CTP Corporate Liquidity and Cash Management 2

Question 1

A company's cash conversion cycle (CCC) is calculated as days sales outstanding plus days inventory outstanding minus days payable outstanding. If DSO=45, DIO=30, and DPO=20, what is the CCC?

Accepted Answer

55 days

Answer

CCC = DSO + DIO - DPO = 45 + 30 - 20 = 55 days.

Question 2

Which liquidity ratio is considered the most conservative measure of a company's short-term liquidity?

Accepted Answer

Cash ratio

Answer

The cash ratio (cash + cash equivalents / current liabilities) is the most conservative because it excludes receivables and inventory.

Question 3

A treasury manager wants to reduce idle cash balances while maintaining daily liquidity. Which technique BEST achieves this?

Accepted Answer

Zero balance accounts (ZBAs)

Answer

ZBAs automatically sweep excess cash to a master account daily, minimizing idle balances while maintaining subsidiary account functionality.

Question 4

Under the Federal Reserve's Regulation CC, which type of check deposit typically has the longest hold period before funds are made available?

Accepted Answer

Non-local checks

Answer

Non-local checks (drawn on banks outside the Federal Reserve check processing region) historically had the longest availability holds under Reg CC.

Question 5

A corporation's net liquidity position is best defined as:

Accepted Answer

Available credit lines plus cash minus near-term cash requirements

Answer

Net liquidity = available borrowing capacity + cash and equivalents minus near-term cash needs, reflecting true financial flexibility.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

CTP Corporate Liquidity and Cash Management 2