CFM Cash Flow Management 2

Question 1

What is the primary purpose of a 13-week cash flow forecast?

Accepted Answer

To provide short-term liquidity visibility for near-term cash management decisions

Answer

The 13-week cash flow forecast is a rolling short-term tool used to monitor and manage near-term liquidity, especially important during financial stress.

Question 2

Which technique involves pooling cash balances from multiple bank accounts into a single master account?

Accepted Answer

Cash pooling (notional or physical)

Answer

Cash pooling concentrates balances from subsidiary accounts into a master account to maximize interest earnings and minimize borrowing costs.

Question 3

What is the difference between a physical cash pool and a notional cash pool?

Accepted Answer

Physical pools involve actual fund transfers; notional pools offset balances mathematically without moving funds

Answer

In a physical pool, funds are swept into a master account; in a notional pool, balances are offset on paper without actual transfers, reducing bank fees.

Question 4

Accounts receivable factoring involves:

Accepted Answer

Selling receivables to a third party at a discount for immediate cash

Answer

Factoring allows a company to sell its receivables to a factor (third party) at a discount, receiving immediate cash rather than waiting for customer payments.

Question 5

What is a lockbox system used for in cash management?

Accepted Answer

Accelerating the collection of customer payments by directing remittances to a bank-operated PO box

Answer

A lockbox system routes customer payments directly to a bank-operated collection center, accelerating deposit and reducing float on incoming receipts.

CFM - Certified Finance Manager Practice Test

CFM - Certified Finance Manager Practice Test

CFM Cash Flow Management 2