CTP Working Capital Management 4

Question 1

Which of the following actions would INCREASE net working capital?

Accepted Answer

Issuing a long-term bond and using proceeds to purchase inventory

Answer

Issuing long-term debt (non-current liability) to buy inventory (current asset) increases current assets without increasing current liabilities, raising net working capital.

Question 2

A treasury analyst is forecasting cash flow using the direct method. Which data source is MOST relevant?

Accepted Answer

Scheduled receipts from customers and planned disbursements to suppliers

Answer

The direct method builds cash flow forecasts from actual expected cash inflows (customer receipts) and outflows (supplier payments), not accrual-based accounting items.

Question 3

A company's weighted average cost of capital (WACC) is 8%. Its short-term investments yield 4%. What is the opportunity cost of holding excess cash?

Accepted Answer

The difference between WACC and the investment yield (4%)

Answer

The opportunity cost of holding excess cash is the difference between WACC (the minimum return required by investors) and the yield earned on the cash investment.

Question 4

In zero-balance account (ZBA) structures, subsidiary accounts maintain a zero balance because:

Accepted Answer

Funds sweep automatically to or from a master concentration account

Answer

ZBA accounts automatically sweep deficits or surpluses to a central master account, keeping subsidiary balances at zero and centralizing liquidity.

Question 5

Which ratio measures how efficiently a company converts inventory into sales?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover (COGS / average inventory) measures how many times a company sells and replaces its inventory over a period.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

CTP Working Capital Management 4