ACCA Financial Management (F9) Certification Practice Exam

What do inter-company markets typically involve?

1. Long-term asset management

2. Lending between treasury departments of large companies

3. Trading in foreign currencies and securities

4. Global investment funds

The correct answer is: Lending between treasury departments of large companies

Inter-company markets typically involve lending between treasury departments of large companies. This refers to the practice where various subsidiaries or divisions of a multinational corporation engage in lending and borrowing activities among themselves. This internal lending is often conducted to optimize cash management, reduce the cost of financing, and ensure better liquidity management across the company’s different operations. In this context, the treasury departments play a crucial role as they facilitate the allocation of resources efficiently. By leveraging their inter-company relationships, large corporations can often achieve more favorable financing terms than those available from external sources and can also more effectively manage their cash across different geographical areas or divisions. The other options do not capture the essence of inter-company markets as they pertain to external financial activities or investment strategies rather than the internal treasury functions of large corporations. Therefore, this choice accurately reflects the primary operations within inter-company markets.