18 Questions
What is the primary responsibility of the treasury department?
Monitoring current and projected cash flows
What is one of the main tasks of the treasurer?
Investing excess funds
Why must the treasurer be prepared for additional borrowings or capital raises?
To mitigate financial risks
What is one of the key responsibilities of the treasurer in relation to cash flows?
Investing excess funds prudently
Which factor is a key consideration in safeguarding existing assets according to the text?
Excessive losses on interest rates
What does the treasurer need to monitor in order to maintain key relationships with investors and lenders?
Internal processes and decisions causing changes in working capital
What is one of the key issues explored in this chapter regarding the treasury department?
Performance metrics
Why must the treasurer be prepared for additional borrowings or capital raises according to the text?
To meet special funding needs
What is the primary goal for the proper investment of excess funds?
To not put funds at risk and to match the maturity dates of investments with a company’s projected cash needs.
How can the treasury staff mitigate a company’s risk related to interest rates and foreign exchange positions?
By creating risk management strategies and implementing hedging tactics.
What role does the treasury staff play in responding to credit rating agencies?
The treasury staff responds to information requests from the credit agency’s review team and provides it with additional information over time.
Why is it important for the treasurer to maintain excellent relations with the investment community?
To ensure successful fund raising and to maintain a good reputation in the financial market.
What topics are addressed in Chapter 9 and Chapter 10 of the text?
Foreign Exchange Risk Management and Interest Risk Management.
What is the purpose of cash forecasting for the treasury staff?
To plan investment vehicles that match scheduled cash outflows and to determine when more cash is needed.
How does working capital management relate to cash availability?
It involves changes in current assets and liabilities in response to sales and internal policies, impacting cash availability.
What role does the treasurer play in ensuring sufficient cash availability for operational needs?
The treasurer uses information from cash forecasting and working capital management to ensure cash availability for operational needs.
Why is it important for the treasury staff to plan for hedging operations at the individual currency level?
To mitigate risks associated with currency fluctuations and to plan hedging operations effectively.
How does working capital management impact the treasurer's role?
The treasurer should be aware of working capital levels and advise management on the impact of policy changes on working capital.
Study Notes
Treasury Department Responsibilities
- The primary responsibility of the treasury department is to manage a company's financial resources.
- The treasurer's main tasks include financial planning, capital raising, and cash flow management.
Cash Flow Management
- The treasurer must be prepared for additional borrowings or capital raises to manage cash flows effectively.
- Monitoring cash flows is a key responsibility of the treasurer to ensure sufficient cash availability for operational needs.
Risk Management
- The treasury staff can mitigate a company's risk related to interest rates and foreign exchange positions through hedging operations.
- It is important for the treasury staff to plan for hedging operations at the individual currency level.
Relationships with Investors and Lenders
- The treasurer must maintain excellent relations with the investment community to ensure access to capital markets.
- The treasurer needs to monitor investor and lender relationships to maintain key relationships.
Investment of Excess Funds
- The primary goal for the proper investment of excess funds is to maximize returns while minimizing risk.
Working Capital Management
- Working capital management relates to cash availability, and the treasurer plays a crucial role in ensuring sufficient cash availability for operational needs.
- Working capital management affects the treasurer's role in managing cash flows and accessing capital markets.
Credit Rating Agencies
- The treasury staff plays a role in responding to credit rating agencies to maintain the company's creditworthiness.
Chapter Topics
- Chapter 9 and Chapter 10 of the text address topics related to the treasury department's role in financial management.
Cash Forecasting
- The purpose of cash forecasting for the treasury staff is to predict and manage cash flows effectively.
This quiz covers the responsibilities of the treasury department in managing a company’s liquidity, including monitoring cash flows, investing excess funds, and preparing for borrowings or capital raises.
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