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Treasury Management > Final Exam > Flashcards

Final Exam Flashcards

1
Q

is all of
the steps involved
in transferring
funds ownership
from one party to
another

A

Clearing

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2
Q

involves the
finalization of a
payment, so that a
new party takes
possession of
transferred funds

A

Settlement

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3
Q

What is the characteristic of clearing and settlement system?

A

The banks of the payer and beneficiary
exchange information regarding
monetary transfers, the result of these
exchanges is payments between the
banks.

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4
Q

It is a continuous process of settling
transactions individually and as they occur,
rather than being processed in a batch
Better - suited for larger transaction amounts
where funds need to be moved as quickly and
as securely as possible.
can minimize the potential for fraud because
of the speedy settlement time

It refers to the method of settling transactions individually and immediately as they happen, rather than in batches. This approach is ideal for larger transaction amounts where it’s crucial to move funds quickly and securely. It can also reduce the risk of fraud because transactions are settled promptly.

A

Gross Basis/Gross Settlement

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5
Q

This is a bank’s routine resolution of
the day’s transactions at the end of the
business day.
It settle the daily transactions between banks.
It deals with aggregate transaction data,
usually processed and settled at the end of a
day (or at the end of another pre-specified
time period).

This is when banks settle the total of daily transactions between them at the end of the day, rather than settling each transaction individually as they happen.

A

Net Basis

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6
Q

What are the two settlement types?

A

Gross Settlement
Net Basis

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7
Q

What are the two Transaction types?

A

High-Value Payment
Low-Value Payment

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8
Q

• Must be executed immediately
• Settled on a gross basis
•Use robust security to guard against
fraud, hacking, and other malicious
behavior

A

High Value Payment

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9
Q

• Does not require immediate execution
• Handled through a ACH system
• Does not have the potential to disrupt
the financial system

A

Low-Value Payment

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10
Q

It is a vital component of the United States’ Financial
System, including real-time gross settlement services
that allow for the instantenous and definitive transfer
of money and securities

A

Fedwire

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11
Q

• An electronic fund transfer made between banks and
credit unions across
• used for all kinds of fund transfer transactions,
including direct deposit of paychecks and monthly debits
for routine payments.

A

Automated Clearing House (ACH) System

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12
Q

specifically designed to mitigate the settlement risk
associated in foreign exchange transactions

A

The Continuous Linked Settlement (CLS) System

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13
Q

occurs when one
party to a transaction pays out the currency it sold but does
not receive the currency it bought due to a default by the
counterparty.

A

Settlement Risk

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14
Q

What are the currencies that can be settled in the CLS System

A

Australian Dollar (AUD) - $
Israeli Shekel (ILS) - ₪
South African Rand (ZAR) - R
British Pound (GBP) - £
Japanese Yen (JPY) - ¥
Singapore Dollar (SGD) - $
Canadian Dollar (CAD) - $
Korean Won (KRW) - ₩
Swedish Krona (SEK) - kr
Danish Krone (DKK) - kr
Mexican Peso (MXN) - $
Swiss Franc (CHF) - CHF or Fr.
Euro (EUR) - €
New Zealand Dollar (NZD) - $
U.S. Dollar (USD) - $
Hong Kong Dollar (HKD) - HK$
Norwegian Krone (NOK) - kr

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15
Q

settle mechanism ensuring that the
exchange happens simultaneously. This
mitigates the risk that one party might
fulfill their part of the transaction while
the other does not.

A

PVP (Payment vs Payment)

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16
Q

The treasurer requires information that is not normally available through
a company’s standard accounting systems, or even from its enterprise
resources planning (ERP) systems.

A

Treasury Technology

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17
Q

What are the treasury technology needs?

A

The treasurer is in the difficult position of requiring information from many
sources, most of which are not required by any other company manager.

• Cash Position
• Foreign Exchange Transactions

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18
Q

Rate feeds from Bloomberg or Reuters
Exposure modelling capability

A

Hedging

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19
Q

What are the efficiency issues of Hedging?

A

• Minimize Data
• Work flow processing

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20
Q

These are critical to preventing:
• errors, fraud, and security breaches
• ensuring compliance with regulatory requirements and internal policies

A

Control Issues

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21
Q

All treasury transactions
should result in this that
identifies who made a
transaction and the date,
amount, and accounts
impacted by the transaction.

A

Audit Trail

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22
Q

The system should limit
access to certain modules
and require approval of key
transactions.

A

Segregation of Duties

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23
Q

The system should
automatically notify users if
transaction confirmations
have not been received, if
hedging policies are being
violated, if there are
negative cash balances, and
so on.

A

Warning Indicators

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24
Q

a software application which automates the process of
managing a company’s financial operations. It helps companies to
manage their financial activities, such as cash flow, assets and
investments, automatically and automate the back office of a
company’s business obligations and financial operations.

A

Treasury Management Systems (TMS)

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25
Q

What are the functions of Treasury Management System?

A

Real-time Cash Management
Cash flow Forecasting
Payment Reconciliation
Debt Management
Trade Finance
Technology

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26
Q

What are the key benefits of Treasury Management System (TMS)?

A

• Better tools to manage bank-related transaction fees
• Improved productivity with enhanced efficiency
• Better bottom-line decisions
• Detailed variance analysis with forecasting tools
• Straight-through processing in a centralized hub
• More control over finances with automation
• Currency management
• Collections
• Reporting
• Disbursement
• Capital management

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27
Q

This network is highly secure and is designed strictly to transport messages between
participants - it does not provide a clearing or settlement service.

It is a highly secure network designed specifically for sending messages between its participants, such as banks. It does not handle clearing or settlement of financial transactions itself.

A

The Society for Worldwide Interbank Financial Telecommunication (SWIFT)

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28
Q

operates a worldwide
network that banks use to exchange standardized electronic messages

These are standardized codes used by banks worldwide to send electronic messages to each other through the SWIFT network.

A

SWIFT MT Codes

29
Q

Companies are now able to access the SWIFT network by any one of four methods

A

• Standardized Corporate Environment (SCORE)
• MEMBER - ADMINISTERED CLOSED USER GROUP (MA CUG)
• Alliance Lite
• Swift Bureau

30
Q

Under this approach, a company can communicate with all member banks in a closed user group.
SWIFT invoices companies directly for their message traffic. This is the most efficient method,
because users have direct access to nearly all banks.

A

Standardized Corporate Environment (SCORE)

31
Q

A company can join a separate ______ for each bank with which it wishes to communicate.
Each _______ is administered by a bank, rather than SWIFT. The bank running each _______ will
invoice member companies for their message traffic.

A company can join a separate of these for each bank with which it wishes to communicate. Each of this is administered by a bank, not by SWIFT. The bank operating each of these will bill member companies for the messages they send and receive.

A

Member - Administered Closed User Group (MA-CUG)

32
Q

SWIFT has made this method available to smaller companies having low transaction volumes. It
allows them to use either a manual browser-based payment entry system or to integrate directly
into their treasury management systems

This is a service from SWIFT for smaller companies with fewer transactions. It lets them either enter payments manually through a web browser or connect directly to their financial management systems.

A

Alliance Lite

33
Q

Third-party providers have set up their own access to the SWIFT network and allow companies
access through their systems for a per transaction fee.

It is a service where third-party providers connect to the SWIFT network and let companies use this connection to make transactions, charging a fee for each transaction.

A

SWIFT Bureau

34
Q

What is the SWIFT MT Code for
MT 101

A

To Request a Fund Transfer

35
Q

What is the SWIFT MT Code for
MT 104

A

For Direct Debit and Request for Debit Transfer

36
Q

What is the SWIFT MT Code for
MT 300

A

For Foreign Exchange Confirmation

37
Q

What is the SWIFT MT Code for
MT 320

A

For Fixed Loan/Deposit Confirmation

38
Q

What is the SWIFT MT Code for
MT 940

A

To Request Bank Account Information

39
Q

This is a set of rules under U.S. securities law that allows companies to raise money by selling their stocks or bonds to the public without having to go through the full process of registering with the Securities and Exchange Commission (SEC). This can save companies time and money. It was established by the Securities Act of 1933 and offers certain benefits to companies, making it easier for them to access public investment while still providing some protections to investors.

A

Regulation A

40
Q

It is a rule that helps private companies or entrepreneurs raise money without having to register their securities with the SEC, which can be time-consuming and expensive. This regulation allows them to quickly and cheaply obtain funding by selling stocks or bonds, usually to a small group of investors. Although it streamlines the process, companies still need to follow other state and federal regulations. This is different from the ________, which deals with limits on withdrawals from savings accounts.

A

Regulation D

41
Q

What is the difference between Regulation A and Regulation D

A

Regulation A and Regulation D are both rules that make it easier for companies to raise money by selling securities, but they have some key differences.

Regulation A allows companies to publicly offer their securities to a wide range of investors, both accredited (wealthy or experienced) and non-accredited (average investors), without the full SEC registration process. It’s like a mini-public offering and can be used by companies of various sizes.

Regulation D, on the other hand, is mainly for private placements, meaning it’s geared towards raising money from a smaller group of investors, typically accredited ones. This makes it faster and less costly than a public offering but limits the pool of potential investors.

So, in summary:
- Regulation A: Public offerings to many types of investors, less paperwork than full registration.
- Regulation D: Private offerings, typically to wealthy or experienced investors, quicker and cheaper but more restricted in who can invest.

42
Q

There are implications of different methods of transferring cash to or from a company that a treasurer should understand, since there are significant differences in the costs and cash flow speed of each one. The level of manual processing
and related controls is significantly different for each kind of transfer, which has a major impact on the long - term efficiency of the finance and accounting functions.

A

Cash Transfer Method

43
Q

This tend to be for very small transactions, though possibly in very high volume, especially in retail situations. However, business - to - business cash payments are not common.
• Cash is bulky, requires significant controls to maintain on -site, and does not earn interest income until deposited. Given the extra cost of counting it at the bank, it is also expensive to deposit. Consequently, companies have a strong incentive to avoid both paying with or accepting cash.

A

Cash Payments

44
Q

a negotiable instrument drawn against deposited funds, to pay therecipient a specific amount of funds ondemand.

A

Check Payments

45
Q

a payment on behalf of the payer, which is guaranteed by the bank (and therefore of value to the payee).

A

Bank Check

46
Q

• A drawer writes a check from their bank account.

A

Check Creation

47
Q

• The person who receives the check becomes the holder.
• Payee accepts the check

A

Holder Acceptance

48
Q

Individuals, businesses, and banks can accept checks without liability if they are holders in due course.

A

Holder’s Liability

49
Q

Payee endorses the check as either blank, special, or restrictive.

A

Endorsement

50
Q

Endorsed check is accepted by a depositary bank, which also endorses it.

A

Acceptance by Depository Bank

51
Q

The bank is required to honor properly payable checks.
• Failure to do so could make the bank liable for wrongful dishonor.

A

Bank’s Obligation

52
Q

Check is proofed, encoded, captured, and sorted (on-us, local, nonlocal).
• Batched and presented to the drawee through clearing arrangements (direct presentment, correspondent bank, clearing house, Federal Reserve bank).

A

Processing for Collection

53
Q

Drawee receives checks for in-clearing capture.
• Full MICR line is captured in Preparation

A

Drawee’s Action

54
Q

• Data from capture runs stored and posted to accounts at the close of business.
• Exception items (rejected checks) require special handling.

A

Data Storage and Posting

55
Q

This type of endorsement involves simply signing the back of the check. It turns the check into a bearer instrument, meaning it can be redeemed by whoever holds it. These are the most flexible but also the riskiest, as anyone who possesses the check can cash it.

A

Blank Endorsement

56
Q

Also known as an “endorsement in full,” this endorsement specifies the person to whom the check is payable. It involves signing the back of the check and writing “Pay to the order of [Name]” above the signature. This restricts the check’s negotiation to the specified person or entity.

A

Special Endorsement

57
Q

• If a company has significant cash holdings, then it may be worthwhile to spend timehere.
• However, maintaining an abnormally small cash balance requires active float monitoring on a daily basis. If there is a gap of even a single day in float monitoring, then
the company will very likely not have sufficient funds for all presented checks, and will incur expensive account overage fees.

A

INVESTING FLOAT – RELATED FUNDS

58
Q

refer to the date when account holders can use funds from deposited checks that already passed through the bank’s clearing cycle
• When an individual (payee) first deposits a check at their bank, the bank will credit the payee’s account with the amount indicated on the check.

A

Value Dating

59
Q

is a service provided by banks to companies for the receipt of payment from customers. Under the service, the payments made by customers are directed to a special post office box instead of going to the company.

A

Lockbox Banking

60
Q

is a technology based method that lets banks accept checks for deposit using electronic images instead of the original, physical, paper versions. It let banking customers use their computers, tablets, or smartphones to conveniently deposit checks.

A

Remote Deposit Capture

61
Q

involves the use of check payments that are drawn on remote bank locations, thereby lengthening the duration of the disbursement float. At its most sophisticated level of usage, a company can have multiple remote bank locations set up around the country, and pay suppliers using bank accounts located the furthest from them.

A

Remote Disbursement

62
Q

which are also known as wire payments, allow money to be moved quickly and securely without the need to exchange cash. They allow two parties to transfer funds even if they’re in different (geographic) locations safely. A transfer is usually initiated from one bank or financial institution to another. Rather than cash, the participating institutions share information about the recipient, the bank receiving account number, and the amount transferred.

A

Wire Transfers

63
Q

one party agrees to pay another. To make that happen, the party receiving payment sends a message to the ACH network asking it tocollect said payment and move the funds into their account.

A

Automated Clearing House (ACH) Debit

64
Q

Is a type of company charge card used for smaller purchases to achieve greater cost efficiency, control and convenience. These are also known as purchasing cards, P-Cards or PCards.
• this can be tied to either a credit card or a bank account. The bank that manages a procurement card will issue payments to payees within days, while providing monthly invoicing to the client company.

A

Procurement Cards

65
Q

What is the RA for foreign investment act of 1991?

A

R.A 7042

66
Q

What is the RA for Philippine Economic Zone Authority (PEZA) for applicant?

A

R.A 7916

67
Q

What is the RA for Metropolitan Authority (SBMA) or Clark Development Corporation (CDC) applicant?

A

R.A 7227

68
Q

What is the RA for Cagayan Economic Zone Authority (CEZA) for applicant?

A

R.A 7922

Treasury Management (3 decks)

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