Chapter 1 - Role of Treasury Management

Question 1

What are the 4 important metrics involved with the conversion cycle?

Answer 1

1. Cash Conversion Cycle
2. Days’ Payable
3. Days’ Receivable
4. Days’ Inventory

Question 2

What is “Cash Application”?

Answer 2

The process of applying a customer’s payment against outstanding invoices or receivables

Question 3

P2P Cycle also known as

Answer 3

Accounts Payable

Question 4

O2C Cycle also known as

Answer 4

Accounts Receivable

Question 5

Main Considerations for Treasury as a Profit Center

Answer 5

Common for companies heavily involved in global finance, trade, or risk management

Sets an expectation for profitability instead of preservation of capital

Question 6

Main Considerations for Treasury as a Cost Center

Answer 6

More common for Treasury to be a cost center

Difficult to expand budget as costs must be maintained

Question 7

SSC vs. GBS

Answer 7

Shared Services Center
Global Business Services

GBS will offer similar services, but may also provide advisory services

Question 8

Annual Report vs. Audited Financials

Answer 8

Investor Relations typically has ownership over the annual report and would be the best source to obtain the annual report from

Question 9

Credit Managers vs. Accounts Receivable Manager

Answer 9

Credit Managers - Preserve and collect accounts receivable; sets collection policies

Accounts Receivable Manager - Monitors and collects accounts receivable

Question 10

What role within the organization does management assume as it relates to agency dilemma?

Answer 10

Management assumes a trustee or fiduciary responsibility

Question 11

What are executive sessions?

Answer 11

They are required to be held by independent board members and these sessions cannot include management

Question 12

In the US, what is the cooling off period to determine independence for a board member? What about in the UK?

Answer 12

US - 3
UK - 5

Question 13

Which committees are required to be comprised of only independent directors?

Answer 13

Nominating Committee
Compensation Committee
Audit Committee

All must possess a reasonable finance/accounting background

Question 14

Centralized vs. Decentralized vs. Combined Global Treasury Operations

Answer 14

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