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Treasury Management & Cash Flow Flashcards

7 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Treasury Management & Cash Flow flashcards as text

  1. A company's days sales outstanding (DSO) increased from 35 to 52 days. What is the most likely impact on the cash conversion cycle?

    Answer: The CCC increases by 17 days

    DSO is a component of the CCC; a 17-day increase in DSO directly lengthens the cash conversion cycle by 17 days.

  2. Which instrument is most commonly used by treasurers to protect against rising short-term borrowing costs?

    Answer: Interest rate cap

    An interest rate cap sets a maximum interest rate on floating-rate debt, protecting the borrower from rising short-term rates.

  3. Under a zero-balance account (ZBA) structure, subsidiary accounts are swept daily to a master account. What is the primary treasury benefit?

    Answer: Maximizes idle cash by concentrating balances centrally

    ZBA structures concentrate cash into a master account so idle subsidiary balances earn returns or offset borrowing costs centrally.

  4. A treasurer is evaluating a $10M commercial paper issuance at a 5.2% discount rate for 90 days. What is the approximate dollar amount of discount?

    Answer: $130,000

    Discount = Face × Rate × (Days/360) = $10M × 0.052 × (90/360) = $130,000.

  5. Which cash flow forecasting method builds projections from individual transaction-level data and is most accurate for short-term (1–30 day) horizons?

    Answer: Direct method

    The direct (receipts and disbursements) method uses scheduled transaction data, providing the greatest short-term accuracy.

  6. A company holds excess cash for 45 days before investing. Which short-term investment vehicle offers the best liquidity with minimal credit risk for this horizon?

    Answer: U.S. Treasury bills

    U.S. Treasury bills are backed by the federal government, highly liquid, and available in maturities matching the 45-day window.

  7. What does a negative free cash flow (FCF) indicate for a treasury manager planning short-term funding needs?

    Answer: The company may need to draw on credit facilities or raise capital

    Negative FCF means operating and investing outflows exceed inflows, signaling potential need for external financing.