CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management
In treasury management, the process of pooling surplus balances from several bank accounts of a group into a single account so that idle funds of one unit can offset the overdrafts of another is best described as:
This is cash pooling. Balances of several group bank accounts are combined into one position so that surplus funds of one unit cover the overdrafts of another, lowering borrowing cost and idle cash. The other options deal with payment timing, receivable sales or inter-unit settlement.
- ACash poolingCorrect
- BLeading and lagging
- CFactoring
- DNetting of payables
Explanation
Cash pooling consolidates balances of multiple accounts so surpluses in some offset deficits in others, reducing interest cost and idle cash. Leading and lagging is a timing strategy for payments, factoring is sale of receivables, and netting settles mutual dues between units.
Did you get it right without looking?
One question tells you little. A timed set on Treasury and Cash Management shows your real accuracy, how long you take and where you lose marks.
More Treasury and Cash Management questions
- Under the Miller-Orr model, if the lower control limit is Rs 20,000, the spread between upper and lower limits is Rs 30,000, then what are t…
- Kaveri Ltd uses the Miller-Orr model. Minimum cash balance is Rs 50,000, the spread is Rs 90,000, and the return point is calculated as lowe…
- Using the Baumol model, Sundaram Traders expects a cash requirement of ₹7,20,000 for the year. The cost per conversion of securities into ca…
- Using the Baumol model, Shree Traders needs Rs 6,00,000 of cash over a year, spread evenly. The fixed cost per transaction of converting sec…
- Aarav Traders receives cheques totalling Rs 20 lakh a month and a lockbox arrangement with its bank reduces the collection float by 3 days. …
- In treasury management, the term 'netting' in the context of a multinational group's cash management refers to: