CCM Cash Forecasting and Liquidity Management

Question 1

Which cash forecasting method relies on historical cash flow data to project future cash needs using statistical techniques such as moving averages?

Accepted Answer

Quantitative method

Answer

The quantitative method uses historical data and statistical techniques like moving averages or regression analysis to forecast future cash flows.

Question 2

A company's operating cash cycle is 45 days. If daily revenues are $500,000, what is the approximate cash tied up in the operating cycle?

Accepted Answer

$22,500,000

Answer

Cash tied up = daily revenues × operating cycle days = $500,000 × 45 = $22,500,000.

Question 3

Which liquidity ratio measures a company's ability to meet short-term obligations using only its most liquid assets, excluding inventory?

Accepted Answer

Quick ratio

Answer

The quick ratio (acid-test ratio) measures liquidity using cash, marketable securities, and receivables—excluding inventory and prepaid expenses.

Question 4

In cash forecasting, what does the 'direct method' primarily track to project future cash positions?

Accepted Answer

Actual cash receipts and disbursements

Answer

The direct method forecasts cash by tracking expected actual cash inflows (receipts) and outflows (disbursements) transaction by transaction.

Question 5

A cash manager notices a consistent weekly pattern of higher disbursements on Fridays. This is best addressed through which forecasting enhancement?

Accepted Answer

Day-of-week adjustment

Answer

Day-of-week adjustments account for systematic intra-week patterns in cash flows, such as higher payroll disbursements on specific days.

(CCM) Certified Cash Manager Practice Test