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WorksheetsExam: Treasury Management
Total questions: 55
Worksheet time: 28mins
The corporate treasurer’s role primarily focuses on:
Marketing strategy
Cash and risk management
Product development
HR management
Treasury creates value for the firm by:
Reducing cost of capital
Increasing marketing spend
Hiring more employees
Expanding product lines
Which is NOT part of treasury’s role?
Cash flow forecasting
Liquidity management
Corporate branding
Risk management
A Treasury Control Framework ensures:
Employee productivity
Internal compliance and fraud prevention
Lower production costs
Better customer experience
Corporate credit ratings affect:
Market access and cost of capital
Hiring policies
Branding
Product pricing
A centralized treasury model is best when:
Operations are global and complex
The company has only one location
Branding is the priority
HR policies dominate
Liquidity risk arises when:
The company cannot meet short-term obligations
The company expands globally
Marketing fails
HR budgets increase
Example of a Treasury KPI:
Debt-to-equity ratio
Market share
Customer satisfaction
Employee turnover
Which real-world company holds one of the largest cash reserves globally?
Apple
Tesla
Coca-Cola
Toyota
Downgrade in credit rating leads to:
Higher borrowing cost
Lower borrowing cost
No effect
More investors
Treasury performance is measured by:
Cash flow accuracy
Market growth
Customer retention
Employee productivity
Corporate value is influenced by treasury via:
Optimal capital structure
HR policies
Product branding
CSR
Treasury must align with:
Corporate strategy
Social media campaigns
HR training
Office design
Example of treasury risk management tool:
Hedging
Job rotation
Advertising
Office relocation
Enron’s failure highlighted:
Lack of strong treasury controls
Lack of good marketing
Poor customer service
Weak product innovation
Which facility obliges the lender to provide funds?
Uncommitted
Committed
Revolver
Club
A loan shared by several banks is called:
Bilateral
Syndicated
Term
Uncommitted
Which is NOT a typical loan fee?
Arrangement
Commitment
Legal
Dividend
A revolver loan allows:
One-time drawdown
Flexible drawdown and repayment
No repayment
Only interest payments
Gross-up provisions protect the:
Borrower
Lender
Government
Shareholder
Which is a promise made by the borrower?
Margin
Covenant
Fee
Syndicate
Which is a statement of fact in loan documentation?
Representation
Margin
Fee
Club
A club loan typically involves:
One lender
Many lenders with equal terms
Government
No documentation
Which is a risk for uncommitted facilities?
Guaranteed funds
Withdrawal at any time
Fixed interest
Syndication
Syndicated loans are often used for:
Small purchases
Large projects
Personal loans
Credit cards
Which is NOT an issue in loan documentation?
Availability
Fees
Margins
Advertising
Covenants are important because they:
Increase fees
Protect lender’s interests
Reduce interest
Eliminate risk
A term loan is best for:
Ongoing working capital
One-time capital expenditure
Daily expenses
Credit cards
Which party arranges a syndicated loan?
Borrower
Lead bank
Government
Accountant
If a borrower breaches a covenant, the lender can:
Ignore it
Demand repayment
Lower the interest
Increase the loan amount
Which type of facility guarantees availability regardless of bank’s discretion?
Uncommitted
Committed
Revolver
Club
A small manufacturing firm arranges a loan with only one bank. This is a:
Syndicated Loan
Bilateral Loan
Club Loan
Term Loan
Which facility allows repeated borrowing and repayment?
Term Loan
Revolver
Bilateral Loan
Syndicated Loan
A P200b toll road requires financing from 10 banks. Most likely loan type?
Bilateral Loan
Club Loan
Syndicated Loan
Term Loan
Which fee is charged on the unused portion of a facility?
Arrangement fee
Commitment fee
Margin
Agency fee
A “gross-up provision” mainly protects:
Borrower from tax increases
Lender from tax deductions
Borrower from higher margins
Lender from currency risk
Which of the following is a positive covenant?
Cannot merge without lender consent
Must maintain insurance coverage
Cannot declare dividends
Cannot incur new debt
Representations and warranties in loan agreements primarily ensure:
Interest rates remain fixed
Borrower’s statements are accurate
Fees are capped
Loans are tax-free
Which facility is most suitable for a retailer facing seasonal demand?
Term Loan
Revolver
Syndicated Loan
Club Loan
A bank demands the borrower to maintain a debt-to-equity ratio of 2:1. This is a:
Representation
Warranty
Covenant
Margin
Which loan type best suits large corporations pooling lenders but in smaller groups than full syndication?
Bilateral Loan
Syndicated Loan
Club Loan
Revolver
A borrower misrepresents its audited financial statements. This leads to:
Higher margin
Event of default
Lower commitment fee
Renegotiation only
Which margin term means the extra spread added over a benchmark interest rate?
Fee
Covenant
Margin
Representation
A firm borrows USD but must pay additional amounts to offset withholding taxes. This reflects:
Margin risk
Availability issue
Gross-up provision
Positive covenant
Which type of loan would a bank likely provide for a 10-year infrastructure project?
Revolver
Term Loan
Club Loan
Uncommitted facility
What is the primary trade-off in cash management?
Liquidity versus profitability
Growth versus taxation
Debt versus equity financing
Market share versus customer loyalty
Define working capital and explain its importance.
Current assets minus current liabilities; ensures operational liquidity
Total assets minus total liabilities; measures overall solvency
Cash reserves only; indicates profitability
Fixed assets minus long-term debt; shows investment capacity
What are the key objectives of short-term investing?
Safety, liquidity, and reasonable return
Maximizing long-term capital gains
Tax avoidance and speculation
Expansion of fixed assets
Explain the concept of ‘rolling down the yield curve.’
Holding longer-term bonds to benefit from declining yields as maturity shortens
Selling bonds before maturity to avoid losses
Investing only in short-term treasury bills
Shifting from equities to bonds during recessions
Which types of instruments are typically used for excess liquidity investments?
Treasury bills, money market funds, and commercial paper
Real estate properties and machinery
Long-term corporate bonds and equities
Venture capital and private equity
Differentiate between commercial paper and bank overdraft as borrowing tools.
Commercial paper is market-issued short-term debt; overdraft is bank-provided credit facility
Both are long-term financing instruments
Overdraft requires SEC approval; commercial paper does not
Commercial paper is collateralized; overdraft is always unsecured
Why might a company prefer short-term borrowing over long-term borrowing?
Lower interest costs and flexibility
Guaranteed profits and tax exemptions
Permanent financing with no repayment obligation
Ability to avoid credit risk entirely
What role does risk management play in cash investment decisions?
Balances safety, liquidity, and return to minimize exposure
Eliminates all financial risks permanently
Focuses only on maximizing profits regardless of risk
Ensures compliance with labor laws
If a company delays supplier payments, what impact does this have on working capital?
Increases working capital temporarily by conserving cash
Reduces working capital immediately
Has no effect on working capital
Eliminates the need for current assets
Case Question: A firm expects negative cash flow next quarter. Should it borrow short-term or adjust working capital policies first? Justify.
Adjust working capital policies first to improve liquidity before borrowing
Borrow long-term immediately to cover short-term gaps
Invest excess cash in fixed assets to offset losses
Ignore cash flow issues since they resolve automatically
