Cash & Treasury Management Flashcards
6 cards from real AAT L4 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Cash & Treasury Management flashcards as text
The primary objective of treasury management is to:
Answer: Manage the organisation's liquidity, funding, and financial risk to ensure it can meet obligations and optimise financial performance
Treasury management encompasses: maintaining adequate liquidity (cash and facilities), managing funding (short and long-term), controlling financial risks (interest rate, foreign exchange, credit), and optimising returns on surplus cash.
Working capital is defined as:
Answer: Current assets minus current liabilities
Working capital = current assets − current liabilities. It represents the net short-term resources available for day-to-day operations; positive working capital means current assets exceed current liabilities.
The cash operating cycle (cash conversion cycle) is calculated as:
Answer: Inventory days + receivables days − payables days
Cash operating cycle = inventory days + receivables days − payables days. It measures the time between paying for inputs and receiving cash from customers — a longer cycle means more working capital is tied up.
An organisation with a very short cash conversion cycle compared to industry peers would typically:
Answer: Require less working capital financing and be more efficient
A short cash conversion cycle means cash is recovered quickly from the operating cycle — less working capital is tied up, reducing the need for external financing. This is generally a positive indicator of operational efficiency.
Which of the following is a short-term source of finance for a business's working capital?
Answer: Bank overdraft facility
A bank overdraft is a flexible, short-term borrowing facility used to fund day-to-day working capital needs. It is repayable on demand and suitable for temporary cash shortfalls rather than permanent financing.
Centralised treasury management means:
Answer: All cash, borrowing, and risk management is managed centrally at group level to optimise liquidity and reduce costs
Centralised treasury pools cash from all subsidiaries, invests surpluses and borrows deficits at the group level — achieving better rates, reducing gross borrowings, and enabling consistent risk management across the group.