Answer

Zero balance accounting

Answer

Disbursement float management

Answer

Lockbox processing

Question 4

A cash manager uses variance analysis to compare actual cash flows to forecasted cash flows. The primary purpose of this analysis is to:

Accepted Answer

Identify forecast errors and improve future forecasting accuracy

Answer

Prepare year-end financial statements

Answer

Calculate tax liabilities for the period

Answer

Satisfy bank covenant reporting requirements

Question 5

Which of the following actions directly shortens a company's cash conversion cycle?

Accepted Answer

Negotiating longer payment terms with suppliers

Answer

Extending the payment terms given to customers

Answer

Increasing inventory safety stock levels

Answer

Increasing capital expenditures

Question 6

In a cash flow forecast, 'float' refers to:

Accepted Answer

The time lag between initiating a payment and the actual transfer of funds

Answer

Interest earned on overnight investments

Answer

The difference between book and market value of securities

Answer

Excess cash held above the minimum balance requirement

Question 7

A firm's liquidity stress test reveals it could only sustain operations for 15 days without external funding. The recommended minimum threshold for most companies is generally:

Accepted Answer

30-90 days

Answer

5-10 days

Answer

6-12 months

Answer

More than 1 year