DFIN402 TREASURY MANAGEMENT

Description

SESSION	JAN – FEB 2026
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	IV
COURSE CODE & NAME	DFIN402 TREASURY MANAGEMENT

 

Assignment Set – 1

 

Q.1. Critically analyze the role, significance, and need of treasury management in modern organizations. Evaluate how its key functions contribute to effective liquidity management, risk mitigation, and financial decision-making in a dynamic business environment. (10 Marks)

Ans 1.

Treasury management is the systematic management of a company’s finances, assets as well as funding and financial risk to enhance the company’s financial performance as well as ensure its continued ability to fulfill financial obligations. Modern organizations operate in the volatile world of markets, treasury management has evolved from a cash management back-office function to become an integral

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Q.2. Analyze the functions of financial markets and apply them to explain how financial markets facilitate efficient allocation of resources and capital formation in an economy. (10 Marks)

Ans 2.

Financial markets are a system of exchange that allow buyers and sellers to exchange financial assets, including stocks, bonds, currencies as well as derivatives and commodities. They perform several critical economic tasks that allow the efficient allocation of savings from investors to the most profitable investing opportunities within an economic system, which drives the creation of capital and growth in

 

Q.3. Explain the concept of treasury management and liquidity. Apply these concepts to illustrate how effective treasury management helps an organization maintain liquidity and ensure smooth financial operations. (5+5 = 10 Marks)

Ans 3.

Concept of Treasury Management

Treasury management encompasses both the operations and strategy-based management of the company’s cash as well as funding, liquidity, investment and exposures to financial risks to maximize financial performance and ensure the organization meets its financial obligations. As a fundamental aspect, treasury management ensures that the right amount of cash is available at the proper place and time at a minimal cost, all while taking care of the risks inherent in the financial markets. Modern corporate treasury functions manage not just cash-related operations on a daily basis but also longer

 

Assignment Set – 2

 

Q.4. Explain any two techniques used for measuring business risks in treasury management. How does an organization use these techniques to evaluate its financial risk exposure? (5+5 = 10 Marks)

Ans 4.

Technique 1: Value at Risk (VaR)

Value at Risk is an approach to statistical analysis that is used to quantify the maximum potential loss in the value of any portfolio or trade over a specified time horizon for a specific confidence level. For example, a daily VaR of 1 crore. 10 crore at 99 percent certainty means there is a 1 percent possibility that your portfolio would drop more than. 10 crore in a single day. Treasury departments rely on VaR in order to group exposures of interest rate, foreign exchange, and commodity risk positions into a

 

Q.5. Describe the concept of interest rate risk and discuss the various methods used to decrease it. Illustrate how these methods help organizations protect themselves against fluctuations in interest rates. (5+5 = 10 Marks)

Ans 5.

Concept of Interest Rate Risk

In the case of interest rate risk, it can result in negative changes in the market value of assets and liabilities, as well as in the liquid flows of financial instruments that result from movements in market interest rates. Organizations face interest rate risk through two primary ways. Price risk can affect the value of fixed rate loan and bonds. When interest rates increase and the current value of cash flows falls, reducing the market value of fixed rate assets and potentially triggering mark-to-market loss. Risk of cash flows affects floating-rate borrower; as base rates rise, interest rates on debt with variable

Q.6. Explain the various risk factors involved in forex trading and describe how each of these risks can affect traders and organizations dealing in foreign exchange. (10 Marks)

Ans 6.

Forex trading is the process of exchange of a particular currency against another and is the world’s most diversified and most liquid market for financial transactions and has daily volumes of trading over seven trillion US dollars. However, despite its ease of use, forex trading is a risk to both professionals and organisations that handle exposure to currencies. Risks in multiple categories impact people who trade on