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Free Questions › CTP › Corporate Liquidity Management
Free CTP Corporate Liquidity Management Practice Questions & Answers
150 exam-style Corporate Liquidity Management questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 91
Prior-day bank reporting typically provides a company with:
Select an option first.
Correct answer: B — The previous business day's final balances and posted transactions
Explanation: Prior-day reporting delivers the closing ledger and available balances and the finalized transactions from the previous business day, forming the basis for daily reconciliation and cash positioning. Minute-by-minute updates are the domain of intraday reporting.
Question 92
The main purpose of intraday bank reporting is to:
Select an option first.
Correct answer: A — Give same-day information on transactions and balances for real-time cash decisions
Explanation: Intraday reporting supplies current-day transaction and balance updates so treasury can make timely funding, investment, and payment decisions before day's end. It complements prior-day reporting, which reflects only the completed prior day.
Question 93
The available balance in a bank account differs from the ledger balance in that the available balance:
Select an option first.
Correct answer: C — Reflects ledger balance minus holds and uncollected float, i.e., funds usable now
Explanation: The available balance is the portion of the ledger balance on which holds and float have been released and that can actually be used or withdrawn. Because float and holds reduce usability, the available balance is typically equal to or less than the ledger balance.
Question 94
The principle of segregation of duties in treasury operations requires that:
Select an option first.
Correct answer: B — The functions of authorizing, executing, and recording/reconciling transactions be assigned to different people
Explanation: Segregation of duties splits incompatible responsibilities, such as initiating, approving, and recording transactions, across different individuals so no one person can both perpetrate and conceal an error or fraud. Concentrating those functions in one person defeats the control.
Question 95
In a treasury organization, the front office is primarily responsible for:
Select an option first.
Correct answer: C — Executing deals and managing market-facing transactions
Explanation: The front office executes trades and manages the firm's market exposures, such as funding, investing, and hedging. Settlement and confirmation belong to the back office, while independent risk and compliance monitoring is the middle office.
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Question 96
The treasury back office is chiefly responsible for:
Select an option first.
Correct answer: A — Confirmation, settlement, and recording of transactions
Explanation: The back office handles post-trade processing, including confirming, settling, and recording transactions, providing an independent check on the front office. Deal execution is a front-office role, and risk-limit setting is typically a middle-office or governance function.
Question 97
The treasury middle office typically focuses on:
Select an option first.
Correct answer: B — Risk measurement, limit monitoring, and compliance oversight
Explanation: The middle office independently measures exposures, monitors compliance with policy limits, and reports risk, sitting between the deal-making front office and the processing back office. It does not execute trades or perform tax audits.
Question 98
Which responsibility most clearly belongs to the treasurer rather than the controller?
Select an option first.
Correct answer: D — Managing corporate liquidity, funding, and financial risk
Explanation: The treasurer manages cash, liquidity, financing, banking relationships, and financial risk, whereas the controller focuses on accounting, financial reporting, and internal control records. Financial statement preparation and ledger maintenance are controller functions.
Question 99
A firm collects 20% of sales in the month of sale, 50% in the following month, and 30% two months after sale. Sales were $100,000 (January), $120,000 (February), and $150,000 (March). What are March cash collections?
Select an option first.
Correct answer: D — $120,000
Explanation: March collections = 20% x March + 50% x February + 30% x January = 0.20 x $150,000 + 0.50 x $120,000 + 0.30 x $100,000 = $30,000 + $60,000 + $30,000 = $120,000. Each prior month's sales contribute according to the fixed collection pattern.
Question 100
Using a simple 3-month moving average, forecast next month's cash receipts if the last three months were $90,000, $100,000, and $110,000.
Select an option first.
Correct answer: B — $100,000
Explanation: 3-month moving average = ($90,000 + $100,000 + $110,000) / 3 = $300,000 / 3 = $100,000. A simple moving average weights each of the three most recent periods equally to produce the next forecast.
Question 101
A firm begins the week with $50,000 in cash, expects receipts of $120,000, and expects disbursements of $140,000. What is the projected ending cash balance?
Select an option first.
Correct answer: A — $30,000
Explanation: Ending cash = beginning cash + receipts - disbursements = $50,000 + $120,000 - $140,000 = $30,000. Because disbursements exceed receipts by $20,000, the opening balance is drawn down accordingly.
Question 102
A notional pool contains three accounts with balances of +$500,000, -$300,000, and +$200,000. What is the net notional position on which interest is calculated?
Select an option first.
Correct answer: C — $400,000
Explanation: Net notional position = $500,000 - $300,000 + $200,000 = $400,000. Notional pooling offsets the credit and debit balances to a single net figure for interest, so the company earns/pays interest on the $400,000 net rather than on gross balances.
Question 103
A company has one account with a +$500,000 credit balance earning 1% and another with a -$300,000 overdraft costing 6%. If notional pooling offsets the $300,000 overdraft against the credit balance, what is the approximate annual interest benefit versus running the accounts separately?
Select an option first.
Correct answer: A — $15,000
Explanation: Offsetting avoids overdraft interest of $300,000 x 6% = $18,000, but the $300,000 of credit balance used for offset no longer earns 1% = $3,000. Net benefit = $18,000 - $3,000 = $15,000 per year, the classic gain from netting a high-cost debit against a low-yield credit.
Question 104
A company's book (general ledger) cash balance is $100,000. Outstanding checks total $15,000 and deposits in transit total $8,000. What is the bank statement balance after reconciliation?
Select an option first.
Correct answer: B — $107,000
Explanation: Bank balance = book balance + outstanding checks - deposits in transit = $100,000 + $15,000 - $8,000 = $107,000. Outstanding checks have reduced the book balance but not yet the bank's, while deposits in transit have raised the book balance ahead of the bank.
Question 105
An account shows a ledger balance of $200,000, of which $30,000 represents deposited funds still subject to float (not yet collected). What is the available balance?
Select an option first.
Correct answer: A — $170,000
Explanation: Available balance = ledger balance - uncollected float = $200,000 - $30,000 = $170,000. Only collected funds are available for use, so the float amount is excluded until it clears.
Question 106
A firm has current assets of $600,000 and current liabilities of $300,000. What is its current ratio?
Select an option first.
Correct answer: D — 2.0
Explanation: Current ratio = current assets / current liabilities = $600,000 / $300,000 = 2.0. A ratio of 2.0 indicates the firm has twice the current assets needed to cover its short-term obligations.
Question 107
A firm has current assets of $600,000 including $200,000 of inventory, and current liabilities of $300,000. What is its quick (acid-test) ratio?
Select an option first.
Correct answer: C — 1.33
Explanation: Quick ratio = (current assets - inventory) / current liabilities = ($600,000 - $200,000) / $300,000 = $400,000 / $300,000 = 1.33. The quick ratio strips out inventory, the least liquid current asset, giving a more conservative liquidity measure than the current ratio.
Question 108
With accounts receivable of $150,000 and annual credit sales of $1,095,000, what is the days sales outstanding (DSO), using 365 days?
Select an option first.
Correct answer: A — 50 days
Explanation: DSO = (accounts receivable / annual sales) x 365 = ($150,000 / $1,095,000) x 365 = 50 days. Equivalently, sales per day are $1,095,000/365 = $3,000, and $150,000 / $3,000 = 50 days of receivables outstanding.
Question 109
With inventory of $100,000 and annual cost of goods sold of $730,000, what is the days inventory outstanding (DIO), using 365 days?
Select an option first.
Correct answer: A — 50 days
Explanation: DIO = (inventory / COGS) x 365 = ($100,000 / $730,000) x 365 = 50 days. COGS per day is $730,000/365 = $2,000, so $100,000 of inventory represents 50 days of sales at cost.
Question 110
With accounts payable of $60,000 and annual cost of goods sold of $730,000, what is the days payable outstanding (DPO), using 365 days?
Select an option first.
Correct answer: B — 30 days
Explanation: DPO = (accounts payable / COGS) x 365 = ($60,000 / $730,000) x 365 = 30 days. With COGS per day of $2,000, $60,000 of payables equals 30 days, indicating the firm takes about a month to pay suppliers.
Question 111
A company has DSO of 50 days, DIO of 50 days, and DPO of 30 days. What is its cash conversion cycle (CCC)?
Select an option first.
Correct answer: C — 70 days
Explanation: CCC = DSO + DIO - DPO = 50 + 50 - 30 = 70 days. The cash conversion cycle measures the time between paying suppliers and collecting from customers; 70 days means cash is tied up in operations for that period.
Question 112
A firm has current assets of $600,000 and current liabilities of $300,000. What is its net working capital?
Select an option first.
Correct answer: C — $300,000
Explanation: Net working capital = current assets - current liabilities = $600,000 - $300,000 = $300,000. Working capital is expressed as a dollar amount (unlike the current ratio, which is the same inputs divided rather than subtracted).
Question 113
A treasurer needs a forecast to manage daily liquidity and same-day funding decisions. Why is the adjusted-net-income (indirect) method poorly suited for this task?
Select an option first.
Correct answer: B — It lacks the daily timing granularity needed for operational cash decisions
Explanation: The indirect method starts from projected net income and adjusts for non-cash items and balance-sheet changes, producing period-level estimates without the day-by-day timing that operational liquidity management requires. It is better suited to longer-horizon planning than to same-day funding.
Question 114
A retailer with pronounced holiday-quarter sales wants a more accurate monthly cash forecast. The most appropriate refinement is to:
Select an option first.
Correct answer: B — Apply seasonal indices that reflect recurring monthly demand patterns
Explanation: Seasonal indices scale each period up or down to reflect recurring intra-year patterns, capturing the holiday surge that a flat annual average would miss. Ignoring monthly timing would defeat the purpose of a short-term forecast.
Question 115
Compared with a static forecast that is prepared once per period, the main advantage of a rolling (continuous) forecast is that it:
Select an option first.
Correct answer: D — Continuously extends and updates the horizon as new actuals arrive, improving accuracy
Explanation: A rolling forecast drops the elapsed period and adds a new one each cycle, incorporating the latest actuals so the outlook stays current and typically more accurate. It does not eliminate error nor remove the need for supporting systems and data.
Question 116
Notional pooling is legally restricted or unavailable in some jurisdictions (such as the United States) primarily because:
Select an option first.
Correct answer: B — Regulations and legal-right-of-offset constraints limit paying interest on offset intercompany balances
Explanation: In several markets, banking regulations and restrictions on the legal right of offset (and historically on paying interest) make true notional pooling difficult, pushing firms toward physical concentration structures instead. The barrier is legal and regulatory, not technological.
Question 117
When designing a cross-border cash pool, the treasurer's greatest challenges typically arise from:
Select an option first.
Correct answer: B — Local regulatory limits, tax and withholding rules, and exchange controls
Explanation: Cross-border pooling must navigate country-specific rules on cross-guarantees and offset, tax treatment of intercompany interest and withholding, and exchange or capital controls that can trap cash. These legal, tax, and regulatory frictions are the central design constraints.
Question 118
A treasurer selects a ZBA sweep structure over leaving balances in local disbursement accounts mainly because it:
Select an option first.
Correct answer: B — Automatically concentrates funds daily, minimizing idle balances and improving investment/borrowing efficiency
Explanation: ZBA sweeps pull surplus cash into a single concentration account each day, reducing dispersed idle balances so treasury can invest the aggregate surplus or offset borrowing more efficiently. It does not eliminate reconciliation or all fees.
Question 119
Regular bank reconciliation is an important internal control primarily because it:
Select an option first.
Correct answer: A — Helps detect errors, unauthorized transactions, and potential fraud by matching internal records to bank records
Explanation: Reconciling the company's cash records to bank statements surfaces discrepancies such as posting errors, missing transactions, or fraudulent disbursements so they can be investigated promptly. It is a detective control and complements, rather than replaces, segregation of duties.
Question 120
Which statement correctly distinguishes a SWIFT MT940 message from a BAI2 file?
Select an option first.
Correct answer: D — Both are end-of-day statement formats, with MT940 being the SWIFT standard message and BAI2 a widely used U.S.-originated format
Explanation: Both MT940 and BAI2 are standardized formats banks use to deliver prior-day statement and transaction information to corporate systems, with MT940 being the SWIFT message type and BAI2 a common bank-administration format. Neither is a payment instruction or loan document.
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