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Master of Business Administration - MBA Semester 4
MF0016-Treasury Management
(Book Id: B1814)
Assignment (60 Marks)
Note: Answer all questions must be written within 300 to 400 words
each. Each Question carries 10 marks 6 X 10=60
Q1. Give the meaning of treasury management. Explain the need for
specialized handling of treasury and benefits of treasury.
Answer. Treasury management is the planning, organising and control of
funds required by a corporate entity. Funds come in several forms: cash, bonds,
currencies, financial derivatives like futures and options etc. Treasury
management covers all these and the intricacies of choosing the right mix.
According to Teigen Lee E, Treasury is the place of deposit reserved for storing
treasures and disbursement of collected funds. Treasury management is one
of the key responsibilities of the Chief Financial Officer (CFO) of a company.

Q2. Explain foreign exchange market. Write about all the types of
foreign exchange markets. Explain the participants in foreign
exchange markets.
Answer. Foreign Exchange market (forex market) deals with purchase
and sale of foreign currencies. The bulk of the market is over the counter
(OTC) i.e. not through an exchange which is well regulated.
International trade and investment essentially requires foreign markets. Banks
act as intermediaries and perform currency exchange transactions by quoting
purchase and selling prices.
In India the Foreign Exchange Management Act (FEMA) 1999 is the law relating
to forex transactions and its aim is to develop, liberalize and promote forex
market and its effective utilization.

Q3. Write an overview of risk mitigation. Explain the processes of risk

containment. Write about the tools available for managing risks.
Answer. Risk Mitigation: It is important that an organisation is not only
aware of the risks before it impacts their bottom line, but has well-laid action
plans to meet the risks and mitigate its adverse impact.
The overall responsibility for risk management lies with the top management
and the board of directors of the enterprise.

Q4. What is Interest Rate Risk Management (IRRM)? Write the

components and features of IRRM. Explain the macro and micro
factors affecting interest rate.
Answer. Interest Rate Risk Management (IRRM)
Interest Rate Risk is the risk
to the earnings from an asset portfolio caused by interest rate changes
to the economic value of interest-bearing assets because of changes in
interest rates
to costs of fixed-rate debt securities from falling bank rates
to impact of interest rates on cost of capital used by the firm as hurdle
rate for capital investment

Q5. Explain the contents of working capital. Write down the need for
working capital.
Answer. As stated above, working capital comprises the working assets of a
firm. What are these assets? Look at the items in these examples.
1. A trading business for instance may have to purchase and store products
to be sold, paying for them before they can be sold and cashed. A factory
that produces and sells products has to store raw materials and finished
goods, besides having some unfinished materials under process.
2. A company may also need to allow the customers to pay later instead of
insisting on cash at the point of delivery.

Q6. Explain the concepts and benefits of integrated treasury. Explain

the advantages and disadvantages of operating treasury.
Answer. The concept of integrated treasury works on the principle that
Treasury can be a single unifying force of a companys activities in the money
market, capital market and forex market; and can help the company derive
synergy. Synergy is a powerful advantage in business because it brings

together two or more activity domains and achieves a total effect that is
greater than the sum of all the individual domains.
Thus a decision related to money market instruments, for example, is taken
after reviewing possible forex actions that could enhance the benefit of the


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