Treasury Management Course Notes (Vocabulary Flashcards)

Vocabulary flashcards covering key treasury management concepts from the lecture notes.

Treasury Management

The art of managing cash, liquidity, risk, and capital to optimize profitability within an acceptable level of risk.

Cash Management

Day-to-day cash operations, forecasting, and reconciliation to ensure cash availability.

Liquidity Management

Maintaining an adequate level of liquidity to meet obligations and optimize returns on surplus funds.

Working Capital

Management of short-term assets and liabilities to support daily operations.

Bank Relationship Management

Coordinating with financial institutions for credit facilities, services, and banking support.

Investment Management

Managing short-term surplus funds to earn returns while preserving liquidity.

Debt Management

Managing borrowings, repayments, and related financing costs.

Risk Management

Identifying, assessing, and hedging financial risks (market, credit, liquidity, operational).

Corporate Finance and Capital Markets

Long-term financing activities, including funding strategy, securities issuance, and capital structure decisions.

Treasurer

The person responsible for the treasury function, including cash flow, investments, risk management, and reporting.

Financial Governance

Ensuring compliance with laws, policies, and ethical standards in treasury activities.

Internal Controls

Systems and processes to safeguard assets and ensure reliable financial reporting.

Capital Markets

Markets for issuing and trading long-term securities like stocks and bonds, with regulation for transparency.

Money Market Transactions

Short-term, highly liquid instruments used to manage liquidity (e.g., T-bills, CDs, commercial paper, repos).

Treasury Policy

Formal rules guiding treasury operations, governance, and compliance.

Primary Market

Market where new securities are issued to raise capital.

Secondary Market

Market where existing securities are traded among investors.

Correspondent Banking

Arrangement between banks to conduct transactions and services on each other’s behalf, enabling cross-border activity.

Nostro Account

An account that a bank holds in a foreign country, in the foreign currency.

Vostro Account

An account that a foreign bank holds in the domestic bank’s country, in the domestic currency.

SWIFT Network

Global secure messaging system enabling interbank communication for international transactions.

Foreign Exchange Management

Processes and strategies to handle transactions and risk in foreign currencies.

Forex Market

Global, decentralized market for trading currencies, operating continuously with high liquidity.

Exchange Rate

The price of one currency in terms of another; can be fixed or floating.

Currency Risk

Risk arising from fluctuations in exchange rates affecting cash flows and investments.

Forward Contract

Agreement to exchange currencies at a future date at a predetermined rate.

Futures Contract

Standardized, exchange-traded contracts to buy or sell currency at a future date and price.

Options (FX Options)

Contracts giving the holder the right, but not the obligation, to exchange currency at a specified rate before a date.

Swaps

Contracts to exchange currencies now and reverse the exchange later, used to hedge currency risk.

Hedging

Using instruments like forwards, futures, options, and swaps to protect against adverse currency movements.

Rate Determination

Process of setting interest rates in markets, influenced by supply/demand, inflation, monetary policy, and indicators.

Nominal Rate

Stated rate before adjusting for inflation.

Real Rate

Rate adjusted for inflation; true cost of borrowing or real return on investment.

Fixed Rate

Interest rate that remains constant over the term of a loan or investment.

Floating Rate

Interest rate that changes with market conditions or benchmarks.

Auction Markets

Markets where rates or prices are determined by competitive bidding.

Central Bank Policies

Monetary policy actions that influence interest rates, liquidity, and financial conditions.

Cash Flow

Movement of cash into and out of an organization; needed to meet obligations.

Financial Reporting

Process of recording and communicating financial performance to management and stakeholders.

Financing Strategies

Plans to raise capital through debt, equity, or hybrid instruments to fund growth.