Treasury Management

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

• Funds-transfer pricing

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

• Pre-transaction risk

Interest rates and bond prices are inversely related.

• TRUE

A business should generate enough __to finance its future growth.

• REVENUE

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

• Short-term commercial paper

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

• TRUE

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

• True
• False

It refers to any use of resources for future benefit.

• INVESTING

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

• TRUE

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

• Capital structure

Medium term forecasts often extend to a rolling year.

• True
• False

Equity financing involves raising money from venture capitalists.

• TRUE

__also called Zero balancing.

• CASH CONCENTRATION

Digital payments have risen sharply because of corona virus.

• TRUE

Borrowing facilities are included in cash-flow forecasts.

• True
• False

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

• equity

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

• preferred

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

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

• TRUE

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

• 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

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

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

Inventory is a current asset

• TRUE

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

• CONTRIBUTED CAPITAL

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

• True
• False

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

• FALSE

Cash is King, because NO cash, NO business.

• TRUE
• Your answer: is correct.

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

• True
• False

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

• Monetary and fiscal policies

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

• True
• False

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

• True
• False

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

• TRUE

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

• retained earnings

Assets structure=Fixed Assets +Current Assets

• True
• False

Capital structure includes short-term liabilities

• True
• False

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

• True
• False

Working capital management also boost company’s earnings.

• TRUE

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

• trading on equity

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

• TRUE

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

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

• FALSE

Capital financing is balancing act between debt and equity.

• TRUE

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

• TRUE

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

A sudden change in currency would distort the risk.

• True
• False

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

• CASH INSOLVENCY

IFRS stands for __.

• International Financial Reporting Standards

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

• True
• False

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

• TRUE

Inventories are not part of working capital.

• True
• False

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

• Debt-to-equity

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

• TRUE

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

• TRUE

Software development facilitates treasury function.

• True
• False

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

• True
• False

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

• FALSE

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

• VENDOR FINANCING

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

Use Income statement to check liquidity.

• True
• False

Capital expenditure is an operational item.

• True
• False

Cash flow means cash receipts.

• True
• False

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

• TRUE

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

• True
• False

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

• True
• False

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

• FALSE

Cross-currency transactions can be unpredictable.

• TRUE
• Your answer: is correct.

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

• 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

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

• PREFERENCE SHARES

Forwards and future contracts help investor hedge interest rate risks.

• TRUE

Assets and Liabilities sit on a Balance Sheet.

• True
• False

Total debt to total assets is known as __ratio.

• debt-assets

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

• STRATEGIC LIQUIDITY

Risk can present opportunities or threat to business objectives.

• True
• False

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

• True
• False

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

• TRUE

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

• FALSE

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

• False
• Answer 18

Business strategy and financial strategy together form a __ strategy.

• CORPORATE

__refers to money put up and owned by the owners.

• EQUITY CAPITAL

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

• CREDIT RATING

Treasurers are financial asset managers in their company.

• True
• False

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

• LONG-TERM BONDS

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

• True
• False

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

• True
• False

Profit is equal to cash flow.

• FALSE

__ crystallize the asset positions into GBP to retain parity.

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

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

• RISK TOLERANCE

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

• TRUE

Managing receivables to optimize the investment in working capital.

• True
• False

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

• TRUE

__ system covers the providers of funds against risks.

• RISK MANAGEMENT

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

• LEVERAGED

Diversification is not an answers to interest rate risk.

• FALSE

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

• True
• False

Externally raised capital may be debt or __.

• EQUITY

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

• LONG-TERM FORECASTS

Identify the primary sources of capital funding.

• revenues
• equity
• loans
• cash reserves

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

• True
• False

Most companies have had a treasury department.

• True
• False

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

• OPERATIONAL LIQUIDITY

Banks are seldom evaluated on their liquidity.

• FALSE

Treasury reports should be in accordance with IFRS.

• True
• False

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

• FALSE

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

• True
• False

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

• True
• False

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

• False

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

• True
• False

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

• TRUE

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

• FALSE

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

• the treasury function

Investing covers which of the following?

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