Ace the 2025 Certified Treasury Pro Test – Cash In on Your Future Brilliance!

In an upward-sloping yield curve environment, it is generally more advantageous for a company to secure funding in the short term rather than lock in long-term rates. This is especially pertinent when dealing with an aggressive working capital strategy following a loss of a significant customer. Pursuing short-term committed lines allows the company to secure necessary liquidity while benefiting from lower interest rates associated with short-term borrowing.

The choice of short-term committed lines is particularly effective because they provide flexibility and assurance of funding while minimizing the exposure to higher long-term rates that could arise from the larger economic climate depicted by an upward-sloping yield curve. By committing to short-term lines, the treasurer can effectively manage their capital needs without overly extending financial liabilities during a time of uncertainty due to the loss of a customer. This positions the company to adapt quickly to changing conditions in the market, allowing for recovery strategies to be implemented as necessary without the burden of long-term commitments.

Engaging in other types of financing options, such as long-term lines or non-committed lines, could expose the company to higher interest rates or insufficient funding flexibility, potentially compounding their financial challenges further. Thus, the focus on short-term committed lines aligns well with both the immediate liquidity needs and the broader economic signals