CTP Corporate Liquidity and Cash Management 3

Question 1

A treasury department uses a lockbox network to accelerate collections. The PRIMARY benefit of a lockbox system is:

Accepted Answer

Accelerating mail and processing float to increase available funds sooner

Answer

Lockbox services reduce collection float by intercepting mail near payers and expediting check processing, making funds available faster.

Question 2

Which short-term investment vehicle offers the HIGHEST degree of safety and liquidity with minimal credit risk for corporate cash reserves?

Accepted Answer

Repurchase agreements (repos) backed by Treasuries

Answer

Repo agreements collateralized by U.S. Treasuries combine high safety (government-backed collateral) with overnight liquidity.

Question 3

A company's daily cash position shows a consistent $5M surplus each morning that is swept to overnight investments. This practice is known as:

Accepted Answer

Cash concentration

Answer

Cash concentration aggregates funds from multiple accounts into a central investment account to maximize returns on surplus balances.

Question 4

The Baumol cash management model is primarily used to determine:

Accepted Answer

Optimal transaction size for converting securities to cash

Answer

The Baumol model applies EOQ inventory logic to cash management to find the optimal amount to convert from securities to cash per transaction.

Question 5

In which scenario would a company MOST likely use a revolving credit facility rather than commercial paper?

Accepted Answer

When the company needs a reliable liquidity backstop and credit markets are volatile

Answer

Revolving credit facilities provide committed backup liquidity even during market stress, making them ideal backstops when commercial paper markets may be inaccessible.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

CTP Corporate Liquidity and Cash Management 3