CTP Corporate Liquidity and Cash Management 4

Question 1

A multinational corporation wants to centralize liquidity across its European subsidiaries in different countries. Which structure BEST minimizes cross-border legal and tax complications while achieving effective cash pooling?

Accepted Answer

In-house banking with intercompany loans

Answer

In-house banking with properly documented intercompany loans can achieve centralized liquidity while respecting local regulations and creating clear audit trails.

Question 2

Under ASC 230 (GAAP), which of the following would be classified as an operating cash flow?

Accepted Answer

Collections from customers on accounts receivable

Answer

Under ASC 230, cash collected from customers is an operating activity as it relates to the primary revenue-generating activities of the business.

Question 3

A company's investment policy statement (IPS) typically addresses all of the following EXCEPT:

Accepted Answer

Target returns benchmarked against equity market indices

Answer

Corporate IPS documents focus on safety and liquidity of cash reserves, not equity-benchmarked returns, which are inappropriate for short-term corporate cash.

Question 4

Which payment method typically creates the MOST favorable disbursement float for a corporate payer?

Accepted Answer

Paper checks mailed to distant locations

Answer

Paper checks mailed to distant locations generate maximum disbursement float due to mail time, processing time, and clearing time before funds are withdrawn.

Question 5

The Miller-Orr cash management model differs from the Baumol model primarily in that it:

Accepted Answer

Accounts for uncertainty and random variation in daily cash flows

Answer

The Miller-Orr model sets upper and lower control limits to manage cash stochastically, accommodating the unpredictable nature of daily cash flows.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

CTP Corporate Liquidity and Cash Management 4