CTP Prep Guide 2023-2025 PDF

2023 – 2025 CTP PREP ® GUIDE CERTIFIED TREASURY PROFESSIONAL ® The Global Standard of Excellence in Treasury CTP Exam Testing Windows and Deadlines The CTP Exam is offered in two 60-day testing windows each year, a December/January win...

2023 – 2025 CTP PREP ® GUIDE CERTIFIED TREASURY PROFESSIONAL ® The Global Standard of Excellence in Treasury CTP Exam Testing Windows and Deadlines The CTP Exam is offered in two 60-day testing windows each year, a December/January window and a June/July window. All forms and applicable fees must be submitted in writing and postmarked by the specified deadline. Forms submitted without appropriate fees cannot be processed. Visit www.CTPCert.org for more information.  TABLE OF CONTENTS The CTP Exam..................................2–4 – Study Strategies – Test Taking Tips Exam Format...................................5–6 –2  023 - 2025 CTP Test Specifications: Knowledge Domains Preparing for the Exam........................7 Exam Question Format.........................8 – Common Types of Multiple-Choice Questions Sample Test Questions...................9-28 Sample Test Answer Key...................29 1 CTP Prep Guide | www.CTPCert.org  THE CTP EXAM CTP Exam The CTP exam is made up of 170 multiple-choice questions and is based on the concepts and experiences basic to cash/treasury management. The topics are derived from the body of knowledge, Essentials of Treasury Management®, Seventh Edition (Essentials) and are grouped into content areas (see CTP Test Specifications on page 5). The number of questions in each area is included in the listing, and are distributed randomly through the exam. Your total seat time is four hours. You will have exactly three and a half hours to take the exam. There is a 20-minute tutorial designed to familiarize you with taking the computer-based exam and how to use the navigation features. The tutorial will also familiarize you with the type of exam questions as outlined on page 8. After the exam, you will be asked to complete a 10-minute post exam survey. 2 CTP Prep Guide | www.CTPCert.org  THE CTP EXAM Study Strategies The following strategies and test taking tips are provided to help you better prepare for the CTP exam. However, we encourage you to seek other independent resources. Please refer to the CTP Candidate Handbook (CH) and the Exam Rules and Regulations on the CTP website (www.CTPCert.org/RulesRegs) for important information on scheduling your exam and what to expect once you arrive at the test center. Regardless of how well you study for the exam, your efforts will go unrewarded if you do not fully comply with exam scheduling and test center admission requirements. The Association for Financial Professionals (AFP) wishes you the best in your efforts to prepare for the exam and looks forward to adding your name to the list of active Certified Treasury Professionals. Recommended Study Plan Recommended Study Strategies Development – D  etermine a study location that will allow you – A  llow a sufficient period for studying. Complete a uninterrupted study periods cursory review of the body of knowledge (found – C  reate flash cards or recordings to review exam in Essentials or CTP Exam Prep Platform) to material. This will reinforce your learning determine how familiar you are with the content – A  rrange your study time by the number of test – T  he CTP exam is documented to Essentials of questions from each content area (see chart Treasury Management, Seventh Edition. It is on page 5) and the amount of information you important to know the information in Essentials already know or the CTP Exam Prep Platform as the exam is – D  evelop and share test questions with other based on global practice and not specific to any candidates to challenge your knowledge. This will organization’s practices help you “drill down” into the material and acquire – Identify your “knowledge gaps.” This means that a greater understanding of some concepts you need to identify what you do not know. If – T  ry to closely simulate an exam experience. For you are using the CTP Exam Prep Platform, take example, attempt to complete the sample test the Pre-test to identify content areas on which questions within a 3.5 hour period, or use the you need to focus extra study time. With career, practice questions of the CTP Exam Prep Platform, family, and other demands, you may find that Post-test to gauge proper pace. We strongly your study time is limited. While a thorough encourage candidates to test themselves in half review of the exam content is beneficial, you will the time. By doing so, you will allow yourself enough need to devote attention to areas that are less time to go back and review questions and answers familiar to you – F  amiliarize yourself with the way the exam questions are structured, e.g., closed question, open question, and item sets 3 CTP Prep Guide | www.CTPCert.org  THE CTP EXAM Test Taking Tips – U  pon entering the testing room immediately agree – D  o not go too fast, and never skim questions to the onscreen non-disclosure agreement (NDA). or answers. You may end-up making careless Failure to do so within five (5) minutes of entering mistakes the testing room will cause your exam to lock and – L  et your original answer stand unless you are you will forfeit your eligibility for this window. To completely sure about the new answer take the exam during the next window, you will need to submit a re-examination form and pay the – D  o not let your work experience dictate how you re-examination registration fee answer a question. The exam is testing your knowledge of industry standards – If you are unsure about how to use the computer, or if you have any questions about the procedures for – Ignore the other test-takers. Their anxiety can the exam, ask the testing center administrator before be contagious the exam begins – R  elax the night before the test and get a good – P  rogrammable calculators, phones and night’s sleep. You have studied well in advance, so smartphones are not allowed. An on-screen the night before the test is time to relax calculator similar to those available on all PCs will – M  ake sure you know exactly where the test center be provided on the testing computer. You may is located. If possible, drive to the center the day toggle between a basic four-function calculator before the exam. Be sure to leave yourself plenty and a scientific version of time to get there on exam day – E  ach question on the exam contains the correct – Bring a jacket or sweater for air conditioned rooms answer and either two or three incorrect options – T  here is no penalty for incorrect answers, so plan to answer every question. You are not penalized for guessing – A  fter you have agreed to the NDA and the exam has begun, write difficult-to-remember formulas and concepts on your white board for later use. Test administrators will not allow you to do this before starting your exam – T  he CTP exam contains 170 questions, which you need to answer within 3.5 hours. That means you have about 74 seconds per question, on average. But, you really should try to make your first pass through all the questions in 90 minutes. That way, you will move quickly through easy-to-answer questions, and save yourself plenty of time to return to the harder questions – If you wish to leave the room during the test, you must secure the administrator’s permission. The testing clock cannot be paused and your testing time will continue to count down while you are away from your work station – A  nswer questions that are obvious to you first. Mark difficult questions to come back to later. Every question, whether it is a simple definition or a complicated calculation, is worth the same number of points. Make your best selection and/or mark it for later review and move on to the next question 4 CTP Prep Guide | www.CTPCert.org  EXAM FORMAT 2023–2025 CTP Test Specifications: Knowledge Domains CONTENT AREAS.............................................................................................................................................. NUMBER OF QUESTIONS Domain 1 Maintain corporate liquidity required to meet current and future obligations in a timely and cost effective manner........................................................................ 37-41 A. Manage optimal cash positioning through short-term investing and borrowing activities........................................................... 4-6 B. Forecast/manage cash receipts and disbursements [cash flows]......................................................................................................... 5-7 C. Manage optimal banking structure such as cash concentration/pooling etc..................................................................................... 3-5 D. Manage foreign exchange (FX) exposure...................................................................................................................................................... 3-5 E. Manage trade financing (including letters of credit).................................................................................................................................. 2-4 F. Manage intercompany financing (including loans, repatriation, in-house banking)......................................................................... 3-5 G. Review cash balances and reconcile transaction activity to ensure accuracy................................................................................... 3-5 H. Optimize treasury operations (including considerations for roles/responsibilities and outsourcing options)........................ 3-5 I. Calculate, analyze, and evaluate financial ratios to optimize financial decision making................................................................ 4-6 Domain 2 Manage capital structure, manage costs of long-term capital, and quantitatively evaluate long-term capital resource investments............................................................27-31 A. Negotiate and manage syndicated agreements.......................................................................................................................................... 3-5 B. Manage investment portfolio.............................................................................................................................................................................. 3-5 C. Manage issuance of debt and equity, including post issuance compliance and retirement.......................................................... 3-5 D. Manage revolving debt agreements................................................................................................................................................................. 3-5 E. Assess impact of mergers, acquisitions, and divestitures......................................................................................................................... 2-4 F. Evaluate current market conditions (including credit availability, spreads, interest rates, terms, risk) as they relate to long-term borrowing strategies……………………………………………………………………………………………………………….3-5 G. Hedge FX, interest rate, and commodities exposure................................................................................................................................. 3-5 H. Administer dividends, issue or repurchase of stock.................................................................................................................................... 2-4 Domain 3 Manage internal and external relationships..................................................................................................27-31 A. Build, maintain, and review relationships with external financial service providers......................................................................... 4-6 B. Evaluate and implement treasury products and services (including banking products, treasury workstations)................... 4-6 C. Administer bank accounts (including bank fee analysis) and maintain documentation................................................................. 4-6 D. Identify, negotiate, and select relationships and operational agreements with external service providers (including financial, technological, and investment/retirement advisors) to ensure best practices and competitive pricing…………………………………………………………………………………………………………………………………………..…….4-6 E. Serve as an internal trusted advisor and consultant (including Project Finance)............................................................................. 3-5 F. Build and maintain relationships with internal stakeholders (including accounting, IT, legal, and tax departments)…………………………………………………………………………………………………..4-6 5 CTP Exam Prep Guide | www.CTPCert.org  EXAM FORMAT CONTENT AREAS.............................................................................................................................................. NUMBER OF QUESTIONS Domain 4 Monitor and control corporate exposure to financial, regulatory, and operational risk.(including emerging and reputational risk).......................................................... 31-35 A. Comply with treasury policies and procedures (such as investment, FX, risk management, hedging, credit approval) …………………………………………………………………………………………………………………………………………..3-5 B. Draft treasury policies and procedures for approval (such as investment, FX, risk management, hedging, credit approval)……………………………………………………………………………………………………………….3-5 C. Detect and mitigate fraud (such as payments, bank transactions, internal, external)…………………………………………………..4-6 D. Benchmark performance against external sources to ensure best practices (including banking fees comparative analysis)…………………………………………………………………………………………………………….3-5 E. Evaluate and manage counterparty risk (including risk related to supply chain, banks, brokers, dealers)……………………3-5 F. Develop, maintain, and test business continuity plans (including bank balance reporting process, funds transfer capabilities)…………………………………………………………………………………………………………….4-6 G. Manage merchant services programs (including fees, risk, controls, card security compliance, retention requirements)…………………………………………………………………………………………………………………………………………..…..2-4 H. Ensure regulatory compliance, and report internally and externally on compliance……………………………………………………..3-5 Domain 5 Assess impact of technologies on the treasury function......................................................................... 17-20 A. Leverage technology systems (including enterprise resource planning (ERP) systems and treasury management systems)…………………………………………………………………………………………………………………6-9 B. Identify security issues and concerns associated with new and existing technology, including merchant services…………………………………………………………………………………………………………………………………………..5-7 C. Monitor information security risk and cyber-related risk (including e-mail scams, phishing scams)……………………………....5-7 Unscored Questions...............................................................................................................................................20* 33–37% of the questions test knowledge of basic facts and terms. 38–42% of the questions test an understanding of concepts and principles. 23–27% of the questions test the higher thinking ability to apply concepts and principles to a specific situation. 10–15% of the questions will require mathematical computations. *These questions are unscored and do not count towards the final score. The questions may be from any domain. The specific questions on the exam that are unscored are determined before the start of the testing window. See the CTP Candidate Handbook for detailed test specification at www.CTPCert.org/CCH 6 CTP Exam Prep Guide | www.CTPCert.org  PREPARING FOR THE EXAM BODY OF KNOWLEDGE Additional Exam Study Aids Essentials of Treasury and Services Management®, Seventh Edition To further assist candidates in preparing for the CTP Developed by a committee of subject matter experts exam, the following services are available: to reflect the knowledge, skills and abilities performed – Complimentary Webinars—AFP offers webinars to by treasury professionals as identified in the CTP test help you prepare that include “Everything You Need specifications. This textbook is the complete Body of to Know About the CTP Exam,” and “CTP Exam Knowledge tested on the CTP exam. Learn more at Strategies and Test Taking Tips.” www.CTPCert.org/ETM. www.CTPCert.org/Webinars – C  TP Exam Q&A—Request any explanation or CTP Exam Prep Platform clarification on content from the Essentials. Written inquiries are submitted to subject matter experts The CTP Exam Prep Platform is the preferred study resource and a response is provided to the candidates within for the CTP Exam and is based on the test specifications for three to five business days. Please note, however, the 2023 - 2025 windows. This fully digital and interactive that volunteers are not in a position to provide platform contains study materials, evaluations, sample a detailed tutorial in a topic area. Submit your questions and customized progress tracking. Features of questions to [email protected] the Exam Prep Platform include; 20 hours of instructor-led video; 20 chapters of online reading material; case studies; – A  FP/TMA Regional Associations—Contact your knowledge checks for each chapter; practice questions. local regional association to locate study groups or Learn more at www.AFPonline.org/EPP. CTP exam preparation courses independent of AFP. A listing of regional associations by geographic location can be found on our Web site at Essentials CTP Exam www.AFPonline.org. Click on About, then click on of Treasury Prep Platform Regional Associations Management Member $860 $185 CTP Preparation Community Non-member $960 $285 on AFP Collaborate Join the discussion community exclusively for CTP candidates and members who are credential holders. Access the community at Collaborate.AFPonline.org CTP Examination Preparation Guide This complimentary online guide contains helpful test-taking tips and strategies. It also includes 170 sample test questions. Download the Guide at www.CTPCert.org/PrepGuide. 7 CTP Prep Guide | www.CTPCert.org  EXAM QUESTION FORMAT Common Types of Multiple-Choice Questions The following are samples of question formats which may be used on the CTP exam. Closed Question Except A complete question followed by three (3) A format used when three (3) of the options or four (4) optional answers, only ONE of are correct and only one option is incorrect. which is correct. Often the word “What” is The incorrect option is actually the correct included in the question. answer in this case. Example: Example: 1. What is the usual color for stop signs? 4. A  ll of the following statements about ice cream A. Red are true EXCEPT: B. Yellow A. It should be stored in the freezer C. Green B. It has very few calories D. Purple C. It comes in many flavors D. It is a popular snack food A complete question that includes the phrase “Which of the following” when there Item Sets is more than one correct answer to a A set of questions based on information question, but only one of the correct contained in the preceding paragraph. answers is offered in the options. Example: Example: Questions 1 and 2 are based on the following 2.  hich of the following colors is a combination of W information: two primary colors? There are 365 days in a year, 7 days in a week and 12 A. Red months in a year. B. Purple C. Yellow 5. How many weeks are there in a year? D. Blue A. 50.00 B. 52.00 C. 54.00 Open Question D. 55.14 An incomplete sentence with three (3) or 6. What is the average number of days in a month? four (4) optional completions, only ONE of A. 29.50 which is correct. B. 30.00 Example: C. 30.42 D. 32.39 3.  period of time of 60 minutes is A called a(n): A. Hour B. Week C. Month D. Year 8 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS Sample Test Questions Review these questions to familiarize y ­ ourself with some of the types of questions on the exam. The answer key is on page 29 of this handbook. 1.  ompany ABC has a C 3.  hich of the following BEST W 7.  hich of the following is a ratio W concentrated investor base describes an advantage of a that is often used by commercial consisting primarily of large company going public? banks to measure a company’s institutional shareholders. It A. Increased management leverage and does not include the would like to increase its number control effect of assets that are difficult of smaller shareholders using the B. Increased public disclosure to value or are NOT easily most cost effective method of C. Increased managerial converted to cash? raising capital available. What flexibility A. Long-term debt to capital should Company ABC do to D. Increased liquidity B. Debt to tangible net worth accomplish this goal? C. Total liabilities to total assets A. Issue preferred stock 4. W  hen a short-term loan is paid D. Cash flow to total debt B. Implement a dividend with a lump sum payment and the reinvestment plan payment includes both interest 8.  hich of the following can be W C. Issue warrants and principal, the loan is often considered key responsibilities of D. Implement a stock repurchase referred to as a: daily cash management? plan A. Single payment note I. O  verseeing compensation for B. Material payment note bank services 2.  cash manager at a retailer A C. Balloon payment note II. M  anagement of short-term forecasts a positive collected cash D. Commercial note borrowing and investing position for the end of the current III. P  rojecting future cash day. The company has an shortages and surpluses 5.  he Company J portfolio consists T overdraft facility at 10%, a of two stocks, 65% of Stock A A. I only separate investment account with a return of 7.63% and 35% of B. I and II only earning 8% before taxes, an Stock B with a return of 3.89%. C. II and III only earnings credit rate of 8% and an What is the Company J portfolio D. I, II, and III outstanding single payment note return? at 9.5% maturing in 1 week. This month’s bank service fees are A. 1.86% 9.  enior management at ABC S expected to exceed the earnings B. 5.10% Company plans to make a large credit. Which of the following C. 6.32% capital expenditure to bolster its intra-day options would be the D. 18.57% infrastructure exactly one year MOST economically positive for from now. Their primary concern the company? 6.  hat does a company with a W is to preserve the current capital restrictive current asset position until the expected cash A. Leave the funds in the account investment strategy typically outlay. The majority of the cash at B. Redeem the single payment have? ABC Company is held in treasury note notes, but management would C. Prepay administrative A. High financing costs like to also invest some of the expenses B. Low accounts receivable money into corporate bonds and D. Transfer funds to the balances money market funds. Which investment account C. High inventory levels investment objective BEST suits D. Low tax liabilities the needs of ABC Company? A. Exposure Horizon B. Diversification C. Liquidity D. Safety 9 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 10. Earnings Credit calculation: 13. W  hen using the Internet to 16. A  n airline wants to lock in the access auction markets, price of the jet fuel it needs to Assumptions – $1,500,000 companies may use certificate purchase to satisfy the peak Average ledger authorities to reduce their in-season demand for travel. The balance exposure to which of the airline wants to manage Deposit Float $250,000 following types of risk? its exposure to fluctuations in Reserve Requirement 10% A. Credit fuel prices. What type of B. Valuation exposure is this? Earnings Credit Rate 45 bps C. Counterparty A. Translation Service Charges for $12,500 D. Foreign exchange B. Delivery the month C. Commodity Days in the Month 30 D. Speculative 14. A company can pay their supplier by check or by What is the earnings credit the electronic transfer. If the 17. A French exporter sells goods to company is receiving for this difference between the value a foreign buyer in euros and month? date of the payment methods is wants to guarantee that payment A. $416.10 4 days from the company’s is made by the buyer. The B. $4,160.96 perspective, what discount exporter would MOST LIKELY C. $449.38 should the supplier offer them to require a(n): D. $457.71 get the company to pay on the A. Bankers’ acceptance same day as they did when they B. Documentary collection 11. U  sing the information provided paid by check (rounded to the C. Letter of credit for question 10, what would the nearest 100th percent)? Assume D. Open account earnings credit change to if the no difference in the cost of the company negotiated a 50% payment method, an opportunity 18. The right of stockholders to decrease in deposit float ? cost of 8%, and float neutrality. purchase, on a pro-rata basis, A. $4,577.05 A. 2.00% any new shares issued by the B. $457.71 B. 0.09% company is referred to as: C. $449.38 C. 0.87% A. Preemptive right D. $503.48 D. 0.02% B. Right of first refusal C. Existing ownership right 12. T  he treasurer of a corporation is 15. Which of the following is a tool D. Prevention of dilution right negotiating with one of his/her that companies use to obtain a suppliers to allow the quantitative rating of a financial corporation to have 30 days to institution’s level of service? pay the supplier’s invoices. The A. Relationship review treasurer is arranging: B. Score card A. Short-term financing C. Service agreement B. Revolving credit agreement D. CAMELS rating C. Factoring of receivables D. Uncommitted line of credit 10 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 19. A  fter a recent review of its 21. A large, mature, diversified and 24. A U.S. company has a secured insurance policies, a petroleum publicly traded company sells committed line of credit of $5.5 products company determines it the smallest of its business million and has an available needs to re-evaluate its risk segments to a strategic buyer for balance of $4 million. The exposure to potentially reduce cash. It uses the proceeds to pay company successfully its insurance premiums. The off all bank debt and transmitted a $5.5 million wire company has operated in two subordinated debenture debt on transfer instruction out to the locations for 20 years but only its books. The company believes bank via SWIFT. The bank produces and stores petroleum the stock is trading at a contacted the company and at one location. In doing so, the reasonable price and continues informed it that the wire transfer risk manager determines the to pay a regular, steady dividend would not be processed. What is following exposures: to shareholders. Management’s the MOST LIKELY reason the The number of employee strategy is to embark on an bank gave the company? workers compensation claims aggressive growth plan including A. Wires exceeding $5 million due to injuries while loading a major acquisition. cannot be transmitted using trucks has increased 25% in the SWIFT past 12 months Based on the above information, B. The bank imposed a guidance The primary tank used for if the company uses the trade-off line of credit on the account petroleum storage is 13 years theory in considering its WACC, C. The company exceeded its old and standard life of tanks how will it finance its growth? balance requirement of this model is 20 years A. By using long-term debt D. The bank refused funding on There is only one road into the B. By issuing Class A stock the company’s discretionary current petroleum storage C. By using retained earnings line of credit facility D. By issuing Class B stock Given the above information, if 25. A large retailer is preparing to the risk manager constructs a 22. T  he treasury manager of a accept credit cards and second road into the petroleum privately held company is anticipates monthly credit card storage facility, what risk looking to finance new sales of $1,000,000. If the terms management strategy is being equipment that has a useful life with the acquiring bank include used? of 5 years. What type of bundled allocated fees of 6% and financing would the Treasury the retailer wishes to delay fee A. Risk avoidance Manager MOST LIKELY employ payment as long as possible, B. Transference of risk to finance the equipment? what should the retailer do? C. Risk mitigation D. Keep the risk A. Equity shares A. Accept gross settlement B. Long-term bond B. Place a hold on consumer 20. Which of the following C. High-yield bond credit limits contributes MOST to the D. Installment term loan C. Receive net settlement marketability of a security? D. Delay funds transfer to card- 23. A retail brokerage firm is MOST issuing banks A. An investment-grade rating like which one of the following B. An irrevocable letter of credit types of financial institutions? guarantee C. A return at or above the yield A. Captive finance companies curve B. Factoring companies D. A large, active secondary C. Investment banks market D. Insurance companies 11 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 26. E  xamples of traditional factors 28. F  rench corporation purchases 31. A company has asked its used in making a credit decision finished products from a U.K. marketing, payroll and sales include which of the following? subsidiary and sells raw materials teams to collaborate in finding a I. Capacity to the subsidiary several times in solution that could augment its II. Capital one month. To minimize foreign customer base, reduce payroll III. Compliance exchange transaction costs, the cost and increase sales. The IV. Character French corporation’s cash solution has to be market ready. manager would MOST LIKELY Which of the following will serve A. IV only use: all 3 purposes? B. I and III only C. I, II, and IV only A. Bilateral netting A. Ghost cards D. I, II, III, and IV B. Multilateral netting B. Smart cards C. Forward options C. PIN based cards D. Pooling D. Stored value card 27. A  company has decided to manage its short-term investment portfolio in-house. It 29. O  ptimal dividend policy is one 32. A  portfolio manager purchases a is looking for enhanced capital that does all of the following floating rate mortgage backed gains as well as the ability to sell EXCEPT: security that would currently the instruments on the A. Maintain adequate retained provide a 4% yield to the secondary market at a premium. earnings for future growth company. Since mortgage rates The investment manager has B. Maximize shareholder value have been fluctuating forecasted the interest rates C. Distribute corporate income significantly over the past month, shown below: to investors the manager is thinking about D. Balance tax shield benefits entering into an interest rate against agency costs swap to hedge against the rate Month Short-term Long-term movements. Although the rates rates manager would remove most of January 0.25% 0.27% 30. A  BC Company, a leading the price sensitivity of the asset provider of office supplies, February 0.28% 0.30% by executing the swap, it would has successfully implemented also lower the total yield on the March 0.26% 0.29% EDI based on a request from one investment due to swap costs. of its customers. ABC will not April 0.24% 0.27% What objective in the company only benefit from the strategic May 0.25% 0.28% investment policy is guiding the alliance that will result, but as portfolio manager’s decision? June 0.26% 0.29% more of ABC’s customers adopt the program, ABC will also A. Risk analysis Which investment strategy experience a positive impact on B. Risk/return trade off should be employed by the its: C. Preservation of principal company? D. Performance measurement A. EFT costs A. Passive strategy B. C2C levels B. Matching strategy C. Value added networks C. Tax-based strategy D. Inventory levels D. Total-return strategy 12 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 33. M  CA, Inc. upgraded the treasury 35. A  company plans to issue 38. A  large mature company with workstation that had been in additional equity within the next limited growth opportunities place for two years and used 12 months but needs to issue (positive NPV projects) achieved data from that 24-month period debt at a low interest rate now. abnormally high profits this year. to develop a new short-term Which of the following After paying mandatory forecast. A trend factor was instruments would BEST meet principal, interest, and taxes, the applied to controlled this objective? company has $200 million in disbursements of 97% on a A. Convertible bonds surplus cash on hand. Assuming month-by-month basis and the B. Private placement issue its investor base is most variance to actual disbursements C. Preferred stock concerned with capital is less than 1%. Which of the D. Subordinated debentures appreciation, which of the following model validation following is the BEST option for techniques was utilized? the company? 36. A  BC Company offers a discount A. In-sample validation of 2/10, net 30 to its customers. A. Declare a special dividend B. Documentation validation ABC factored its accounts B. Reinvest cash into the C. Ongoing validation receivables with an outside company D. Comparison validation vendor, under a “with recourse” C. Declare a cash dividend arrangement. What impact might D. Repurchase shares of 34. A  manufacturing company is this have on the company? outstanding stock working to improve its cash A. Increase days sales conversion cycle. Factory outstanding 39. T  he yield curve is inverted. A production has increased over B. Improve cash conversion creditworthy firm considering the last year to increase cycle alternative debt maturities would inventory levels. They have an C. Reduce bad debt expense MOST LIKELY: inventory turnover of 3.1 and D. More customers may A. Enter into a short-term asset turnover of 5.0. The take the discount floating rate agreement company has a days’ payable B. Obtain long-term fixed of 30 and a days’ receivable of interest rate debt 37. T  he treasury manager of a 60. It has started enforcing its C. Roll-over short-term chain of clothing stores wants net 30 terms and placed debt at each maturity to develop a medium-term customers with balances D. Obtain a long-term floating forecast. Management plans outstanding more than 45 days rate agreement to open two new stores, and on credit hold. As a result, the anticipates same-store sales company collected receivables to increase by 15%. Which of 40. A  $100,000 T-bill currently sells quicker but it suffered a 10% loss the following items can be for $98,600 and matures in 90 in sales. What can the company predicted with the highest days. What is the 365 day basis do to reduce its cash conversion degree of certainty? yield for this investment? cycle? A. Taxes on stock options A. 5.76% A. Pay vendors in advance B. New product sales B. 5.68% B. Decrease the days’ payable C. Fixed bond interest payment C. 5.48% C. Extend payables deferral D. Refranchising proceeds D. 5.37% period D. Revise credit policy to be more lenient 13 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 41. A  U.S. firm acquires a large U.K. 44. C  ompany A regularly modifies its 47. C  ompany S wants to issue manufacturer that generates capital structure by repurchasing $25,000,000 of commercial high levels of cash flow in its stock. Which one of the following paper at a discount of 35 bps local currency. The purchase is is a true statement? and a maturity of 27 days. The denominated in British pounds A. Investors may feel that dealer fee is 10 bps annually and and is financed through the management is manipulating the bank assesses a backup L/C issuance of 10-year, 7.5% U.S. the stock price fee of 20 bps. What is the dollar bonds. The U.S. firm will B. Stock repurchases are not an approximate annual interest rate rely entirely on the U.K. attractive alternative to the company pays for this issue manufacturer’s cash flows to dividend payments of commercial paper? fund the interest payments on C. Partial disclosure to the A. 3.85% the bonds. What derivative regulators is required for B. 2.48% instrument would help the U.S. repurchases C. 1.57% firm manage its FX exposure? D. Stock repurchases do not D. 0.66% A. Currency forward offer tax deferral advantages B. Currency swap over dividends 48. T  he stock of a manufacturing C. Interest-rate swap company is priced so that its D. Currency future 45. In evaluating alternative capital expected rate of return is below investments, a company should its required rate, as calculated by 42. W  hich of the following is a consider qualitative factors such the Capital Asset Pricing Model source of short-term financing? as: (CAPM). Which of the following A. Bond issuance A. Projected cash flows will occur in an efficient capital B. Factoring of accounts B. Estimated economic returns market? receivable C. Corporate strategy A. Buying pressure for the firm’s C. Issuance of common stock D. Estimated costs stock will drive the price up D. Retaining profits B. Buying pressure for the firm’s 46. A  company is experiencing the stock will drive the price 43. C  ompany XYZ is aggressively following long-term trend on a down expanding globally. It is evaluating month-over-month basis: C. Selling pressure for the firm’s four markets: Latin America, stock will drive the price up Sales are increasing by Europe, Asia and Middle East. D. Selling pressure for the firm’s $100,000, a 15% increase. stock will drive the price Latin America: Risk adjusted Accounts receivable are down discount rate: 15%, Payback increasing by $5,000, period=7 years, IRR=15% a 1% increase. Europe: Risk adjusted discount Accounts payable are rate: 8%, NPV=$20M increasing by $20,000, a 4% increase. Middle East: Risk adjusted Labor expenses are increasing discount rate: 11%, IRR=12%, by $40,000, a NPV=$5M 3% increase. Asia: WACC: 9%, Payback=2 yrs, With all other income, expenses, IRR=8% long-term assets and liabilities Based on the information, which remaining stable, this trend two markets will company XYZ would MOST LIKELY prompt MOST LIKELY pursue? what action by the company? A. Europe and Asia A. Financing working capital B. Asia and Latin America requirements C. Europe and Middle East B. Repaying short-term debt D. Middle East and Latin C. Reducing labor costs America D. Factoring accounts receivable 14 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 49. A  n intern was hired by the VP 51. A  properly designed 54. C  ompany XYZ is now required to of Accounts Payables to process concentration system will make electronic payments by its the electronic payments that potentially achieve which of the suppliers. To prevent an increase come through the bank. The following results? in costs, the company should: intern is responsible for manually I. Increased authority to field A. Negotiate a change in entering payee information into offices payment timing with its the system at each step of the II. Increased investment income suppliers process. The VP directed the III. Improved ability to take B. Institute a just-in-time intern to enter the information as discounts inventory system fast as possible without mistakes IV. R  educed dependence on C. Negotiate a change in cash to optimize the number of third-party concentration disbursement with its transactions that could be vendors concentration bank processed. Instead of manually D. Institute a modified RSA entering information the VP A. IV only B. I and II only system for its inventory should have utilized: C. II and III only A. Large value transfer system D. II, III, and IV only 55. A  s an internal control tool, what B. Straight-through processing does the matching of an invoice C. Continuous linked settlement to the original purchase confirm? 52. In an organization with personnel D. Enterprise resource planning limitations, which of the A. The placement of the order system following strategies should be B. The fulfillment of the order considered to mitigate cash C. The execution of the order 50. X  YZ Company has a well management system risk? D. The payment of the order established commercial paper (CP) program that they use to A. Outsourcing B. Verification 56. L  oss exposures related to fund operations. The company is C. Matching treasury management may expanding by purchasing a new D. Hedging include which of the following? factory. The CFO is worried about the time and expense A. Excessive product recalls needed to issue long-term debt 53. C  ompany X, a Singapore based B. PBGC violations and decides to use the funds multi-national, is exploring the C. Deterioration of investment they raise in the CP market to option of locating a subsidiary in principal pay for the purchase of the another country where there has D. Bank consolidations factory. This strategy will be been some historical risk of successful if: expropriation of local assets of foreign corporations. Therefore, A. An interest rate swap is used as part of the risk assessment B. A credit default swap is process the company must employed specifically quantify the: C. A commodities future is purchased A. Political risk D. The yield curve remains B. Physical security risk upward sloping C. Financial institution risk D. Property risk 15 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 57. T  he key parties involved in a 59. C  ompany Q has average daily 62. M  aking payments through disaster recovery plan are credit sales of $15,875.00. The electronic payments networks generally classified as internal daily cash sales are $8,750.00. can be a part of a treasury resources or external counter The AR ending balance for June management system’s parties. When evaluating the risks 30 is $387,500.00. What is the functionality, but it is subject to of both parties, which of the average days’ sales outstanding numerous constraints. Which of following can be assumed? for Company Q? the following is a true statement A. The review of internal A. 24.41 of those constraints? resources takes greater B. 0.04 A. The process is easy for the importance C. 15.74 payee but very intensive B. The infrastructure linking the D. 0.06 manually for the payor parties’ systems must be B. Negotiation of trade terms is considered 60. W  hich of the following is subject required, but float terms are C. The disaster recovery sites of to transaction risk exposure? excluded both parties must be in the C. Remittance detail, whether a A. A U.S. company’s foreign same location lot or a little, can be easily subsidiary in Japan has a D. The systems used by both included with all payment receivable denominated in parties must be compatible forms Yen D. Collecting payment-routing B. A Japanese company’s foreign 58. A publicly traded company is details, and populating these subsidiary in the U.S. has a looking to fund its next project into the software, is a receivable denominated in with the issuance of stock. The significant task Yen company’s stock is primarily held C. A U.S. company’s foreign by a small group of investors. The subsidiary in Japan has a 63. A main characteristic of a company is concerned that payable denominated in Yen company with regional offices issuing stock may upset these D. A Japanese company’s foreign using a centralized treasury investors because it would dilute subsidiary in the U.S. has a function is: their holdings. Which of the payable denominated in A. High level of control following strategies would help dollars B. Increased borrowing costs address the investors’ concern? C. Centrally determined A. Grant the investors cumulative 61. A put option on a company’s depository accounts voting rights stock has an exercise price of D. Increased operating costs B. Grant the investors pre- $20. On the delivery date, the emptive rights to the new stock is trading at $24 per share. 64. Treasury management systems issue What should the investor who has and ERP systems allow C. Allow the investors to cast paid $2 for the option do? companies to do all of the their votes by proxy at the following EXCEPT: A. Not exercise the option and next shareowners meeting lose $2 A. Reduce cash processing costs D. Offer to stagger the election B. Not exercise the option and B. Migrate external data of directors lose $6 into G/L infrastructure C. Exercise the option and C. Increase productivity through gain $2 seamless exchange of data D. Exercise the option and D. Reduce redundant data entry gain $4 errors 16 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 65. O  ne reason for using a sale and 68. A  n international company would 71. Netting is used by which of the lease-back arrangement in lease establish a re-invoicing center for following as a cross-border financing is to: which of the following reasons? payment technique? A. Create an infusion of cash A. To reduce its international A. European giro providers into the company balance reporting charges B. Foreign subsidiaries of a B. Benefit from tax advantages B. To manage the foreign company from depreciation exchange exposure of its C. Counterparties in a letter of C. For income or costs in one foreign subsidiaries credit transaction period C. To take advantage of D. TARGET participants D. Eliminate off-balance sheet interest-bearing demand debt deposits 72. In which of the following D. To bring transaction international cash management 66. An equity management exposures more closely in line methods is title for goods company’s Chief Financial Officer with economic exposures transferred for intercompany and Treasurer are evaluating sales? their corporate investments and 69. XYZ Company has decided to A. Pooling decide that they need to purchase a close competitor. This B. Internal factoring diversify their stock holdings to acquisition would make XYZ C. Multilateral netting include personal care products Company the 4th largest in its D. Re-invoicing companies. Based on their industry allowing it better analysis, publicly-traded purchasing power and greater 73. Which of the following is NOT a companies A and B stand out as distribution channels. After key area to consider when choices. Company A has a beta completing the M&A analysis, it establishing treasury policies? value of 0.65 while company B is determined that the combined has a beta value of 1.10. They companies would produce a 40% A. Equity method investments decide to invest in Company A. increase in revenue, reduce accounting What objective of their manufacturing costs by 30%, but B. Medium-term financing investment policy did they use to would increase current liabilities C. Management reporting make their decision? by 27%. Which of the following D. Foreign currency would keep the acquisition from management A. Safety B. Liquidity happening? C. Exposure horizon A. Increased weighted average 74. Establishing the authority to D. Risk/return trade-off cost of capital open bank accounts is the B. Low return on investment responsibility of: 67. A  merchant presents 2 different C. Negative net present value A. The board of directors batches of credit card D. Restrictive bond covenants B. The CFO transactions for processing, each C. The treasurer batch has the same dollar value 70. Amalgamated Binding D. The board of governors and number of transactions, but Consolidators takes 20 days to the fees are different. Which of convert its raw materials to the following explains why? finished goods, 5 days to sell it, A. Use of a different terminal and 15 days to collect its credit B. Goods or services sold sales. What is the company’s C. Type of card accepted days receivable period? D. Time of batch closure A. 5 days B. 15 days C. 20 days D. 40 days 17 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 75. A daily short-term forecast and 79. Securities sold by companies in 83. ABC Company is a national retail variance analysis for LMN, Inc. is an initial public offering (IPO) company and uses XYZ Bank for updated with relevant trends and are: its collections and payroll actual data every Monday. Upon A. A specific type of security services. XYZ has recently review, the treasurer assessed sold by a public company for experienced financial problems; that sales were higher than the first time what is the greatest risk to ABC forecasted, inventory was up and B. Debt securities sold on the Company? yields being earned on excess open market A. Damage to their working cash were lower. The MOST C. Public securities sold by a relationship important reason for this cash private company for the first B. Deterioration of service forecast process is: time quality A. Financial control D. Securities sold by a private C. Increase in service fees B. Managing costs company to a limited number D. Loss of assets C. Capital budgeting of investors D. Liquidity management 84. The rate of interest commercial 80. A company has grown quickly in banks charge their best credit 76. A company is interested in the euro zone market. It wants to rated customers is called the: lowering its overall banking maximize its excess cash. Which A. Rate costs, managing netting, pooling, would be the BEST method of B. Call rate re-invoicing, and centralizing FX concentrating funds? C. Prime rate exposure at headquarters. Which A. Bank Overlay D. Real interest rate of the following options will B. Notional Pooling accomplish this? C. Physical Pooling 85. A wholesale foods supplier A. In-house banking D. Scheduled Transfer receives an order from ABC B. Shared service center Foods located in Minnesota. The C. Company processing center 81. Which of the following global supplier’s policy is to bill upon D. Automated clearing house cash concentration methods fulfillment of the order and not at would be MOST appropriate for a delivery. ABC Foods pays upon 77. Money market funds are able to single company with operations receipt of goods. A blizzard has obtain very competitive trading in the United States, Germany, closed the manufacturing facility terms because: Mexico, and Japan looking to and roads; delivery will be A. There is no diversification minimize expenses? delayed by two days. Which type B. Of the economies of scale A. Multilateral netting of float occurs between the C. Invested funds are locked in B. Bank overlay structure receipt of an invoice by ABC for a specific period of time C. Shared service center Foods, including the credit D. The investment manager only D. Internal book transfer period, and the time ABC purchases high yielding Burgers’ account is debited? instruments 82. F  inancing decisions in a budget A. Payment are used to construct all of the B. Invoicing 78. C  onvertible securities consist of following pro forma financial C. Collection preferred stock and: statement components EXCEPT: D. Disbursement A. Treasury stock A. Debt B. Common stock B. Interest expense C. Bonds C. Shareholder’s equity D. Tracking stock D. Inventory 18 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 86. C  ompany ABC experienced a loss 89. T  he company currently calculates 93. W  hich of the following trade in the past when an employee in its Days’ Receivables at 42 days, payment methods virtually the treasury department was able its Days’ Payables at 31 days, and eliminates the seller’s credit risk? to transfer $1.5 million to a its Days Inventory at 58 days. A. Bankers’ acceptance personal account offshore. The What is the cash conversion cycle B. Cash before delivery company is working with a for the company? C. Countertrade security agent to prevent this A. 131 days D. Consignment from happening in the future. B. 15 days ABC also accepts a large number C. 69 days 94. C  ompany A has $1,375,000 that it of checks as payment. The agent D. 47 days plans to invest for three years at has suggested upgrades to ABC’s an interest rate of 4%, with all payment process. What step 90. U  sing the above information, interest paid at maturity. How should be taken to help mitigate what is the cash turnover for the much interest will the company this type of risk in the future? company? receive at the end of the third A. Securely store check stock year? A. 5.3 times B. Set up international bank B. 7.7 times A. $16,566.09 security C. 24.3 times B. $165,000 C. Implement dual approval D. 2.7 times C. $55,000 D. Implement data security D. $171,688 standards 91. In order to be defined as independent, a corporate director: 95. A  BC Company’s treasury 87. A  company wants to gather daily A. Cannot have owned preferred department outsourced its balance reporting from its stock shares in the company overnight investment duties to international subsidiaries’ bank B. Cannot have a material XYZ Money Management. XYZ accounts. Which of the following relationship with the company placed the funds received from systems would allow the C. Cannot meet regularly with ABC into corporate commercial company’s bank to gather the executive management paper, which has recently gone balance positions from the local outside of board meetings into default after numerous banks? D. Cannot have been an ratings downgrades. The A. SWIFT investment policy of ABC employee with the company B. CHIPS Company states that all during the past three years C. Giros investments must be in D. EDI investment grade commercial 92. After several internal discussions paper; however, the agreement about treasury management 88. T  reasury policies should be gives XYZ the ability to make systems (TMSes), ABC Company approved by the: exceptions with the approval of has determined that it has no A. Audit committee the treasurer of ABC Company. need for customization but that it B. Controller The treasurer was never notified does want a backup for high C. Board of directors of the ratings downgrades. What priority capabilities. The company D. External auditors role or responsibility, if any, was needs access to knowledgeable IT violated with regards to the support resources but wants to investment policy? reduce overall IT costs. These parameters will MOST LIKELY A. Exposure horizon monitoring result in what kind of TMS? B. Valuation of investment vehicles A. An ERP module TMS C. Policy approvals and B. An integrated TMS exception management C. A hosted ASP TMS D. No violation occurred D. Development of its own TMS 19 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 96. C  ompany XYZ is a manufacturer 100. C  ompany R has an AR 103. C  ompany ABC needs external of industrial equipment and has collection pattern of 8% in the capital to finance a new product enjoyed a large percentage current month, 47% in the first line. Its operating leverage is increase in profits from a small month, 30% in the second high, and its revolving credit increase in revenues. Sales month, 10% in the third month, agreement contains a ratings recently plummeted resulting in and 5% in the fourth month. If trigger. What will Company steep decline in profitability. AR for July is $598,000, what ABC MOST LIKELY do to Which of the following BEST amount of cash do they expect finance its new product line? describes the cost structure of to collect in October? A. Issue convertible debentures the company? A. $281,060 B. Issue long-term notes A. Low contribution margin B. $59,800 C. Issue common stock B. High financial leverage C. $179,400 D. Use retained earnings C. Low variable costs D. $47,840 D. High operating leverage 104. T  he risk-free rate of return is 101. W  hich two of the following are 2.15% and the historical stock 97. A  company hires an investment optimal uses for short-term market average rate of return is firm to fully underwrite a new excess cash? 6%. If Company M has a beta of stock issuance. Which of the I. Pay down credit lines 1.36, what is their required rate parties carries the MOST risk? II. Make overnight investments of return for capital asset A. The public III. Repurchase stock pricing? B. The company IV. Make capital expenditures A. 8.083% C. The company’s bond holders A. I and II B. 7.39% D. The investment firm B. I and III C. 0.42% C. II and III D. 0.04% 98. W  hich of the following is a KEY D. II and IV operational advantage of 105. W  hich of the following is an short-term debt? 102. O  ver the past 3 years XYZ example of a Eurobond? A. It can be arranged quickly Company has expanded into A. A bond that is denominated and easily multiple countries and in euros, issued in France by B. It improves the current ratio significantly grown its banking a French company for debt covenant and relationships. The company now B. A bond that is denominated compliance purposes incurs significant expenses in pounds, issued in the U.K. C. It reduces the risk of interest related to payment transaction by a U.S. company rate fluctuation and lowers costs and maintaining multiple C. A bond that is denominated interest expense bank connections. What should in Japanese Yen, issued in D. It improves the overall the company use to combat the U.K. by a U.S. company liquidity position and reduces these rising costs? D. A bond that is denominated risk A. SWIFT network in euros, issued in a B. ACH network European market by a U.S. 99. In a typical swap transaction, two C. CHIPS network company parties agree to exchange: D. TARGET 2 A. Notional principal amounts B. Amortization schedules C. Maturity dates of obligations D. Cash flows at future points in time 20 CTP Prep Guide | www.CTPCert.org  SAMPLE TEST QUESTIONS 106. A  treasury manager has $5 110. A  treasurer decides to use 113. A  company enters into a cash million that is not needed for 6 notional pooling across wholly- flow hedge to offset months. The treasury manager owned multiple legal entities fluctuations in the value of has decided to invest the funds instead of wiring money foreign currency transactions in a liquid instrument, using the between entity accounts. What occurring in two years. How current portion of a 5-year AA specific section in the should the company record the rated corporate bond that is company’s policy allowed the gains and/or losses on the cash subject to U.S. Securities and treasurer to make this decision? flow hedge in the current year? Exchange Commission (SEC) A. Regulatory and legal A. The hedged gains and losses regulations. In what market considerations are reported in would the treasury manager B. Liquidity strategy comprehensive income purchase this investment? C. Collection strategy B. The hedged gains and losses A. IPO Market D. Concentration practices and are reported in current B. Private Market strategies period income C. Primary Market C. The hedged gains and losses D. Secondary Market 111.  ompany T pays $12.00 for a C are reported in current wire and $2.00 for an ACH period income together with 107. A  company with high operating transaction. They receive a wire the offsetting gains and leverage reduces its average one day sooner than they do an losses of the foreign cost per unit by 20% as its sales ACH and they earn 1.75% on the currency volume increases by 40% funds. What is the break-even D. The hedged gains and losses annually. This is an example of: amount for a wire instead of an are reported in ACH? comprehensive income A. Low fixed costs together with the offsetting B. Low variable costs A. $246,114.29 gains and losses of the C. Economies of scale B. $208,571.43 foreign currency D. Equal distribution of fixed C. $2,085.71 and variable costs per item D. $20,857.14 114. W  hich of the following is a characteristic of giro systems 108. B  anks often control information 112. C  ompany XYZ is a high used in countries throughout flow, records and assets, technology company. It is Europe? therefore it is critical that banks planning on acquiring another have: company in the high technology A. They operate through postal sector. Company XYZ does not systems A. Backup systems and disaster have enough cash to acquire B. They are primarily used for recovery procedures the company and is planning on company-to-company B. Controlled disbursement financing the acquisition payments procedures through a bond offering. Which C. They do not replace checks C. Standard formats for of the following measures is for the payment of bills electronic submission company XYZ MOST LIKELY to D. They do not allow the use of D. Timetables for service use in its analysis of operating direct debits and credits implementation profits con