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Treasury Management Question Paper

Treasury Management

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2010

UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFM 305: TREASURY MANAGEMENT (SATURDAY)
DATE: DECEMBER 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
You have 4 Wholesalers with the following credit terms:
i. B-2/14 net 30
ii. A-3/11 net 24
iii. X-5/13 net 15
iv. Z-2/20 net 28
Required
a) Compute the cost of giving up the cash discount assuming goods worth Kshs 1,320,455 are on
sale & (5 marks)
b) Rank the Wholesalers in terms of highest to lowest cost of giving up the cash discount.
(4 mark)
c) Assuming this discount is forfeited annually, compute the attached cost. (5 marks)
d) Consider the following Credit terms offered by Supplier w - 2/10 net 30. Assuming we are able
to negotiate and get an extension of the credit period to 30 days, what would be the savings made
in terms of the implicit cost of giving up the cash discount. Assume the goods to be purchased
are worth Kshs 120,404. (5 marks)
2
e) Identify and explain at least three main ways through which banks lend unsecured loans to
businesses. (6 marks)
f) Define the following terms (5 marks)
i. Credit risk
ii. Financial risk
iii. Market risk
iv. Operational risk
v. Strategic risk
QUESTION TWO
a) Identify in detail the characteristics of the various forms of payment systems in Kenya.
(5 marks)
b) Explain the importance of portfolio management in a banking set up (7 marks)
c) Determine the value of the call options at their expiration date given the
following information; (8 marks)
Option Market price per share at
expiration date (Ksh)
Exercise price
of the option (Ksh)
A 10 12
B 25 21
C 48 52
D 7 5
QUESTION THREE
For a treasury function to thrive in the modern day world, it needs to embrace best practice. Discuss.
(20 marks)
QUESTION FOUR
A Treasury manager faces a number of challenges in performing his role
effectively. Identify 10 such challenges describing how best to overcome them.
(20 marks)
3
QUESTION FIVE
a) Define treasury management (2 marks)
b) Explain the role of treasury management in an economy such as Kenya’s. (8 marks)
c) The person in charge of the treasury function is required to have a set of skills for him to perform
his role effectively. Illustrate using examples 5 such vital skills. (10 marks)

Treasury Management Question Paper

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