ACCA Financial Management (F9) Certification Practice Exam

What is a primary function of a centralized treasury department?

1. To manage international trade

2. To centralize liquidity management

3. To track employee performance

4. To oversee human resources

The correct answer is: To centralize liquidity management

A primary function of a centralized treasury department is to centralize liquidity management. This function involves overseeing the cash flow and financial resources of the organization to ensure that there is enough liquidity available to meet the company’s operational needs and strategic initiatives. By centralizing liquidity management, the treasury department can effectively monitor cash balances across various subsidiaries, optimize the use of cash, manage foreign exchange risks related to liquidity, and make informed investment decisions based on the organization's overall financial position. Centralizing liquidity management also allows the treasury to implement uniform policies and procedures across the organization, which can lead to increased efficiency and reduced costs. Furthermore, the treasurer can coordinate funding activities and negotiate better terms with financial institutions since they have a comprehensive view of the organization’s cash flow needs. In contrast, managing international trade, tracking employee performance, and overseeing human resources pertain to functions that fall outside the traditional responsibilities of a treasury department. International trade focuses on the operational aspects of selling and sourcing goods across borders, while tracking employee performance and overseeing human resources are human capital management tasks essential for organizational development but unrelated to treasury functions.