Practice Test GeeksCFM - Certified Finance Manager Practice Test
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CFM Treasury & Cash Management Flashcards

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

Read the first 6 CFM Treasury & Cash Management flashcards as text

  1. Which financial instrument allows a company to hedge against rising interest rates on a floating-rate loan?

    Answer: Interest rate swap (pay-fixed, receive-floating)

    In a pay-fixed, receive-floating interest rate swap, the company pays a fixed rate and receives the floating rate, effectively converting variable loan costs to fixed costs.

  2. What is the purpose of a revolving credit facility for a corporation?

    Answer: To provide flexible short-term borrowing capacity that can be drawn and repaid repeatedly

    A revolving credit facility (revolver) gives companies the ability to borrow up to a set limit, repay, and re-borrow as needed, providing flexible liquidity support.

  3. When evaluating short-term investment options, a CFM should prioritize which three characteristics in order?

    Answer: Safety, liquidity, return

    For corporate treasury, preserving capital (safety) comes first, followed by the ability to access funds quickly (liquidity), with return as a secondary objective.

  4. What is the net present value (NPV) of a $10,000 cash inflow received one year from now at a 5% discount rate?

    Answer: $9,524

    NPV = $10,000 / (1 + 0.05) = $9,523.81, rounded to $9,524, representing today's value of that future cash flow.

  5. Which ratio best indicates a company's ability to meet its most immediate obligations without relying on inventory?

    Answer: Quick ratio (acid-test ratio)

    The quick ratio (cash + marketable securities + receivables) / current liabilities excludes inventory, providing a more stringent test of immediate liquidity.

  6. What is the key risk associated with investing excess corporate cash in commercial paper?

    Answer: Credit risk if the issuer defaults before maturity

    Commercial paper is unsecured short-term debt, so if the issuing corporation defaults, investors may lose principal, making credit quality assessment essential.