Treasury Management

What is treasury management?

Treasury management is the process of planning, organizing, and controlling a company’s financial resources. It includes tasks such as cash flow forecasting, investing, risk assessment, and day-to-day operations like banking and invoicing.

The most basic functions of treasury management are:

  • Cash flow management: This involves forecasting and managing cash inflows and outflows to ensure that the company has sufficient funds to meet its obligations.
  • Investment management: This involves investing the company’s excess funds in a way that maximizes returns while minimizing risk.
  • Risk management: This involves identifying and mitigating risks to the company’s financial health, such as interest rate risk, foreign exchange risk, and liquidity risk.
  • Banking relationships: This involves managing the company’s relationships with its banks, such as negotiating terms and conditions of loans and deposits.
  • Invoicing and payments: This involves issuing invoices to customers and making payments to suppliers in a timely and efficient manner.

MCQs on treasury management

  1. Which of the following is not a function of treasury management?
    • Cash flow management
    • Investment management
    • Risk management
    • Accounting
    • Answer: Accounting
  2. The goal of cash flow management is to:
    • Maximize profits
    • Minimize costs
    • Ensure that the company has sufficient funds to meet its obligations
    • All of the above
    • Answer: Ensure that the company has sufficient funds to meet its obligations
  3. Which of the following is a risk that treasury management can help to mitigate?
    • Interest rate risk
    • Foreign exchange risk
    • Liquidity risk
    • All of the above
    • Answer: All of the above
  4. Which of the following is not a day-to-day operation of treasury management?
    • Issuing invoices to customers
    • Making payments to suppliers
    • Managing relationships with banks
    • Forecasting cash flow
    • Answer: Forecasting cash flow
  5. Which of the following is not a type of investment that a treasury manager might consider?
    • Bonds
    • Stocks
    • Real estate
    • Cash
    • Answer: Cash