ACCA Strategic Professional · Advanced Financial Management · The role of the treasury function in multinationals
A multinational's treasury is run as a cost centre. Which performance measure is most consistent with that approach?
A cost centre treasury is judged on how well it controls its costs against budget and benchmarks and how well it meets risk-management policy objectives. Profit measures like trading profit or ROCE apply to profit centres, which actively seek returns from treasury activities.
- ANet trading profit generated from speculative foreign exchange positions
- BCost of the treasury function relative to a budget and benchmarks, plus achievement of risk-management policy objectivesCorrect
- CReturn on capital employed of the treasury department compared with operating divisions
- DShare of group profit before tax contributed by treasury dealing
Explanation
A cost centre treasury exists to serve the group by managing risk and funding at minimum cost, so it is judged on cost control against budget and on compliance with policy. Profit-based measures such as trading profit, ROCE or profit contribution belong to a profit centre approach.
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