CFM CFM Treasury & Cash Management

Question 1

What is the primary objective of corporate treasury management?

Accepted Answer

Ensuring the company has sufficient liquidity to meet obligations while optimizing cash use

Answer

Treasury management focuses on maintaining adequate liquidity for operations while deploying excess cash efficiently and managing financial risk.

Question 2

Which technique concentrates cash from multiple subsidiary accounts into a single master account?

Accepted Answer

Zero-balance account (ZBA) or cash pooling

Answer

Cash pooling (zero-balance accounts) sweeps subsidiary balances into a master account daily, allowing centralized management of liquidity and reducing idle cash.

Question 3

A company's cash conversion cycle (CCC) equals:

Accepted Answer

DSO + DIO - DPO

Answer

CCC = Days Sales Outstanding + Days Inventory Outstanding - Days Payable Outstanding, measuring how many days cash is tied up in operations.

Question 4

Which short-term investment instrument is typically issued by the US government and matures in one year or less?

Accepted Answer

Treasury Bills (T-Bills)

Answer

Treasury Bills are short-term US government debt securities with maturities of 4, 8, 13, 26, or 52 weeks, considered among the safest and most liquid short-term investments.

Question 5

What is a lockbox system used for in cash management?

Accepted Answer

Accelerating collection of customer payments by routing receipts to a bank P.O. box

Answer

A lockbox system directs customers to mail payments to a post office box managed by the company's bank, which processes receipts daily, speeding up deposit and reducing float.

CFM - Certified Finance Manager Practice Test

CFM - Certified Finance Manager Practice Test

CFM CFM Treasury & Cash Management