CFM Treasury & Working Capital Management

Question 1

What is the primary objective of treasury management?

Accepted Answer

Ensuring the company has sufficient liquidity while managing financial risks efficiently

Answer

Maximizing short-term profits from financial market trades

Answer

Minimizing the company's tax liability

Answer

Maximizing the return on the company's pension fund

Question 2

What is working capital defined as?

Accepted Answer

Current assets minus current liabilities

Answer

Total assets minus total liabilities

Answer

Cash and equivalents plus short-term investments

Answer

Long-term assets minus long-term debt

Question 3

What is days payable outstanding (DPO)?

Accepted Answer

Average number of days a company takes to pay its suppliers

Answer

Average number of days customers take to pay the company

Answer

Number of days inventory is held before sale

Answer

Number of days to convert sales to cash

Question 4

Which of the following increases a company's working capital?

Accepted Answer

Issuing long-term bonds and using proceeds to buy inventory

Answer

Paying down accounts payable with cash

Answer

Collecting outstanding receivables

Answer

Purchasing inventory on credit

Question 5

What is an interest rate swap?

Accepted Answer

A derivative where two parties exchange fixed-rate and floating-rate interest payments on a notional principal

Answer

Exchanging one currency for another at a fixed rate

Answer

A bond refinancing where fixed coupons are replaced with variable ones

Answer

A bank agreement to cap interest rate exposure

Question 6

What is a commercial paper (CP) program used for in corporate treasury?

Accepted Answer

Short-term unsecured borrowing by investment-grade companies to fund working capital

Answer

Long-term capital markets financing for major acquisitions

Answer

Asset-backed financing collateralized by receivables

Answer

Subordinated debt financing for leveraged buyouts