CFM Treasury & Cash Management Flashcards
6 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFM Treasury & Cash Management flashcards as text
What does a negative cash conversion cycle indicate?
Answer: The company collects from customers before paying its suppliers, financing operations with supplier credit
A negative CCC, common in retail (e.g., Amazon), means the company receives cash before it must pay suppliers, effectively using free supplier financing.
Which of the following is a benefit of centralized treasury management?
Answer: Netting of intercompany exposures, reducing external hedging costs
Centralized treasury can net intercompany currency exposures before hedging externally, significantly reducing hedging costs and improving risk management efficiency.
What is the Baumol model used for in treasury management?
Answer: Calculating the optimal cash balance by balancing transaction costs and opportunity costs
The Baumol model applies inventory theory to cash management, finding the optimal transfer amount from investments to cash by minimizing total transaction and opportunity costs.
A company issues a $1,000 face value commercial paper at a $980 price maturing in 90 days. What is the approximate annualized discount yield?
Answer: 8.0%
Discount yield = ($20 / $1,000) × (360 / 90) = 2% × 4 = 8.0% annualized on a 360-day basis.
What is the purpose of a foreign currency forward contract for a US company with receivables in euros?
Answer: To lock in the exchange rate today for a future euro receipt, eliminating currency risk
A forward contract fixes the exchange rate for a future transaction, hedging the US company against euro depreciation between invoice date and payment receipt.
Which of the following is NOT typically a component of working capital management?
Answer: Evaluating long-term capital expenditure projects
Long-term capital expenditure evaluation is part of capital budgeting, not working capital management, which focuses on short-term assets and liabilities.