CFO Treasury Management & Cash Flow 3

Question 1

A Treasury Management System (TMS) primarily helps a CFO by:

Accepted Answer

Centralizing cash visibility, automating bank reconciliation, and managing financial risk positions

Answer

Automating payroll processing and benefits administration

Answer

Preparing GAAP-compliant financial statements for external reporting

Answer

Processing accounts payable invoices and vendor payments

Question 2

In a plain vanilla interest rate swap, Company A pays a fixed rate and receives a floating rate. This structure benefits Company A when:

Accepted Answer

Floating rates rise above the fixed rate paid

Answer

Floating rates decline below the fixed rate paid

Answer

The yield curve becomes inverted

Answer

Credit spreads on corporate bonds widen

Question 3

Commercial paper is best described as:

Accepted Answer

Short-term unsecured promissory notes issued by corporations to fund working capital

Answer

Long-term secured bonds issued by investment-grade corporations

Answer

Government-backed securities with maturities up to 5 years

Answer

Asset-backed securities collateralized by trade receivables

Question 4

SOFR (Secured Overnight Financing Rate) replaced LIBOR primarily because:

Accepted Answer

SOFR is based on actual overnight Treasury repo transactions, making it more reliable and manipulation-resistant

Answer

SOFR provides higher interest rates that benefit lenders

Answer

SOFR is administered by the U.S. Federal Reserve directly

Answer

SOFR eliminates all basis risk in interest rate swaps

Question 5

A zero-balance account (ZBA) in cash management operates by:

Accepted Answer

Automatically sweeping all funds to or from a master concentration account, keeping the ZBA balance at zero each day

Answer

Maintaining a fixed minimum balance to avoid bank service fees

Answer

Investing all daily cash receipts in overnight government securities

Answer

Netting intercompany receivables and payables to zero at month-end

Question 6

Which trapped cash strategy is most commonly used by multinationals to repatriate cash from high-withholding-tax jurisdictions efficiently?

Accepted Answer

Using intercompany royalties, management fees, or interest payments to move cash to low-tax holding entities

Answer

Paying special dividends to minority shareholders in each subsidiary

Answer

Issuing local currency bonds to institutional investors

Answer

Establishing joint ventures with local government partners

Question 7

The optimal capital structure target that a CFO sets for treasury purposes balances:

Accepted Answer

The tax shield benefit of debt against the increased financial distress costs of higher leverage

Answer

Revenue growth targets against R&D spending

Answer

Dividend yield against share buyback programs

Answer

Operating cash flow against capital expenditure requirements