FA Treasury and Cash Management

Question 1

What is the primary objective of treasury management within an organization?

Accepted Answer

Ensuring optimal liquidity while managing financial risks

Answer

Maximizing net income reported on financial statements

Answer

Minimizing the company's overall tax liabilities

Answer

Increasing the company's market share

Question 2

Which of the following is a key metric used to evaluate how efficiently a company collects its receivables in the cash conversion cycle?

Accepted Answer

Days Sales Outstanding (DSO)

Answer

Return on equity (ROE)

Answer

Earnings per share (EPS)

Answer

Price-to-earnings (P/E) ratio

Question 3

A company has $400,000 in average daily cash outflows and maintains a 6-day liquidity buffer. What is the minimum target cash balance?

Accepted Answer

$2,400,000

Answer

$400,000

Answer

$1,200,000

Answer

$3,200,000

Question 4

In treasury management, 'float' refers to:

Accepted Answer

The difference between bank balance and book balance due to checks in transit

Answer

The variable interest component on adjustable-rate loans

Answer

The premium paid on foreign currency options

Answer

The spread between bid and ask prices on money market instruments

Question 5

Which short-term instrument is most commonly used by corporate treasurers to invest excess cash due to its high liquidity and safety?

Accepted Answer

Treasury bills (T-bills)

Answer

High-yield corporate bonds

Answer

Common equity shares

Answer

Real estate investment trusts (REITs)

Question 6

What is the primary purpose of a bank lockbox system in treasury management?

Accepted Answer

Accelerating collection of receivables by reducing mail and processing float

Answer

Physically securing petty cash at retail locations

Answer

Delaying payments to suppliers to maximize available cash

Answer

Encrypting banking credentials during electronic transfers

Question 7

Which liquidity ratio provides the strictest measure of a company's ability to meet immediate obligations using only cash and equivalents?

Accepted Answer

Cash ratio

Answer

Current ratio

Answer

Quick ratio

Answer

Debt-to-equity ratio