Treasury 101

Question 1

Corporate Treasury

Answer 1

The department responsible for managing a company’s liquidity, funding, and financial risk.

Question 2

Cash Management

Answer 2

The process of collecting, handling, and utilizing cash.

Question 3

Liquidity Management

Answer 3

Ensuring that the company has access to enough cash to meet its short-term obligations.

Question 4

Working Capital

Answer 4

The difference between a company’s current assets and current liabilities.

Question 5

Intercompany Loans

Answer 5

Loans made between different entities within the same corporation, often used for funding or cash management.

Question 6

Cross-border Cash Concentration

Answer 6

A method of pooling cash from different subsidiaries across borders to optimize liquidity.

Question 7

Automated Funding

Answer 7

The use of technology to automate the transfer of funds between accounts or entities.

Question 8

Regulatory Reporting

Answer 8

The process of submitting required financial information to regulatory authorities.

Question 9

Foreign Currency Risk

Answer 9

The potential for losses due to changes in exchange rates.

Question 10

Cash Mobility

Answer 10

The ability to move cash freely in and out of different markets or currencies.

Question 11

Debt Cost Optimization

Answer 11

Strategies to minimize the cost of borrowing.

Question 12

Return Enhancement

Answer 12

Methods to increase the yield on cash and investments.

Question 13

Payment Optimization

Answer 13

Improving the efficiency of payment processes to save costs and time.

Question 14

Fund Movement

Answer 14

The transfer of cash between accounts, entities, or markets.

Question 15

Restricted Markets

Answer 15

Markets with regulatory controls that limit the movement of cash.

Question 16

Hedging

Answer 16

Using financial instruments to reduce exposure to various risks, such as currency or interest rate fluctuations.

Question 17

Cash Extraction

Answer 17

The process of withdrawing cash from subsidiaries, often through intercompany loans or dividends.

Question 18

Dividend Repatriation

Answer 18

The return of profits from a foreign subsidiary to the parent company.

Question 19

Multicurrency Management

Answer 19

Handling transactions and balances in multiple currencies.

Question 20

Treasury Management System (TMS)

Answer 20

Software used to manage a company’s financial operations, including cash management.

Question 21

Capital Structure

Answer 21

The mix of debt and equity financing used by a company.

Question 22

Credit Facility

Answer 22

A type of loan made in a business or corporate finance context.

Question 23

Debt Covenant

Answer 23

Agreements between a company and its creditors that the company should operate within certain rules set by the creditors.

Question 24

Equity Financing

Answer 24

The method of raising capital by selling company stock to investors.

Question 25

Financial Risk Management

Answer 25

The practice of protecting economic value in a firm by using financial instruments to manage exposure to risk.

Question 26

Interest Rate Swap

Answer 26

A financial derivative contract in which two parties agree to exchange one stream of interest payments for another.

Question 27

Letter of Credit

Answer 27

A letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount.

Question 28

Leverage

Answer 28

The use of various financial instruments or borrowed capital to increase the potential return of an investment.

Question 29

Liquidity Risk

Answer 29

The risk that an entity will not be able to meet its financial obligations as they come due.

Question 30

Market Risk

Answer 30

The risk of losses in positions arising from movements in market prices.

Question 31

Operational Risk

Answer 31

The risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events.

Question 32

Payment System

Answer 32

A system used to settle financial transactions through the transfer of monetary value.

Question 33

Risk Assessment

Answer 33

The identification and analysis of relevant risks to achieve the objectives of an organization.

Question 34

Securitization

Answer 34

The process of taking an illiquid asset, or group of assets, and through financial engineering, transforming them into a security.

Question 35

Short-term Financing

Answer 35

Loans and other forms of credit that are expected to be repaid within a year.

Question 36

Supply Chain Finance

Answer 36

A set of technology-based business and financing processes that link the various parties in a transaction—buyer, seller, and financing institution—to lower financing costs and improve business efficiency.

Question 37

Trade Finance

Answer 37

The financing of international trade flows.

Question 38

Treasury Bills

Answer 38

Short-term debt obligations backed by the U.S. government with a maturity of less than one year.

Question 39

Treasury Bonds

Answer 39

Long-term debt securities issued by the U.S. Treasury.

Question 40

Treasury Notes

Answer 40

Debt securities issued by the U.S. government that are intermediate in terms of maturity.