Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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Which of the following is NOT a component of treasury management?

  1. Cash budgeting

  2. Arranging a bank overdraft facility

  3. Investment in long-term assets

  4. Comparing actual cash flows against budget

The correct answer is: Investment in long-term assets

Treasury management primarily focuses on managing a company's liquidity, funding, and financial risk, ensuring that sufficient cash resources are available to meet obligations as they arise. Cash budgeting is an essential part of treasury management, as it helps forecast cash requirements and plan for the timing of cash inflows and outflows. Arranging a bank overdraft facility is a function of treasury management, as it ensures that a company can access additional cash when needed. Comparing actual cash flows against the budget is critical for treasury management, as it helps the organization track performance, maintain control over cash flows, and make informed financial decisions. In contrast, investing in long-term assets typically falls under capital budgeting or investment management rather than treasury management. This process involves evaluating potential investments in assets that will benefit the company over a longer period, and while it may involve cash considerations, it does not directly align with the core functions of treasury management, which is focused on short-term liquidity and cash flow management. Therefore, this is why investing in long-term assets is not considered a component of treasury management.