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FIN3703 Exam pack 2024(Treasury Management)Questions and answers
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FIN3703 EXAM PACK2024
QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
EMAIL:gabrielmusyoka940@gmail.com
, lOMoARcPSD|31863004
QUESTION 1
Treasury management is executed in any business, irrespective of its size, structure
or industry. Which one of the following statements does NOT apply in the definition of
corporate treasury management?
a. Management of cash, liquidity, and risk exposure.
b. Management of foreign currency and cash flow.
c. Setting strategic organisational goals and objectives.
d. Management of cash surplus and cash deficit.
The correct answer is C
Treasury management is defined as management of cash flow (cash surplus and
deficit), liquidity, risk exposure and foreign currencies according to the treasury
policies and guidelines stipulated by the board of directors. Setting strategic
organisational goals and objectives are the responsibilities of the company executives
such as the board of directors and the CEO. Treasury mandate is to implement the
stipulated strategies, objectives and goals outlined in treasury policy by the board of
directors. All students were awarded a free mark for this question.
QUESTION 2
The key activities of treasury management include all of the following, EXCEPT …
a. collection of cash.
b. investment of cash deficit.
c. disbursement of cash.
d. profit and price determination
A. a b
B. b d
C. a c d
D. a b c
The correct option is B because they do not refers to the definition of treasury
managment .
The answer to this question is also obtained or clarified in the definition of
treasumanagement in question 1. Profit determination executed at the cost center
(accounting department) and the marketing strive to position the product at the
appropriate price. This means that option D , or that statement is not prescilely the
part of activities exercised in treasury. Option B is incorrect because cash deficit is
financed through various lines of credits facilities, is not invested as the statement
indicates.
, lOMoARcPSD|31863004
QUESTION 3
One of the primary objectives of treasury management is to manage risk efficiently.
The key risks to which treasury is exposed can be grouped under the following
categories …
a. liquidity risk, financial market risk, operational risk, and counterparty risk.
b. project risk, liquidity risk, financial market risk, technical risk.
c. liquidity risk, financial market risk, operational risk and technical risk.
d. technical risk, project risk, liquidity risk and financial risk.
The correct option is A.
The key risks that a company treasury is exposed to are liquidity, financial market, operational
and counterparty risk. Technical and project risks are not part or mentioned in the learning
material as treasury risk which makes statements B to D incorrect.
QUESTION 4
A business that conducts its operations locally, with no international transactions, will
not be exposed to … risk.
a. liquidity
b. interest rate
c. operational
d. foreign exchange
The correct answer is option D.
Foreign exchange risk is defined as a risk or a loss that arises from changes in
exchange rates when a company’s financial transactions are denominated in a
currency other than the domestic currency. A business that operate locally and does
not export or import its goods is not exposed to foreign exchange risk.
QUESTION 5
Mondi is a global leader in packaging and paper, employing around 21,000
people at approximately 100 production sites across 30 countries, with key
operations located in Europe, North America and Africa. Their business is
integrated across the value chain – from managing forests and producing
pulp, paper, and films, to developing and manufacturing effective industrial
and consumer packaging solutions. Like any company, Mondi is exposed to
different types of financial risks. Due to its risk management strategies the
company does not have net exposure to certain type of risk. Which of the
following statements is correct?
a. The company does not have a net exposure to commodity risk.
b. The company does not have a net exposure to currency risk.
c. The company does not have a net exposure to interest rate risk.
d. The company does not have a net exposure to liquidity risk.
, lOMoARcPSD|31863004
Option C is the correct answer. There is no mention of borrowed funds
If it is assumed that the company operates with equity only, it can be concluded that it
is not exposed to interest rate risk because there is no borrowed funds in place.
Unforturnately such information was not provided or clearly presented. Most students
argued that the company is exposed to all of the above mention risks. We gave all
students a mark for this question.
QUESTION 6
Which one of the following statements best describes the relationship between
accounting, financial management and treasury management?
a. Financial managers devote most of their time to collecting and presenting
historical data in the form of financial statements.
b. One key principle that differentiates accounting from financial management is
the generally accepted accounting principles.
c. The difference between treasury management and accounting lies in the level
of decision-making.
d. Accountants analyse financial statements, develop more relevant information,
and make final decisions on how the business must be financed.
The correct statement is B.
Financial managers analyse financial statements, develop more relevant information
and, given the findings, they make final decisions on how the business should be
financed and operated. This justify why statements A and D are incorrect. Statement
C is also incorrect because the difference between treasury management and
accounting lies in the level of activity not decision-making. This leave statement B to
be the only correct option.
QUESTION 7
Which of the following measures is NOT an essential approach in building a
successful treasury risk mitigation strategy?
a. Establishment of a good customer relationship.
b. Recruitment of employees without previous general criminal records.
c. Segregation of treasury functions and implementation of standard settlement
instructions.
d. Development and implementation of professional physical security systems.
All students were given a full mark for this questions.
Segregation of duties is the appropriate control measure that is applicable in
developing risk mitigation strategy as well as standard settlement instructions.
Statements B and D have not been mentioned in the study material but one can well
justify that employing staff without previous criminal records as this tendency is
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