Treasury Management Chapter 10 Prep Exam Actual Question With Correct Verified Correct Answers.

Cash outflows - correct answer Include funds disbursed to employees, vendors/suppliers, lenders, tax agencies, bondholders and shareholders. described by the procure-to-pay timeline. Cash Inflows - correct answer Funds collected from customers, obtained from financial sources (loans, investments) and or received from other sources. Described by the order-to-cash timeline. Concentration Flows - correct answer Funding flows. Involve internal transfers among operating units of a firm and the associated bank accounts. Primary objective of concentration flows include pooling of funds or the funding of disbursement accounts. Liquidity Management Flows - correct answer Refer to the effective deployment of the firm's liquidity reserves to maximize firm value. If there is a surplus of funds, treasury may either invest in suitable investments, pay down existing debt or return value to shareholders in form or dividends or share repurchases. If shortage of funds may need to sell off investments or draw on available debt sources like credit lines or commercial paper. Cash Flow Timeline - correct answer describes the conversion of noncash current assets and liabilities into cash. The cash flow timeline consists of the procure-to-pay period, the inventory period and the order-to-cash period. Procure to pay timeline - correct answer represents the time between the purchase of raw materials, retail goods, or services, and the point at which payment is received by the supplier. represents an outflow of cash. inventory timeline - correct answer includes time needed to turn raw materials into finished goods and to sell the finished goods. good firms will have a short period for this timeline. Order to cash period - correct answer is the final piece of the operating cycle and represents a cash inflow. This component includes all tasks involved in soliciting customers and converting inventory to sales and ultimately into cash. Float - correct answer refers to the time or delay between the start and completion of a specific phase or process occuring along the cash flow timeline. often the result of wait time and inefficiencies in the process. increased by paper processes and delivery systems such as mailing of invoices to customers. is the period of time that occurs between payment generation and the actual time when the payee's account is credited with available funds. Payment Floats (+10 days) - correct answer represents the delay between the time an invoice is sent to the buyer, and the time seller/payee account is credited with available funds (sellers). represents the delay between the time an invoice is received and the time the buyers/payers account is debited (buyers). Information float - correct answer refers to the inability to use or generate cash due to a delay in receiving related information, such as remittance information. Can happen in multiple processes so does not have a specific place on the timeline. Collection Float - correct answer Time interval or delay between the time the buyer/payer initiated the payment and time seller receives good funds. Applies principally to paper-based instruments that are subject to float. Mail Float - correct answer Delay between the day a payment is mailed and the day it is received by a payee or payees processing site. Can be a day or two or weeks. Processing Float - correct answer Delay between the time the payee or the payee's processing site receives the payment and the time the payment is deposited into the payees account. Typically a day or less. Availability Float - correct answer The delay between the day when a payment is deposited into a bank account and the day when the payee's account is credited with collected funds. Could be zero to two days. Varies if its domestic or international payments. Disbursement Float - correct answer Time or delay between the day when a payment is initiated and the day when funds are debited from buyer/payors account. Subject to mail, processing and clearing delays. Clearing float is the time interval or delay between the day a check is deposited by the payee and the day when the payor's account is debited. Use of ACH(automated clearinghouse) upon initiation. Invoicing float - correct answer delay between the day that a customer places an order and the day that the customer actually receives an invoice for that order that can be processed for payment. CCC - correct answer Continuous flow of cash through working capital accounts. which provides the amount of time that elapses between when the funds are disbursed in direct support of a revenue-generating activity until the time when revenues are collected. shows how inventory, A/R, A/P interact to affect cash flow. begins when inventory is purchased and ends when available funds are collected from A/R. Days' inventory - correct answer For a manufacturing firm. is the average number of days that elapse from the purchase of raw materials until the sales of finished goods. For retailer is the average time that the finished goods inventory is held before sale. Days' receivable - correct answer the average number of days required to collect on credit. Changes in competitive market place or general business conditions also may impact this.