Treasury Management and Cash Flow Forecasting Flashcards
6 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Treasury Management and Cash Flow Forecasting flashcards as text
Which technique eliminates the need for a company to convert one currency to another when settling intercompany transactions?
Answer: Netting
Netting consolidates intercompany payables and receivables so only the net difference is settled, reducing currency conversion costs.
A treasury department uses a notional pooling arrangement primarily to:
Answer: Reduce net interest expense by offsetting balances
Notional pooling offsets credit and debit balances across accounts to reduce net borrowing costs without physically moving funds.
Which risk arises from the possibility that a counterparty in a financial transaction will fail to meet its obligations?
Answer: Counterparty credit risk
Counterparty credit risk is the risk that the other party in a transaction defaults before the final settlement.
In cash forecasting, the direct method differs from the indirect method primarily because it:
Answer: Lists actual cash receipts and disbursements
The direct method itemizes actual cash receipts and disbursements, providing a more granular view of cash movements.
A company enters into a revolving credit facility primarily to:
Answer: Provide flexible short-term borrowing access
A revolving credit facility provides flexible, short-term borrowing capacity that can be drawn, repaid, and redrawn as needed.
Which ratio is MOST directly relevant to assessing a company's ability to meet immediate cash obligations?
Answer: Cash ratio
The cash ratio measures the amount of cash and cash equivalents relative to current liabilities, reflecting immediate liquidity.