TM CH5: Cash Concentration Quiz

What is the primary goal of cash concentration?

• Increasing credit availability

• Reducing operational costs

• Combining cash from different accounts to manage money effectively

• Increasing loan options for subsidiaries

Which method physically transfers funds into a central account?

• Zero Balance Method

• Notional pooling

• Fixed Sweep Method

• Physical sweeping

Which of the following is NOT a core function of a concentration bank?

• Receiving deposits from collection accounts

• Offering long-term investment advice

• Transferring funds to disbursement accounts

• Acting as a central hub for short-term credit

In which method does a set percentage of cash get transferred to the main account?

• Target Balance Method

• Percentage Method

• Investment Sweep Method

• Zero Balance Method

What is the main benefit of eliminating idle cash through cash concentration?

• It reduces banking fees

• It ensures funds are available in all accounts

• It pools cash for better investment returns

• It minimizes tax liabilities

What is a risk associated with centralized cash concentration?

• Increased subsidiary-level autonomy

• High overdraft fees for negative balances

• Reduced autonomy for subsidiaries

• Higher interest on debt

Which of the following is an advantage of using large commercial banks as concentration banks?

• More local knowledge of regulations

• Enhanced manual review of balances

• Additional services like daily balance reporting

• Higher interest rates on accounts

Which strategy combines centralized liquidity management but decentralized payments?

• Complete decentralization

• Centralized liquidity management, decentralized payments

• Centralized payments, decentralized liquidity management

• All functions centralized

In the Fixed Sweep Method, what happens when a sub-account's balance is less than the fixed amount?

• No funds are transferred

• Half the balance is transferred

• A percentage is transferred

• The entire balance is transferred

What is a key consideration for cash concentration across countries?

• Interest rate differences

• Tax implications

• Stock market performance

• Credit ratings of banks