CFO Treasury Management & Cash Flow

Question 1

What is the primary objective of treasury management for a CFO?

Accepted Answer

Ensuring liquidity, managing financial risk, and optimizing cash utilization

Answer

Treasury management focuses on maintaining sufficient liquidity, hedging financial risks, and deploying cash efficiently to support operations and strategic goals.

Question 2

Which metric measures a company's ability to meet short-term obligations using only cash and cash equivalents?

Accepted Answer

Cash ratio

Answer

The cash ratio (cash and equivalents ÷ current liabilities) is the most conservative liquidity measure, excluding receivables and inventory.

Question 3

The Cash Conversion Cycle (CCC) measures which of the following?

Accepted Answer

The number of days between paying for inventory and collecting cash from customers

Answer

CCC = DSO + DIO − DPO, representing the net days a company's cash is tied up in the operating cycle from inventory purchase to customer collection.

Question 4

Which short-term instrument is most commonly used by CFOs to invest excess cash while maintaining liquidity?

Accepted Answer

Money market funds

Answer

Money market funds invest in high-quality, short-duration instruments and offer same-day liquidity with minimal credit risk, making them ideal for corporate cash management.

Question 5

What does liquidity risk represent in the context of treasury management?

Accepted Answer

The risk that a company cannot meet its financial obligations as they come due

Answer

Liquidity risk is the danger that a firm lacks sufficient liquid assets or access to funding to honor its payment obligations when they fall due.

CFO - Certified Chief Financial Officer Practice Test

CFO - Certified Chief Financial Officer Practice Test

CFO Treasury Management & Cash Flow