CH01-Treasury Management

Question 1

9 objectives of Treasury Management

Answer 1

1. Maintain liquidity
2. Optimize cash resources
3. Access to short-term financing (under 1 year)
4. Manage investments
5. Access to Medium and LT financing
6. Manage risk
7. Manage IT
8. Collaborate with other depts
9. Manage external parties

Question 2

4 Core Cash Management activities

Answer 2

1. Maintain liquidity
2. Optimize cash resources
3. Access to short-term financing
4. Manage investments

Question 3

What outlines the sequence of operating cash flows?

Answer 3

Cash Conversion Cycle

Question 4

What does the Cash Conversion Cycle indicate?

Answer 4

if financing will be needed to fund working capital gap created by the operating cycle

Question 5

What is Treasury’s core objective?

Answer 5

Support business strategy = funding the creation of revenue while maintaining compliance

Question 6

Who does Tax typically report to?

Answer 6

CFO but sometimes Treasurer

Question 7

When and why is treasury set up as a profit center?

Answer 7

Treasury is a profit center when there’s income from trading and hedging/speculative activities.

Question 8

When is Treasury setup as a Cost Center?

Answer 8

when Treasury is a support function = Cost Center

Question 9

3 Advantages of Centralized Treasury

Answer 9

Control,
Economies of scale,
Low operating costs

Question 10

1 Disadvantage of Centralized Treasury

Answer 10

Less autonomy

Question 11

1 Advantage of Decentralized Treasury

Answer 11

Familiar with local business, banking, language, customs

Question 12

3 Disadvantages of Decentralized Treasury

Answer 12

Compliance burden,
Periodic reports,
Home office audits

Question 13

The BOD typically grants the treasury function the authority to:

Answer 13

• Open, close, and modify bank accounts
• Establish credit facilities
• Oversee investments
• Issue debt and equity securities
• Devise, implement, and execute risk management strategies