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CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management

In treasury management, which of the following is a function of the treasury department related to managing the firm's foreign currency exposure?

Hedging exchange rate risk on imports and exports is a treasury function. Treasury manages cash, funding, investments and financial risks such as currency and interest rate risk, whereas cost sheets, statutory audit and payroll belong to other departments.

  1. APreparing the cost sheet for each product
  2. BHedging exchange rate risk arising from imports and exportsCorrect
  3. CStatutory audit of the financial statements
  4. DPreparing the payroll for employees

Explanation

Treasury management covers cash management, funding, investment of surplus funds and risk management including currency and interest rate risk. Hedging forex exposure on imports and exports is a core treasury function. Cost sheets, payroll and statutory audit belong to costing, HR and audit functions.

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