FA Treasury and Cash Management 2

Question 1

What is the primary function of a short-term cash flow forecast in treasury management?

Accepted Answer

Identifying future cash surpluses or deficits to plan investments or financing

Answer

Setting the company's long-term capital structure targets

Answer

Determining the optimal dividend payout ratio for shareholders

Answer

Calculating the market value of the company's outstanding equity

Question 2

Which of the following best describes a revolving credit facility?

Accepted Answer

A flexible borrowing arrangement allowing repeated drawdowns up to a set credit limit

Answer

A fixed-term loan with a single lump-sum repayment at maturity

Answer

A long-term mortgage secured by specific company assets

Answer

A government-guaranteed loan program for small business capital expenditures

Question 3

The Baumol model for cash management is analogous to which inventory concept?

Accepted Answer

Economic Order Quantity (EOQ)

Answer

FIFO inventory valuation

Answer

ABC inventory classification

Answer

Just-in-Time (JIT) inventory management

Question 4

Concentration banking helps a company by:

Accepted Answer

Consolidating dispersed funds from multiple accounts into a central master account

Answer

Focusing all investments in a single high-performing asset class

Answer

Limiting banking relationships to a single primary financial institution

Answer

Concentrating sales efforts in the highest-revenue geographic markets

Question 5

A company with Days Sales Outstanding (DSO) of 35 days, Days Inventory Outstanding (DIO) of 50 days, and Days Payable Outstanding (DPO) of 40 days has a cash conversion cycle of:

Accepted Answer

45 days

Answer

25 days

Answer

85 days

Answer

125 days

Question 6

What is working capital as used in treasury and liquidity management?

Accepted Answer

Current assets minus current liabilities

Answer

Total assets minus total long-term liabilities

Answer

Cash and equivalents minus all outstanding debt

Answer

Operating income minus capital expenditures

Question 7

Remote disbursement as a treasury strategy involves:

Accepted Answer

Issuing checks drawn on banks in distant locations to extend disbursement float

Answer

Collecting receivables via lockboxes located near customers

Answer

Wiring payments internationally to reduce processing fees

Answer

Using electronic ACH transfers to speed up supplier payments