CPFM Treasury Management and Cash Flow Forecasting 1

Question 1

Which primary function of treasury management ensures a company can meet its short-term obligations?

Accepted Answer

Liquidity management

Answer

Liquidity management ensures sufficient cash is available to meet short-term obligations without holding excess idle funds.

Question 2

A company's 13-week cash flow forecast is BEST used for which purpose?

Accepted Answer

Short-term liquidity planning

Answer

A 13-week rolling cash flow forecast is the standard tool for short-term liquidity planning and identifying near-term cash gaps.

Question 3

Which instrument is MOST commonly used by treasury departments to invest short-term excess cash?

Accepted Answer

Money market instruments

Answer

Money market instruments such as T-bills and commercial paper are preferred for excess cash due to their high liquidity and low risk.

Question 4

The difference between a company's cash inflows and outflows in a given period is called:

Accepted Answer

Net cash flow

Answer

Net cash flow is the difference between total cash inflows and total cash outflows during a specific period.

Question 5

A centralized treasury structure offers which primary advantage over a decentralized one?

Accepted Answer

Netting of intercompany cash flows

Answer

Centralization allows netting of intercompany cash flows, reducing external borrowing costs and foreign exchange transaction volumes.

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