Treasury Management Review Questions with Complete Answers (Already Passed)

Treasury Management Review Questions with Complete Answers (Already Passed) 1. What are the major objectives of treasury management (Chapter 1) - Answers Maintain liquidity Optimize cash resources Maintain access to short term financing Manage investments Maintain access to medium and long term financing Manage financial risk Coordinate financial functions and share financial information Manage external vendors 2. Which of these objectives make up working capital management (Chapter 1) - Answers Maintain liquidity Optimize cash resources Maintain access to short term financing Manage investments 3. Why is effective management of working capital critical to an organization (Chapter 1) - Answers Working capital management is the foundation of effective treasury management. Without access to cash to pay vendors and employees, companies cannot operate. Many profitable companies have been forces to close their doors because of insufficient liquidity due to poor cash management. 4. What are the typical responsibilities of a treasurer (Chapter 1) - Answers Managing overall financial risk, including FX risk. Arranging ST and LT external financing Managing relationships with banks and other service providers Overseeing day to day liquidity and cash management Investing for ST and LT Developing and implementing treasury policies and procedures Managing domestic and international payments 5. What are the typical responsibilities of a credit manager (Chapter 1) - Answers The credit manager preserves and collects accounts receivable, sets corporate credit policies, approves the extension of credit terms and exposure to limits to customers and establishes information systems to monitor accounts receivables. 6. What are some typical activities for which a board of directors might grant authority to individuals within treasury organizations (Chapter 1) - Answers Open close and modify bank accounts Establish credit facilities Oversee investments Issue debt and equity securities Devise implement and execute risk management strategies 7. What are the 6 tasks involved in daily cash management (Chapter 1) - Answers Preparing a cash position worksheet Monitoring cash balances on deposit at financial institutions Collecting concentrating and disbursing cash Investing and borrowing funds on a ST basis when needed Researching and reconciling exception items such as unexpected charges on bank accounts missing deposits and uncleared checks Coordinating efforts with other finance areas such as AR AP tax and accounting 8. What is the downside of making treasury a cost center? (Chapter 1) - Answers The downside to making treasury a cost center is that management may focus on the cost of treasury operations and not the value provided by the function, leading to difficulties in obtaining appropriate budget and staff 9. Why are shared services centers (SSCs) typically deployed (Chapter 1) - Answers Reduce the costs of multiple or duplicate operations Standardize the process Increase the quality and timelines of services Create a higher degree of strategic flexibility 10. Define corporate governance. (Chapter 1) - Answers The principles and processes by which any organization is governed. It provides the guidelines for managing a company so that it can fulfill its stated goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the LT 11. What is required for a director to be considered independent under NYSE standards (Chapter 1) - Answers The board must determine that the director has no material relationship with the listed company either directly or as a partner, shareholder, or an officer to the organization 12. What are the major checks and balances that limit and monitor management performance (Chapter 1) - Answers To protect stockholders, corporate governance procedures establish a set of checks and balances to place limits on executive prerogatives and monitor management performance. Important components include the BPD, shareholder meetings, independent external auditors and regulatory agencies. 1. What is the primary role that financial institutions play in the economy and why are they regulated? (Chapter 2) - Answers o Provide a mechanism for savers of capital to transfer that capital to those who might best use it. Because this vital role of capital transfer is fundamental to the efficient functioning of the economy, FIs generally are regulated closely by monetary and other government authorities. 2. What is a central bank? (Chapter 2) - Answers o An entity that is responsible for implementing and managing a countries monetary policy (money supply and interest rates) 3. What is the financial stability board? (Chapter 2) - Answers o Was established to provide int. coordination of national financial authorities and international standard setting bodies. It works to develop and promote the implementation of effective regulatory supervisory and other financial sector policies. 4. What are the principal committees of the bank for international settlements? (Chapter 2) - Answers o Group of Governors and Head of Supervision (GHOS) o Committee on Global Financial System (CGFS) o Committee on Payment and Settlement Systems (CPSS) 5. Describe the main features of the third Basel accords. (Chapter 2) - Answers o Goals: Improve the banking sectors liability to absorb shocks arising from financial and economic stress, whatever the source Improve risk management and governance Strengthen banks transparency and disclosures o Reforms target: Bank level regulation help raise the resilience of individual banking institutions to periods of stress