Treasury Management

__also called Zero balancing.

• CASH CONCENTRATION

A business should generate enough __to finance its future growth.

• REVENUE

At the strategic level, treasury is about advising on the appropriate choices, trade-offs and compromises involved when financial decisions are taken.

• True
• False

__is the safest type of debt capital because the company has years to come up with the principal.

• LONG-TERM BONDS

Interest rates affect equity investors and less directly than bond investors.

• TRUE

Risk is the primary source of the firm’s growth.

• True
• False

Investing covers which of the following?

• Acquiring property, plant and equipment
• Intangible assets
• Marketing programs
• Staff training
• Research and development

__ arises when an organization has to commit to a price before actually entering into transactions.

• Pre-transaction risk

Responsibilities of hedging company-wide interest rate and FX risk sits with the __.

• the treasury function

Software development facilitates treasury function.

• True
• False

In the company’s treasury department funds move in real time.

• True
• False

__are loans from the capital market to meet day-to-day working capital requirements.

• Short-term commercial paper

Profit is equal to cash flow.

• FALSE

__model provides insight into how company will earn on the money its owners have invested.

Working capital is the difference between the current assets and current liabilities.

• TRUE

Manufacturers take advantage of long-term debt by issuing __.

• PREFERENCE SHARES

The use of fixed interest bearing securities along with owner’s equity as sources of finance is known as __.

• trading on equity

Business will not lose money when they don’t hedge exposures for currencies.

• True
• False

Shortened the cash flow conversion period is not a good idea.

• FALSE

The key role of the treasury function is to advise the board and management on business decisions and technical operations considerations that are fundamental to corporate strategy.

• True
• False

In debt ratio, more liabilities mean less equity and therefore indicate a more __position.

• LEVERAGED

Business can use accounting programs to make cash flow analysis easy.

• TRUE

Earning perspective involves the impact of changes in interest rates on accrual.

• TRUE

__are essential tool for identifying trends and overall cash generation over time.

• LONG-TERM FORECASTS

A sudden change in currency would distort the risk.

• True
• False

Corporate finance is concerned with maximizing shareholder value through short-term financial planning.

• FALSE

Profit from past years that have been kept by the company is known as __.

• retained earnings

Successful management depends on having an insight into the business’s future cash generation.

• True
• False

Interest rate risk arises when the absolute level of interest rates fluctuate.

• TRUE

Banks are not required to hold capital commensurate with the level of interest rate risk.

• False
• Answer 18

Inter-company payments can often be another source of lost liquidity.

• True
• False

Diversification is not an answers to interest rate risk.

• FALSE

Identify the primary sources of capital funding.

• revenues
• equity
• loans
• cash reserves

Managing receivables to optimize the investment in working capital.

• True
• False

Inventories are not part of working capital.

• True
• False

An organization with little cash can remain liquid as long as it has the ability to borrow.

• True
• False

__ratio provides insight into how risky a company’s borrowing practices.

• Debt-to-equity

__ system covers the providers of funds against risks.

• RISK MANAGEMENT

Banks are seldom evaluated on their liquidity.

• FALSE

Cash flow means cash receipts.

• True
• False

__is the amount and type of risk an organization is willing to accept in pursuit of its business objectives.

• RISK TOLERANCE

Most companies have had a treasury department.

• True
• False

__is the process of costing a balance sheet and then setting requisite prices for asset creators.

• Funds-transfer pricing

Treasurers are financial asset managers in their company.

• True
• False

Use Income statement to check liquidity.

• True
• False

It refers to any use of resources for future benefit.

• INVESTING

Optimizing bank charges and float can save considerable amounts of money.

• True
• False

Strong balance sheets should reflect lower levels of debt and higher levels of __.

• equity

__ of the government will also affect the capital structure decisions.

• Monetary and fiscal policies

Risk can present opportunities or threat to business objectives.

• True
• False

Cross-currency transactions can be unpredictable.

• TRUE
• Your answer: is correct.

Cash is King, because NO cash, NO business.

• TRUE
• Your answer: is correct.

Capital financing is balancing act between debt and equity.

• TRUE

Equity financing involves raising money from venture capitalists.

• TRUE

Firms with a variety of operations across the globe may encounter data consolidation issues when attempting to analyze liquidity risk at the group level.

• TRUE

If the economy is slow, the central bank may reduce the interest rate to stimulate activity.

• True
• False

Assets structure=Fixed Assets +Current Assets

• True
• False

Liquidity enables an organization to pay its obligations where and when they fall due.

• True
• False

FX spot trades cannot be used to long-term interest rate swaps.

• True
• False

Medium term forecasts often extend to a rolling year.

• True
• False

__risk focuses on longer-term and ensure that the business can continue business plans in the future.

• STRATEGIC LIQUIDITY

Equity consists of a company’s Common and __ stock plus Retained earnings.

• preferred

Identify the factor on which an organization’s financial strategy assesses the optimal financing solution as the diversity of sources and the maturity of financing.

• markets
• leverage
• ranking of capital

Assets and Liabilities sit on a Balance Sheet.

• True
• False

__risk focuses on short-term needs arising from day- to- day operations.

• OPERATIONAL LIQUIDITY

It is good to manage cash flow using the bank balance.

• FALSE

Digital payments have risen sharply because of corona virus.

• TRUE

Good cash forecast accurately predicts the cash inflows but never the outflows.

• FALSE

Forwards and future contracts help investor hedge interest rate risks.

• TRUE

Effective treasury requires a thorough understanding of the organization’s business model and its industry.

• True
• False

Organizations with more stable cash flows and longer-term assets will be more comfortable servicing debt and so are unlikely to borrow for proportionately longer periods.

• True
• False

Risk of __ arises due to failure to pay fixed interest liabilities.

• CASH INSOLVENCY

__is the particular combination of debt and equity used by a company to finance its overall operations and growth.

• Capital structure

The economic value perfective identifies risk arising from short-term interest rate gaps.

• False

Every organization deals with treasury issues, but many organizations have the same treasury functions.

• True
• False

One type of liquidity refers to the ability to trade an asset.

• TRUE

Inventory is a current asset

• TRUE

Consolidating bank accounts balances from a number of accounts into one account to offset interest income against expense

• True
• False

Working capital management also boost company’s earnings.

• TRUE

More companies today are now requiring cash surplus than in the past.

• True
• False

IFRS stands for __.

• International Financial Reporting Standards

Shareholders are determined to maximize long-term free cash flow.

• TRUE

Capital expenditure is an operational item.

• True
• False

Interest rates and bond prices are inversely related.

• TRUE

A company can sell goods before they have to pay the bill to the vendor is __.

• VENDOR FINANCING

Treasury reports should be in accordance with IFRS.

• True
• False

Total debt to total assets is known as __ratio.

• debt-assets

Banks should measure their vulnerability to loss under stressful market conditions.

• TRUE

Identify the factor on which an organization’s financial strategy assesses the optimal financing solution as how to measure and monitor leverage.

• markets
• leverage
• ranking of capital

Invoicing a customer for products or services you sold creates revenue.

• TRUE

__refers to money put up and owned by the owners.

• EQUITY CAPITAL

Funding strategies include asset-based financing, leasing and working-capital financing.

• True
• False

Borrowing facilities are included in cash-flow forecasts.

• True
• False

Current assets include anything that can be easily converted into cash within 24 months.

• FALSE

Capital structure includes short-term liabilities

• True
• False

Long-term assets are different from non-current assets.

• FALSE

If your business is expanding, business loan is not recommended.

• FALSE

There are more than ten ratios involved in tracking down efficient working management.

• FALSE

__ crystallize the asset positions into GBP to retain parity.

Cash flow problems can be one of the leading causes of failure for business.

• TRUE

Moody’s Standard & Poor’s is a __agency.

• CREDIT RATING

Land and buildings or expensive equipment are good security for a provider of acquisition funds.

• True
• False

The element of receivables management comes under the umbrella of cash forecasting.

• TRUE

The government gives financial support for businesses struggling from the impact of corona virus.

• TRUE

__is the money that was originally invested in the business in exchange for shares of stock or ownership.

• CONTRIBUTED CAPITAL

Presenting and explaining your own organization’s credit standing to external parties will influence their willingness to do business with you and the terms they will demand.

• True
• False

Acid test ratio is a strong indicator whether a firm has sufficient short-term assets to cover its immediate liabilities.

• TRUE

Companies in developing markets focus too closely on accounting-type measures.

• True
• False

Business strategy and financial strategy together form a __ strategy.

• CORPORATE

Working capital management requires monitoring of the company’s assets and liabilities.

• TRUE

For short-term cash flow shortages, many business owners make use of credit cards or lines of credit.

• TRUE

A __ of a company helps to increase the market price of shares and securities.

• SOUND CAPITAL STRUCTURE

Those who trade assets on the stock market cannot just buy or sell any asset at any time.

• TRUE

Working capital management is less significant to operation cycle of the business.

• TRUE

Externally raised capital may be debt or __.

• EQUITY

Identify the factor on which an organization’s financial strategy assesses the optimal financing solution as the ease and cost of financing.

• leverage
• ranking of capital
• markets