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

A TMS integrates with banks and ERPs to provide real-time cash positioning, automate reconciliation, and manage hedging programs and debt portfolios from a single platform.

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

A fixed-rate payer benefits when floating rates rise because it receives more than it pays on the floating leg, resulting in a net receipt from the swap.

Question 3

Commercial paper is best described as:

Accepted Answer

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

Answer

Commercial paper is a short-term (typically 1–270 days) unsecured debt instrument used by highly rated companies to finance short-term liabilities at rates below bank loans.

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

Unlike LIBOR, which was based on bank submissions and susceptible to manipulation, SOFR reflects real transactions in the $1 trillion+ overnight Treasury repurchase market.

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

A ZBA ends each day with a zero balance — disbursements are funded by drawing from the master account, and receipts are swept up to it, centralizing liquidity management.

CFO - Certified Chief Financial Officer Practice Test

CFO - Certified Chief Financial Officer Practice Test

CFO Treasury Management & Cash Flow 3