TreaM-CashConcentration Quiz

What is one inefficiency associated with larger companies maintaining numerous bank accounts?

• Difficulty in tracking individual account balances
• Reduced interest income from idle cash balances
• Limited investment opportunities
• Lack of centralized control over cash management

What is an excellent solution to the problem of highly fragmented cash balances?

• Increasing the number of subsidiary accounts
• Implementing notional pooling only
• Utilizing cash concentration strategies
• Maintaining decentralized liquidity management

What benefit does cash concentration offer in terms of investment returns?

• Higher yields on short-term investments
• Increased risk in investment portfolios
• Lower returns on long-term investments
• Reduced oversight of investment activities

What is a benefit of using automated sweeping arrangements for cash concentration?

• Increased labor costs
• Reduced oversight of accounts
• Lower investment returns
• Higher bank overdraft charges

Which cash concentration strategy involves pooling all cash into a concentration account and managing disbursements centrally?

• Complete decentralization
• Centralized payments, decentralized liquidity management
• Centralized liquidity management, decentralized payments
• All functions centralized

In which scenario would cash concentration be considered cost-effective?

• When the sweeping fee exceeds the interest income improvement
• When overdraft charges exceed the interest income improvement
• When the interest income improvement exceeds the sweeping fee
• When investment returns are lower than the interest income improvement

What is a disadvantage of maintaining multiple decentralized bank accounts?

• Increased investment opportunities
• Reduced treasury staff workload
• Higher risk of overdraft charges
• Lower interest income from idle cash balances

Which cash concentration strategy involves centralized payments but decentralized liquidity management?

• Complete decentralization
• Centralized payments, decentralized liquidity management
• Centralized liquidity management, decentralized payments
• All functions centralized

What is a potential drawback of centralizing all cash management functions?

• Decreased control over accounts payable
• Limited investment opportunities
• Reduced overhead costs
• Enhanced cash flow forecasting

When might it not be cost-effective for a company to implement a centralized treasury staff?

• When subsidiary account balances are high
• When investment income offsets overhead costs
• When the sweeping fee is lower than interest income improvement
• When regional control over currencies is preferred