Chapter 1 - Role of Treasury Management Flashcards
Key Concepts to Reinforce
What are the 4 important metrics involved with the conversion cycle?
- Cash Conversion Cycle
- Days’ Payable
- Days’ Receivable
- Days’ Inventory
What is “Cash Application”?
The process of applying a customer’s payment against outstanding invoices or receivables
P2P Cycle also known as
Accounts Payable
O2C Cycle also known as
Accounts Receivable
Main Considerations for Treasury as a Profit Center
Common for companies heavily involved in global finance, trade, or risk management
Sets an expectation for profitability instead of preservation of capital
Main Considerations for Treasury as a Cost Center
More common for Treasury to be a cost center
Difficult to expand budget as costs must be maintained
SSC vs. GBS
Shared Services Center
Global Business Services
GBS will offer similar services, but may also provide advisory services
Annual Report vs. Audited Financials
Investor Relations typically has ownership over the annual report and would be the best source to obtain the annual report from
Credit Managers vs. Accounts Receivable Manager
Credit Managers - Preserve and collect accounts receivable; sets collection policies
Accounts Receivable Manager - Monitors and collects accounts receivable
What role within the organization does management assume as it relates to agency dilemma?
Management assumes a trustee or fiduciary responsibility
What are executive sessions?
They are required to be held by independent board members and these sessions cannot include management
In the US, what is the cooling off period to determine independence for a board member? What about in the UK?
US - 3
UK - 5
Which committees are required to be comprised of only independent directors?
Nominating Committee
Compensation Committee
Audit Committee
All must possess a reasonable finance/accounting background
Centralized vs. Decentralized vs. Combined Global Treasury Operations
Centralized - economies of scale, stronger control
Decentralized - pure decentralization is uncommon, but allows for better understanding of local requirements
Blended - emphasizes using regional treasury centers to oversee individual countries
