Answers / Corporate Treasury
Treasury Interview Questions
Cash management, FX hedging, funding, and capital structure — corporate treasury interviews.
61 questions · model answers · common mistakes
Treasury Operations & Controls
- What does a corporate treasurer do?
- Explain a letter of credit and how it works.
- How do you manage bank relationships?
- How do you handle a SWIFT outage?
- How do you benchmark bank fees?
- What controls would you put in place to prevent payment fraud, including business email compromise (CEO/CFO fraud)?
- What conditions must be met to offset (net) cash balances in notional pooling on the balance sheet, and why does it matter?
- Compare a letter of credit, a bank guarantee, and a surety bond — when would you use each in trade?
- What is an in-house bank with POBO/COBO, and what benefits and risks does it bring?
- Why do large groups rationalize their bank accounts and relationships, and what's the trade-off?
FX Risk Management
- Explain FX transaction vs. translation exposure.
- A company has a net investment hedge in a foreign subsidiary using a USD-denominated loan. The USD strengthens by 5% against the EUR. How is this hedge accounted for under IAS 21? What is the impact on equity?
- What is the difference between transaction exposure and translation exposure in FX risk management?
- A company has a USD functional currency and a EUR subsidiary. The subsidiary has a €100M loan from a bank. The EUR weakens by 10% against USD. How does this affect the group's reported net debt and leverage? Assume no hedge.
- What is a zero-cost collar in FX hedging?
- How would you design a layered (rolling) hedging program for recurring forecast FX exposures, and why layer rather than hedge spot-by-spot?
- Why centralize FX exposure management at group treasury, and how does exposure netting reduce hedging cost?
- Should a company hedge translation (balance-sheet) exposure, and how does that differ from hedging economic exposure?
- How are FX forward points determined, and what does it mean to say a currency trades at a forward premium or discount?
- What makes hedging emerging-market currency exposure difficult, and how would you approach it?
- What is Cash Flow at Risk (CFaR), and why might a corporate treasurer prefer it to Value at Risk?
Interest Rate & Derivatives
- Explain an interest rate swap.
- Explain IFRS 9 hedge accounting.
- Explain counterparty risk in derivatives and how it's mitigated.
- Explain the fixed/floating decision.
- Explain mark-to-market on a derivative.
- A company enters into a 5-year receive-fixed interest rate swap to hedge a variable-rate loan. The loan is prepaid after 2 years. Under IFRS 9, the swap was designated as a cash flow hedge. What happens to the hedge accounting and the swap?
- Explain the mechanics of an interest rate swap from initiation to maturity, including cash flows and valuation.
- What is a cash flow hedge and how does it differ from a fair value hedge?
- What is the difference between a cash flow hedge and a fair value hedge?
- What is a cross-currency basis swap, and how would a treasurer use one to fund a foreign-currency asset or debt?
- How do treasurers manage counterparty credit risk on a derivatives portfolio, and what is CVA?
- When would a treasurer use an interest-rate cap instead of a swap, and what's the cost trade-off?
- How would a treasurer use a swaption to hedge an anticipated debt issuance, and why not just wait?
- How does hedge effectiveness testing work under IFRS 9, and how does it differ from the old IAS 39 approach?
- How would a corporate hedge a key commodity input cost, and what basis risk should it watch?
Debt & Capital Structure
- How do you prepare for a rating agency meeting?
- A company has a €500M bond maturing in 2 years and a €300M RCF undrawn. The CFO wants to refinance now to lock in low rates. You notice the RCF has a material adverse change (MAC) clause. How does this affect your refinancing strategy?
- A company has a €200M RCF with a net leverage covenant of 3.5x. After a large acquisition, net debt/EBITDA is 3.8x. You have a cure right to inject equity. The CFO asks: should we cure now or wait? What factors drive your decision?
- Why do rating agencies and investors expect a commercial paper program to be backed by committed bank lines, and how much backup is appropriate?
- Why can supply-chain finance (reverse factoring) be reclassified from trade payables to debt, and why do investors and rating agencies care?
- Walk me through the covenant compliance certificate process and why the credit agreement's EBITDA definition matters so much.
- What is a make-whole call provision, and how does it affect the economics of redeeming a bond early?
- What key factors and ratios drive a corporate credit rating, and why should a treasurer manage to them?
- What is pension de-risking, and how does a liability-driven investment (LDI) approach work for a corporate DB scheme?
- How do sustainability-linked loans and bonds work, and how do they differ from green bonds?
- What does capital-structure theory (trade-off vs pecking order) say about how much debt a company should carry?
Liquidity & Cash Management
- How would you structure an in-house bank?
- A company uses physical cash pooling in Germany and notional pooling in the US. The German pool has a surplus of €10M, the US pool has a deficit of $12M. The EUR/USD spot is 1.10. The German subsidiary has a tax rate of 30%, the US 21%. The CFO wants to cover the US deficit. How would you execute this optimally considering tax and FX?
- What is the cash conversion cycle and how does it impact a company's liquidity needs?
- How do you determine the appropriate size of a corporate liquidity buffer?
- Explain the cash conversion cycle and how it impacts a company's liquidity needs.
- When would you build a cash forecast using the direct method versus the indirect method, and what are the limits of each?
- What is trapped cash, and what are your options when a subsidiary holds large balances in a jurisdiction with capital controls?
- What is the difference between committed and uncommitted facilities, and why does only committed liquidity count as backup?
- What goes into a corporate cash-investment policy for surplus liquidity, and what's the ordering of objectives?
- Why does where a corporate holds its cash matter for counterparty risk, and what is bail-in risk on deposits?
- What is the difference between a CNAV and a VNAV money market fund, and why does it matter for corporate cash?
- Compare factoring, invoice discounting, and asset-based lending as working-capital financing.
- How can a repo (repurchase agreement) be used for short-term liquidity, and what are the risks?
- What is dynamic discounting, and how does it differ from supply-chain (reverse) factoring?
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