ctp-exam-prep-guide.pdf

2015 Examination

Prep Guide

The Global Standard of Excellence in Treasury

Certiﬁed Treasury Professional

Certified Treasury Professional

AFP, Association for Financial Professionals, the AFP logo, CTP, Certified Treasury Professional, the CTP logo, AFP Learning System: Treasury and the Essentials of Treasury

Management are registered trademarks of the Association for Financial Professionals. © 4/15

This edition of the CTP

Examination Preparation Guide

supersedes all previous editions.

for Financial Professionals, Inc.,

Bethesda, Maryland, USA.

These materials are protected

by United States Copyright Law,

International Copyright Laws and

International Treaty Provisions.

The CTP examination has been

developed in collaboration

with Pearson VUE of

Bloomington, MN.

Section Title

For additional information please visit www.CTPcert.org or call +1.301.907.2862

between 8:30 a.m. and 5:00 p.m. ET, Monday through Friday.

Testing Windows

Offered in 60-day testing windows for greater flexibility and convenience to candidates!

Testing Window Early Deadline* Final Deadline**

June/July 2015 March 20, 2015 April 24, 2015

December 2015/January 2016 September 25, 2015 November 6, 2015

* Submit your application by this date and save $100 on the final deadline fee. Only for new applications.

**Applications received after the final deadline will automatically be deferred to the next available testing window.

For eligibility requirements and an application, please see the 2015 CTP Certification Candidate Guide.

Study Strategies and Test Taking Tips

CTP

Examination .......................................................................... 2

Study Plan Development ........................................................... 2

Study Strategies ............................................................................ 2

Test Taking Tips ............................................................................. 3

Test Specifications ................................................................... 4–5

Preparing for the Examination

Essentials of Treasury Management

, Fourth Edition ........6

The Preferred Resource for Preparing

for the CTP Examination ............................................................6

AFP Additional Examination Study Aids and Services .....6

CTP Exam Study Network .................................................6

AFP/TMA Regional Associations .......................................6

Study Tips Blog ......................................................................6

CTP Exam Q&A ......................................................................6

Exam Question Format

Common Types of Multiple-Choice Questions ................... 7

Sample CTP Examination Questions

Sample CTP Examination Questions ............................... 8-20

Sample Test Answer Key ...........................................................21

Contact Information:

Association for Financial Professionals

(AFP)

Certification Department

4520 East-West Highway

Suite 750

Bethesda, Maryland 20814, USA

Phone: +1.301.907.2862

Fax: +1.301.907.2864

Email: CTP@AFPonline.org

Online: www.AFPonline.org

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Table of Contents

CTP Examination

The CTP examination 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®, Fourth Edition (Essentials) and are grouped

into content areas (see CTP Test Specifications on page

4-5). The number of questions in each area is included

in the listing, and are distributed randomly through the

examination.

Given that the body of knowledge is designed to reflect

industry standards, the CTP examination is also designed

to assess your knowledge of industry standards.

Your total seat time is 4 hours. You will have exactly 3.5

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 7. It is to your advantage

to complete the tutorial quickly, as no additional time

beyond 3.5 hours will be allotted to taking the exam.

After the exam, you will be asked to complete a 10-minute

post exam survey.

Recommended Study

Plan Development

— Allow a sufficient period for studying. Complete a

cursory reading of the body of knowledge (found

in Essentials or AFP Treasury Learning System

™

) to

determine how familiar you are with the content.

— The CTP examination is documented to Essentials of

Treasury Management

, Fourth Edition. It is important

to know the information in Essentials or the AFP

Treasury Learning System

™

, as the examination is

based on general practice and not specific to any

organization’s practices.

— Identify your “knowledge gaps.” This means that

you need to identify what you do not know. If you

are using the AFP Treasury Learning System

™

take the

Pre-test to identify content areas on which you need

to focus extra study time. With career, family, and

other demands, you may find that your study time is

limited. While a thorough review of the exam content

is beneficial, you will need to devote attention to

areas that are less familiar to you.

Recommended Study Strategies

— Determine a study location that will allow you

uninterrupted study periods.

— Create flash cards or recordings to review exam

material. This will reinforce your learning.

— Arrange your study time by the number of test

questions from each content area (see chart on page 4)

and the amount of information you already know.

— Develop and share test questions with other candidates

to challenge your knowledge. This will help you

“drill down” into the material and acquire a greater

understanding of some concepts.

— Try to closely simulate an exam experience. For

example, attempt to complete the sample test

questions within a 3.5 hour period, or use the timing

feature of the AFP Treasury Learning System

™

Post-

test to gauge proper pace. We strongly encourage

candidates to test themselves in half the time. By

doing so, you will allow yourself enough time to go

back and review questions and answers.

— Familiarize yourself with the way the exam questions

are structured, e.g., closed question, open question,

and item sets.

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 2015 CTP

Certification Candidate Guide 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 active list of Certified Treasury Professionals.

Certified Treasury Professional Revised 5/2015

Study Strategies and Test Taking Tips

Test Taking Tips

— Upon entering the testing room immediately agree

to the onscreen non-disclosure agreement (NDA).

Failure to do so within five (5) minutes of entering the

testing room will cause your exam to lock and you

will forfeit your eligibility for this window. To take the

exam during the next window, you will need to submit

a re-examination form and pay the re-examination

registration fee.

— If you are unsure about how to use the computer, or

if you have any questions about the procedures for the

exam, ask the testing center administrator before the

exam begins.

— Programmable calculators, phones and smartphones

are not allowed. An on-screen calculator similar to

those available on all PCs will be provided on the

testing computer. You may toggle between a basic

four-function calculator and a scientific version.

— Each question on the examination contains the correct

answer and either two or three incorrect options.

— There is no penalty for incorrect answers, so plan

to answer every question. You are not penalized for

guessing.

— After 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.

— Remember the “31-Second Rule.” The 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.

— Answer 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.

— Do not go too fast, and never skim questions or

answers. You may end-up making careless mistakes.

— Let your original answer stand unless you are

completely sure about the new answer.

— Do not let your work experience dictate how you

answer a question. The exam is testing your

knowledge of industry standards.

— Ignore the other test-takers. Their anxiety can be

contagious.

— Relax the night before the test and get a good night’s

sleep. You have studied well in advance, so the night

before the test is time to relax.

— Make sure you know exactly where the test center is

located. If possible, drive to the center the day before

the exam. Be sure to leave yourself plenty of time to

get there on exam day.

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Study Strategies and Test Taking Tips (continued)

Certified Treasury Professional Revised 5/2015

Test Speciﬁcations

2014-2016 CTP Test Speciﬁcations

Essentials of Treasury Management, Fourth Edition

Content Areas Number of questions

Domain 1. The Corporate Treasury Function ..........28-32

A. Role of Treasury Management ........................... 3-5

B. Treasury Organizational Structure ....................2-4

C. Financial and Regulatory Environment ............ 5-7

D. Relationship Management ................................. 4-6

E. Financial Accounting and Reporting ................. 3-5

F. Corporate Governance ..........................................3-5

G. Risk Management .................................................. 3-5

Domain 2. Cash and Liquidity Management.........36-40

A. Cash Management and Forecasting ...............19-21

B. Payment and Collection Systems ................... 17-19

Domain 3. Working Capital Management ............... 33-37

A. Working Capital Philosophy and Tools ........14-16

B. Short-term Investing and Borrowing .............11-13

C. Financial Supply Chain ......................................... 5-7

D. Market Effects on Working Capital ....................1-3

Content Areas Number of questions

Domain 4. Capital Markets and Funding ................ 21-25

A. Capital Structure and Dividend Policy .............2-4

B. Sources of Capital .................................................. 5-7

C. Capital Market Investments ............................... 5-7

D. Financing Decisions and Management ............7-9

Domain 5. Treasury Operations and Controls ........ 22-26

A. Treasury Systems ................................................... 5-7

B. Operational Risk Management ....................... 9-11

C. Treasury Policies and Procedures....................... 5-7

D. Ethics and Accountability .....................................1-3

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.

The Essentials of Treasury Management, Fourth Edition is the Body of Knowledge for the 2014-2016 CTP exams.

* 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.

Test Speciﬁcation Task Statements

Within each of the domains above are tasks commonly performed by Certiﬁed Treasury Professionals. Successful

performance of the tasks listed below requires speciﬁc knowledge, which is what will be tested.

Domain 1. The Corporate Treasury Function

1. Manage the treasury function per

internal company policies and procedures

and regulatory requirements to ensure

compliance and mitigate risk

2. Benchmark performance against external

sources to ensure best practices (e.g.,

industry benchmark materials, borrowing

costs, accounting metrics, key performance

indicators, banking fees comparative analysis)

3. Identify, negotiate, and select relationships

and operating agreements with external

service providers (e.g., financial, technological,

investment/retirement advisor) to ensure best

practices and competitive pricing

4. Conduct analytical reviews and feasibility studies

of external service providers (e.g., financial,

technological, SSAE16) to mitigate risk

5. Monitor, evaluate, and/or maintain relationships

and operating agreements with external service

providers (e.g., financial, technological) to provide

ongoing service availability

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Test Speciﬁcations (continued)

6. Reengineer treasury operations following

change (e.g., mergers and acquisitions, initial

public offering, economic conditions, corporate

reorganization, regulatory changes)

7. Develop, implement, and/or manage banking

structures (e.g., number, purpose, and location of

accounts) to ensure best practices and compliance

with legal and organizational policies

8. Identify, measure, analyze, and/or mitigate risk

(e.g., financial, market, operational, reputational)

9. Maintain corporate governance relationships (e.g.,

auditing, analysts, rating and regulatory agencies)

Domain 2. Cash and Liquidity Management

1. Manage receipts and disbursements instruments

strategically using geographic standards and

practices

2. Develop, implement, and/or manage receipt

collection methods

3. Develop, implement, and/or manage

paymentdisbursement methods

4. Develop and monitor cash flow forecasts to

manage liquidity and identify associated risk

5. Calculate and manage cash position

6. Develop, implement, and/or manage cash

concentration structures

7. Review cash balances and reconcile transaction

activity to ensure accuracy

8. Process and execute foreign exchange

transactions

9. Manage merchant services programs (e.g.,

fees, risk, controls, PCI compliance, retention

requirements)

10. Develop, implement, and/or generate cash and

liquidity management reports

Domain 3. Working Capital Management

1. Research and evaluate market conditions

(e.g., spreads, interest rates, terms, credit rating)

2. Manage portfolio risk based on market conditions

and internal guidelines

3. Evaluate and manage counter-party risk (e.g.,

supply chain, banks, brokers, dealers)

4. Develop and implement short-term borrowing

strategies and procedures, including alternative

financing methods (e.g., letters of credit,

factoring, discounting, netting)

5. Develop and implement short-term investment

strategies and procedures

6. Execute and report short-term borrowing

transactions

7. Execute and report short-term investment

transactions

8. Calculate, analyze, and evaluate financial ratios to

optimize financial decision making

Domain 4. Capital Markets and Funding

1. Develop, implement, and/or manage long-term

borrowing strategies

2. Develop, implement, and/or manage long-term

investment strategies

3. Evaluate current market conditions as it relates

to long term borrowing strategies (e.g., credit

availability, spreads, interest rates, terms, risk)

4. Evaluate current market conditions as it relates

to long term investment strategies (e.g., spreads,

interest rates, terms, risk, credit rating, ratio

analysis)

5. Execute and report long-term borrowing activities

(e.g., rating agencies, governmental reporting, SEC)

6. Execute and report long-term investment

activities (e.g., financial statement reporting)

7. Propose and arrange the financing and

capitalization for operations and projects

8. Manage organizational capital structure (e.g.,

debt, equity, dividend)

Domain 5. Treasury Operations and Controls

1. Analyze and evaluate cash/treasury management

products, services, and systems (e.g., services and

fees from financial service providers)

2. Implement and administer cash/treasury

management functions, strategies, and systems

(e.g., outsourcing, consolidation, payments)

3. Develop, maintain, and test business continuity

plans (e.g., bank balance reporting process, funds

transfer capabilities)

4. Identify, implement, and/or monitor operational

risk prevention measures (e.g., fraud preventive

tools, internal controls and procedures)

5. Maintain documentation (e.g., bank account,

service agreements, resolutions, archiving

information)

6. Monitor compliance with debt and investment

policies, covenants, guidelines, and other legal

agreements

7. Prepare and report treasury data to stakeholders

(e.g., board of directors, financial services

providers, accounting, operations, audit requests)

The Essentials of Treasury

Management

The Essentials of Treasury Management®, Fourth Edition is

the reference text for the 2014 – 2016 CTP examinations.

Essentials is developed from the test specifications and

all questions are documented to it.

The Preferred Resource for Preparing

for the CTP Examination

The AFP Treasury Learning System™ course provides a

rich, interactive learning experience and the opportunity

for you to measure learning outcomes, making it the

preferred resource to prepare for the CTP exam.

The AFP Treasury Learning System™ course provides users

with the CTP body of knowledge, Essentials of Treasury

Management®, Fourth Edition, in seven print-based

text modules. More than 900 online questions and 50

calculation exercises emulate the look and feel of the

questions on the computer-based CTP exam.

Web-based components include:

— Pre-test covering all areas in the CTP body of

knowledge

— Module-specific tests providing immediate feedback

and answer rationale

— Calculation exercises with immediate feedback

— Comprehensive post-test, with questions distributed

proportionately to those on the CTP exam

— Printable flash cards of key glossary terms and

equations

— Detailed reporting to track learner progress and

learning gained

— A test timing feature to learn the pace necessary to

complete the CTP exam on time

Increase your chances to earn the CTP credential. Order

the AFP Treasury Learning System™ course as your exam

preparation resource. Visit www.AFPLearningSystem.com

to learn more or to purchase today.

Additional Examination

Study Aids and Services

To further assist candidates in preparing for the CTP

examination, the following services are available:

— CTP Exam Study Network – AFP offers an online

study network so you can identify other CTP exam

candidates in your local area. Names and contact

information are listed on a designated area of the

AFP Web site so candidates may contact each other.

A participation form is provided on our Web site at

www.CTPcert.org. Click on Preparation then click on

More Resources.

— AFP/TMA Regional Associations – Contact your local

regional association to locate study groups or CTP

examination preparation courses independent of AFP.

A listing of regional associations by geographic location

can be found on our Web site at www.AFPonline.

org. Click on Membership, then click on Regional

Associations.

— Study Tips Blog – Read study tips posted weekly by

a CTP instructor. Go to www.CTPcert.org and click on

Blogs.

— CTP Exam Q&A – Request any explanation or

clarification on content from the Essentials. Written

inquiries are submitted to subject matter experts

and a response is provided to the candidates within

3–5 business days. Please note, however, that

volunteers are not in a position to provide a detailed

tutorial in a topic area. Submit your questions to

ctpqa@afponline.org.

Certified Treasury Professional Revised 5/2015

Preparing for the Examination

1. Closed Question

— A complete question followed by

four (4) optional answers, only

ONE of which is correct. Often the

word “What” is included in the

question.

Example:

What is the usual color for stop

signs?

(A) Red

(B) Yellow

(D) Purple

— A complete question that

includes the phrase “Which of

the following” when there is

more than one correct answer to

a question, but only one of the

correct answers is offered in the

options.

Example:

Which of the following colors is a

combination of two primary colors?

(A) Red

(B) Purple

(D) Blue

2. Open Question

— An incomplete sentence with four

(4) optional completions, only ONE

of which is correct.

Example:

A period of time of 60 minutes is

called a(n):

(A) Hour

(B) Week

(D) Year

3. Except

— A format used when three (3)

of the options are correct and

only one option is incorrect. The

incorrect option is actually the

correct answer in this case.

Example:

All of the following statements about

ice cream are true EXCEPT:

(A) It should be stored in the freezer.

(B) It has very few calories.

(D) It is a popular snack food.

4. Item Sets

— A set of questions based on

information contained in the

preceding paragraph.

Example:

Questions 1 and 2 are based on the

following information:

There are 365 days in a year, 7 days in

a week and 12 months in a year.

1. How many weeks are there in a year?

(A) 50.00

(B) 52.00

(D) 55.14

2. What is the average number of days in

a month?

(A) 29.50

(B) 30.00

(D) 32.39

Common Types of Multiple-Choice Questions

The following are samples of question formats which may be used on the CTP examination.

The CTP Credential

Increase Your Competitive Edge

and Professional Excellence

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Exam Question Format

1. Company ABC has a concentrated

investor base consisting primarily of

large institutional shareholders. It

would like to increase its number of

smaller shareholders using the most

cost effective method of raising capital

available. What should Company ABC do

to accomplish this goal?

(A) Issue preferred stock.

(B) Implement a dividend

reinvestment plan.

(D) Implement a stock repurchase plan.

2. A cash manager at a retailer forecasts a

positive collected cash position for the

end of the current day. The company

has an overdraft facility at 10%, a

separate investment account earning 8%

before taxes, an earnings credit rate of

8% and an outstanding single payment

note at 9.5% maturing in 1 week. This

month’s bank service fees are expected

to exceed the earnings credit. Which of

the following intra-day options would

be the MOST economically positive for

the company?

(A) Leave the funds in the account.

(B) Redeem the single payment note.

(D) Transfer funds to the

investment account.

3. Which of the following BEST describes

an advantage of a company going

public?

(A) Increased management control

(B) Increased public disclosure

(D) Increased liquidity

4. When a short-term loan is paid with a

lump sum payment and the payment

includes both interest and principal, the

loan is often referred to as a:

(A) single payment note.

(B) material payment note.

(D) commercial note.

5. The Company J portfolio consists of two

stocks, 65% of Stock A with a return

of 7.63% and 35% of Stock B with a

return of 3.89%. What is the Company J

portfolio return?

(A) 1.86%

(B) 5.10%

(D) 18.57%

6. What does a company with a restrictive

current asset investment strategy

typically have?

(A) High financing costs

(B) Low accounts receivable balances

(D) Low tax liabilities

7. Which of the following is a ratio that

is often used by commercial banks to

measure a company’s leverage and does

not include the effect of assets that

are difficult to value or are NOT easily

converted to cash?

(A) Long-term debt to capital

(B) Debt to tangible net worth

(D) Cash flow to total debt

8. Which of the following can be

considered key responsibilities of daily

cash management?

I. Overseeing compensation for bank

services

II. Management of short-term

borrowing and investing

III. Projecting future cash shortages

and surpluses

(A) I only

(B) I and II only

(D) I, II, and III

9. Senior management at ABC Company

plans to make a large capital

expenditure to bolster its infrastructure

exactly one year from now. Their

primary concern is to preserve the

current capital position until the

expected cash outlay. The majority of

the cash at ABC Company is held in

treasury notes, but management would

like to also invest some of the money

into corporate bonds and money market

funds. Which investment objective

BEST suits the needs of ABC Company?

(A) Exposure Horizon

(B) Diversification

(D) Safety

10. Earnings Credit calculation:

Assumptions – Average

ledger balance

$1,500,000.00

Deposit Float $250,000.00

Reserve Requirement 10%

Earnings Credit Rate 45 bps

Service Charges for the

month

$12,500.00

Days in the Month 30

What is the earnings credit the

company is receiving for this month?

(A) $416.10

(B) $4,160.96

(D) $457.71

11. Using the information provided for

question 10, what would the earnings

credit change to if the company

negotiated a 50% decrease in deposit

float ?

(A) $4,577.05

(B) $457.71

(D) $503.48

12. The treasurer of a corporation is

negotiating with one of his/her suppliers

to allow the corporation to have 30

days to pay the supplier’s invoices. The

treasurer is arranging:

(A) short-term financing.

(B) revolving credit agreement.

(D) uncommitted line of credit.

The following questions are similar to those on the CTP examination. By reviewing them, you can

familiarize yourself with the types of questions on the examination. These sample questions do not

necessarily reflect the composition of the actual examination in terms of topic area emphasis, the

mixture of calculations, definitions and application type questions or the level of difficulty of actual

exam questions. The Answer Key is on page 19.

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions

13. When using the Internet to access

auction markets, companies may use

certificate authorities to reduce their

exposure to which of the following

types of risk?

(A) Credit

(B) Valuation

(D) Foreign exchange

14. A company can pay their supplier by

check or by electronic transfer. If the

difference between the value date

of the payment methods is 4 days

from the company’s perspective, what

discount should the supplier offer

them to get the company to pay on

the same day as they did when they

paid by check (rounded to the nearest

100th percent)? Assume no difference

in the cost of the payment method,

an opportunity cost of 8%, and float

neutrality.

(A) 2.00%

(B) 0.09%

(D) 0.02%

15. Which of the following is a tool that

companies use to obtain a quantitative

rating of a financial institution’s level of

service?

(A) Relationship review

(B) Score card

(D) CAMELS rating

16. An airline wants to lock in the price

of the jet fuel it needs to purchase to

satisfy the peak in-season demand for

travel. The airline wants to manage its

exposure to fluctuations in fuel prices.

What type of exposure is this?

(A) Translation

(B) Delivery

(D) Speculative

17. A French exporter sells goods to a

foreign buyer in euros and wants to

guarantee that payment is made by the

buyer. The exporter would MOST LIKELY

require a(n):

(A) bankers’ acceptance.

(B) documentary collection.

(D) open account.

18. The right of stockholders to purchase,

on a pro-rata basis, any new shares

issued by the company is referred to as:

(A) preemptive right.

(B) right of first refusal.

(D) prevention of dilution right.

19. After a recent review of its insurance

policies, a petroleum products company

determines it needs to re-evaluate its

risk exposure to potentially reduce its

insurance premiums. The company has

operated in two locations for 20 years

but only produces and stores petroleum

at one location. In doing so, the risk

manager determine the following

exposures:

• The number of employee workers

compensation claims due to injuries

while loading trucks has increased

25% in the past 12 months.

• The primary tank used for petroleum

storage is 13 years old and standard

life of tanks of this model is 20 years.

• There is only one road into the

current petroleum storage facility.

Given the above information, if the

risk manager constructs a second

road into the petroleum storage

facility, what risk management

strategy is being used?

(A) Risk avoidance

(B) Transference of risk

(D) Keep the risk

20. Which of the following contributes

MOST to the marketability of a security?

(A) An investment-grade rating

(B) An irrevocable letter of

credit guarantee

(D) A large, active secondary market

21. A large, mature, diversified and publicly

traded company sells the smallest of

its business segments to a strategic

buyer for cash. It uses the proceeds to

pay off all bank debt and subordinated

debenture debt on its books. The

company believes the stock is trading

at a reasonable price and continues

to pay a regular, steady dividend to

shareholders. Management’s strategy is

to embark on an aggressive growth plan

including a major acquisition.

Based on the above information, if the

company uses the trade-off theory in

considering its WACC, how will it finance

its growth?

(A) By using long-term debt

(B) By issuing Class A stock

(D) By issuing Class B stock

22. The treasury manager of a privately

held company is looking to finance new

equipment that has a useful life of 5

years. What type of financing would

the Treasury Manager MOST LIKELY

employ to finance the equipment?

(A) Equity shares

(B) Long-term bond

(D) Installment term loan

23. A retail brokerage firm is MOST like

which one of the following types of

financial institutions?

(A) Captive finance companies

(B) Factoring companies

(D) Insurance companies

24. A U.S. company has a secured

committed line of credit of $5.5 million

and has an available balance of $4

million. The company successfully

transmitted a $5.5 million wire transfer

instruction out to the bank via SWIFT.

The bank contacted the company and

informed it that the wire transfer

would not be processed. What is the

MOST LIKELY reason the bank gave the

company?

(A) Wires exceeding $5 million

cannot be transmitted using SWIFT.

(B) The bank imposed a guidance

line of credit on the account.

its balance requirement.

(D) The bank refused funding on

the company’s discretionary

line of credit.

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample CTP Examination Questions

25. A large retailer is preparing to accept

credit cards and anticipates monthly

credit card sales of $1,000,000. If the

terms with the acquiring bank include

bundled allocated fees of 6% and the

retailer wishes to delay fee payment

as long as possible, what should the

retailer do?

(A) Accept gross settlement.

(B) Place a hold on

consumer credit limits.

(D) Delay funds transfer

to card-issuing banks.

26. Examples of traditional factors used in

making a credit decision include which

of the following?

I. Capacity

II. Capital

III. Compliance

IV. Character

(A) IV only

(B) I and III only

(D) I, II, III, and IV

27. A company has decided to manage its

short-term investment portfolio in-

house. It is looking for enhanced capital

gains as well as the ability to sell the

instruments on the secondary market

at a premium. The investment manager

has forecasted the interest rates shown

below:

Month Short-term

rates

Long-term

rates

January 0.25% 0.27%

February 0.28% 0.30%

March 0.26% 0.29%

April 0.24% 0.27%

May 0.25% 0.28%

June 0.26% 0.29%

Which investment strategy should be

employed by the company?

(A) Passive strategy

(B) Matching strategy

(D) Total-return strategy

28. Brazilian corporation purchases finished

products from a German subsidiary and

sells raw materials to the subsidiary

several times in one month. To minimize

foreign exchange transaction costs, the

Brazilian corporation’s cash manager

would MOST LIKELY use:

(A) bilateral netting.

(B) multilateral netting.

(D) pooling.

29. Optimal dividend policy is one that does

all of the following EXCEPT:

(A) maintain adequate retained

earnings for future growth.

(B) maximize shareholder value.

income to investors.

(D) balance tax shield benefits

against agency costs.

30. ABC Company, a leading provider

of office supplies, has successfully

implemented EDI based on a request

from one of its customers. ABC will not

only benefit from the strategic alliance

that will result, but as more of ABC’s

customers adopt the program, ABC will

also experience a positive impact on its:

(A) EFT costs.

(B) C2C levels.

(D) inventory levels.

31. A company has asked its marketing,

payroll and sales teams to collaborate in

finding a solution that could augment

its customer base, reduce payroll cost

and increase sales. The solution has

to be market ready. Which of the

following will serve all 3 purposes?

(A) Ghost cards

(B) Smart cards

(D) Stored value card

32. A portfolio manager purchases a

floating rate mortgage backed security

that would currently provide a 4% yield

to the company. Since mortgage rates

have been fluctuating significantly

over the past month, the manager is

thinking about entering into an interest

rate swap to hedge against the rate

movements. Although the manager

would remove most of the price

sensitivity of the asset by executing

the swap, it would also lower the total

yield on the investment due to swap

costs. What objective in the company

investment policy is guiding the

portfolio manager’s decision?

(A) Risk analysis

(B) Risk/return trade off

(D) Performance measurement

33. MCA, Inc. upgraded the treasury

workstation that had been in place

for two years and used data from that

24-month period to develop a new

short-term forecast. A trend factor was

applied to controlled disbursements of

97% on a month-by-month basis and

the variance to actual disbursements

is less than 1%. Which of the following

model validation techniques was

utilized?

(A) In-sample validation

(B) Documentation validation

(D) Comparison validation

34. A manufacturing company is working

to improve its cash conversion cycle.

Factory production has increased over

the last year to increase inventory

levels. They have an inventory turnover

of 3.1 and asset turnover of 5.0. The

company has a days’ payable of 30 and

a days’ receivable of 60. It has started

enforcing its net 30 terms and placed

customers with balances outstanding

more than 45 days on credit hold.

As a result, the company collected

receivables quicker but it suffered a 10%

loss in sales. What can the company do

to reduce its cash conversion cycle?

(A) Pay vendors in advance.

(B) Decrease the days’ payable.

(D) Revise credit policyto be

more lenient.

35. A company plans to issue additional

equity within the next 12 months but

needs to issue debt at a low interest

rate now. Which of the following

instruments would BEST meet this

objective?

(A) Convertible bonds

(B) Private placement issue

(D) Subordinated debentures

36. ABC Company offers a discount of 2/10,

net 30 to its customers. ABC factored

its accounts receivables with an

outside vendor, under a “with recourse”

arrangement. What impact might this

have on the company?

(A) Increase days sales outstanding.

(B) Improve cash conversion cycle.

(D) More customers may

take the discount.

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions (continued)

37. The treasury manager of a chain of

clothing stores wants to develop a

medium-term forecast. Management

plans to open two new stores, and

anticipates same-store sales to increase

by 15%. Which of the following items

can be predicted with the highest

degree of certainty?

(A) Taxes on stock options

(B) New product sales

(D) Refranchising proceeds

38. A large mature company with limited

growth opportunities (positive

NPV projects) achieved abnormally

high profits this year. After paying

mandatory principal, interest, and taxes,

the company has $200 million in surplus

cash on hand. Assuming its investor

base is most concerned with capital

appreciation, which of the following is

the BEST option for the company?

(A) Declare a special dividend.

(B) Reinvest cash into the company.

(D) Repurchase shares of

outstanding stock.

39. The yield curve is inverted. A

creditworthy firm considering

alternative debt maturities would MOST

LIKELY:

(A) enter into a short-term

floating rate agreement.

(B) obtain long-term

fixed interest rate debt.

debt at each maturity.

(D) obtain a long-term

floating rate agreement.

40. A $100,000 T-bill currently sells for

$98,600 and matures in 90 days. What

is the 365 day basis yield for this

investment?

(A) 5.76%

(B) 5.68%

(D) 5.37%

41. A U.S. firm acquires a large U.K.

manufacturer that generates high levels

of cash flow in its local currency. The

purchase is denominated in British

pounds and is financed through the

issuance of 10-year, 7.5% U.S. dollar

bonds. The U.S. firm will rely entirely

on the U.K. manufacturer’s cash flows

to fund the interest payments on the

bonds. What derivative instrument

would help the U.S. firm manage its FX

exposure?

(A) Currency forward

(B) Currency swap

(D) Currency future

42. Which of the following is a source of

short-term financing?

(A) Bond issuance

(B) Factoring of accounts receivable

(D) Retaining profits

43. Company XYZ is aggressively expanding

globally. It is evaluating four markets:

Latin America, Europe, Asia and Middle

East.

Latin America: Risk adjusted discount

rate: 15%, Payback period=7 years,

IRR=15%

Europe: Risk adjusted discount rate:

8%, NPV=$20M

Middle East: Risk adjusted discount

rate: 11%, IRR=12%, NPV=$5M

Asia: WACC: 9%, Payback=2 yrs,

IRR=8%

Based on the information, which two

markets will company XYZ MOST

LIKELY pursue?

(A) Europe and Asia

(B) Asia and Latin America

(D) Middle East and Latin America

44. Company A regularly modifies its

capital structure by repurchasing stock.

Which one of the following is a true

statement?

(A) Investors may feel

that management is

manipulating the stock price.

(B) Stock repurchases are

not an attractive alternative

to dividend payments.

is required for repurchases.

(D) Stock repurchases do not offer tax

deferral advantages over dividends.

45. In evaluating alternative capital

investments, a company should consider

qualitative factors such as:

(A) projected cash flows.

(B) estimated economic returns.

(D) estimated costs.

46. A company is experiencing the following

long-term trend on a month-over-

month basis:

• Sales are increasing by $100,000,

a 15% increase.

• Accounts receivable are increasing

by $5,000, a 1% increase.

• Accounts payable are increasing by

$20,000, a 4% increase.

• Labor expenses are increasing by

$40,000, a 3% increase.

With all other income, expenses,

long-term assets and liabilities

remaining stable, this trend would

MOST LIKELY prompt what action by

the company?

(A) Financing working

capital requirements

(B) Repaying short-term debt

(D) Factoring accounts receivable

47. Company S wants to issue

$25,000,000.00 of commercial paper

at a discount of 35 bps and a maturity

of 27 days. The dealer fee is 10 bps

annually and the bank assesses a

backup L/C fee of 20 bps. What is

the approximate annual interest rate

the company pays for this issue of

commercial paper?

(A) 3.85%

(B) 2.48%

(D) 0.66%

48. The stock of a manufacturing company

is priced so that its expected rate of

return is below its required rate, as

calculated by the Capital Asset Pricing

Model (CAPM). Which of the following

will occur in an efficient capital market?

(A) Buying pressure for the firm’s

stock will drive the price up.

(B) Buying pressure for the firm’s

stock will drive the price down.

stock will drive the price up.

(D) Selling pressure for the firm’s

stock will drive the price down.

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample CTP Examination Questions (continued)

49. An intern was hired by the Vice

President of Accounts Payables to

process the electronic payments that

come through the bank. The intern is

responsible for manually entering payee

information into the system at each

step of the process. The VP directed

the intern to enter the information as

fast as possible without mistakes to

optimize the number of transactions

that could be processed. Instead of

manually entering information the VP

should have utilized:

(A) large value transfer system.

(B) straight-through processing.

(D) enterprise resource planning system.

50. XYZ Company has a well established

commercial paper (CP) program that

they use to fund operations. The

company is expanding by purchasing a

new factory. The CFO is worried about

the time and expense needed to issue

long-term debt and decides to use the

funds they raise in the CP market to pay

for the purchase of the factory. This

strategy will be successful if:

(A) an interest rate swap is used.

(B) a credit default swap is employed.

(D) the yield curve remains

upward sloping.

51. A properly designed concentration

system will potentially achieve which of

the following results?

I. Increased authority to field offices

II. Increased investment income

III. Improved ability to take discounts

IV. Reduced dependence on third-party

concentration vendors

(A) IV only

(B) I and II only

(D) II, III, and IV only

52. In an organization with personnel

limitations, which of the following

strategies should be considered to

mitigate cash management system risk?

(A) Outsourcing

(B) Verification

(D) Hedging

53. Company X, a Singapore based multi-

national, is exploring the option of

locating a subsidiary in another country

where there has been some historical

risk of expropriation of local assets

of foreign corporations. Therefore, as

part of the risk assessment process the

company must specifically quantify the:

(A) political risk.

(B) physical security risk.

(D) property risk.

54. Company XYZ is now required to make

electronic payments by its suppliers.

To prevent an increase in costs, the

company should:

(A) negotiate a change in payment

timing with its suppliers.

(B) institute a just-in-time

inventory system.

in cash disbursement with

its concentration bank.

(D) institute a modified RSA

system for its inventory.

55. As an internal control tool, what does

the matching of an invoice to the

original purchase confirm?

(A) The placement of the order

(B) The fulfillment of the order

(D) The payment of the order

56. Loss exposures related to treasury

management may include which of the

following?

(A) Excessive product recalls

(B) PBGC violations

investment principal

(D) Bank consolidations

57. The key parties involved in a disaster

recovery plan are generally classified

as internal resources or external

counterparties. When evaluating the

risks of both parties, which of the

following can be assumed?

(A) The review of internal resources

takes greater importance.

(B) The infrastructure

linking the parties’

systems must be considered.

sites of both parties must

be in the same location.

(D) The systems used by both

parties must be compatible.

58. A publicly traded company is looking

to fund its next project with the

issuance of stock. The company’s stock

is primarily held by a small group of

investors. The company is concerned

that issuing stock may upset these

investors because it would dilute their

holdings. Which of the following

strategies would help address the

investors’ concern?

(A) Grant the investors

cumulative voting rights.

(B) Grant the investors pre-emptive

rights to the new issue.

their votes by proxy at the

next shareowners meeting.

(D) Offer to stagger the

election of directors.

59. Company Q has average daily credit

sales of $15,875.00. The daily cash sales

are $8,750.00. The AR ending balance

for June 30 is $387,500.00. What is the

average days’ sales outstanding for

Company Q?

(A) 24.41

(B) 0.04

(D) .06

60. Which of the following is subject to

transaction exposure?

(A) A U.S. company’s foreign

subsidiary in Japan has a

receivable denominated in Yen.

(B) A Japanese company’s foreign

subsidiary in the U.S. has a

receivable denominated in Yen.

subsidiary in Japan has a

payable denominated in Yen.

(D) A Japanese company’s foreign

subsidiary in the U.S. has a

payable denominated in dollars.

61. A put option on a company’s stock has

an exercise price of $20. On the delivery

date, the stock is trading at $24 per

share. What should the investor who

has paid $2 for the option do?

(A) Not exercise the option and lose $2.

(B) Not exercise the option and lose $6.

(D) Exercise the option and gain $4.

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions (continued)

62. Making payments through electronic

payments networks can be a part

of a treasury management system’s

functionality, but it is subject to

numerous constraints. Which of the

following is a true statement of those

constraints?

(A) The process is easy for the

payee but very intensive

manually for the payor.

(B) Negotiation of trade

terms is required, but float

terms are excluded.

or a little, can be easily included

with all payment forms.

(D) Collecting payment-routing details,

and populating these into the

software, is a significant task.

63. A main characteristic of a company

with regional offices using a centralized

treasury function is:

(A) high level of control.

(B) increased borrowing costs.

depository accounts.

(D) increased operating costs.

64. Treasury management systems and ERP

systems allow companies to do all of

the following EXCEPT:

(A) reduce cash processing costs.

(B) migrate external data

into G/L infrastructure.

seamless exchange of data.

(D) reduce redundant data entry errors.

65. One reason for using a sale and lease-

back arrangement in lease financing is

to:

(A) create an infusion of

cash into the company.

(B) benefit from tax advantages

from depreciation.

costs in one period.

(D) eliminate off-balance sheet debt.

66. An equity management company’s

Chief Financial Officer and Treasurer are

evaluating their corporate investments

and decide that they need to diversify

their stock holdings to include personal

care products companies. Based on their

analysis, publicly-traded companies A

and B stand out as choices. Company A

has a beta value of 0.65 while company

B has a beta value of 1.10. They decide to

invest in Company A. What objective of

their investment policy did they use to

make their decision?

(A) Safety

(B) Liquidity

(D) Risk/return trade-off

67. A merchant presents 2 different

batches of credit card transactions for

processing, each batch has the same

dollar value and number of transactions,

but the fees are different. Which of the

following explains why?

(A) Use of a different terminal

(B) Goods or services sold

(D) Time of batch closure

68. An international company would

establish a re-invoicing center for which

of the following reasons?

(A) To reduce its international

balance reporting charges

(B) To manage the foreign exchange

exposure of its foreign subsidiaries

bearing demand deposits

(D) To bring transaction exposures

more closely in line with

economic exposures

69. XYZ Company has decided to purchase

a close competitor. This acquisition

would make XYZ Company the 4th

largest in its industry allowing it

better purchasing power and greater

distribution channels. After completing

the M&A analysis, it is determined

that the combined companies would

produce a 40% increase in revenue,

reduce manufacturing costs by 30%, but

would increase current liabilities by 27%.

Which of the following would keep the

acquisition from happening?

(A) Increased weighted

average cost of capital

(B) Low return on investment

(D) Restrictive bond covenants

70. Amalgamated Binding Consolidators

takes 20 days to convert its raw

materials to finished goods, 5 days to

sell it, and 15 days to collect its credit

sales. What is the company’s days

receivable period?

(A) 5 days

(B) 15 days

(D) 40 days

71. Netting is used by which of the

following as a cross-border payment

technique?

(A) European giro providers

(B) Foreign subsidiaries of a company

of credit transaction

(D) TARGET participants

72. In which of the following international

cash management methods is title for

goods transferred for intercompany

sales?

(A) Pooling

(B) Internal factoring

(D) Re-invoicing

73. Which of the following is NOT a key area

to consider when establishing treasury

policies?

(A) Equity method investments

accounting

(B) Medium-term financing

(D) Foreign currency management

74. Establishing the authority to open bank

accounts is the responsibility of:

(A) the board of directors.

(B) the CFO.

(D) the board of governors.

75. A daily short-term forecast and variance

analysis for LMN, Inc. is updated with

relevant trends and actual data every

Monday. Upon review, the treasurer

assessed that sales were higher than

forecasted, inventory was up and yields

being earned on excess cash were lower.

The MOST important reason for this

cash forecast process is:

(A) financial control

(B) managing costs.

(D) liquidity management.

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample CTP Examination Questions (continued)

76. A company is interested in lowering its

overall banking costs, managing netting,

pooling, re-invoicing, and centralizing FX

exposure at headquarters. Which of the

following options will accomplish this?

(A) In-house banking

(B) Shared service center

(D) Automated clearing house

77. Money market funds are able to obtain

very competitive trading terms because:

(A) there is no diversification.

(B) of the economies of scale.

for a specific period of time.

(D) the investment manager only

purchases high yielding instruments.

78. Convertible securities consist of

preferred stock and:

(A) treasury stock.

(B) common stock.

(D) tracking stock.

79. Securities sold by companies in an initial

public offering (IPO) are:

(A) a specific type of security sold by a

public company for the first time.

(B) debt securities sold on

the open market.

company for the first time.

(D) securities sold by a private company

to a limited number of investors.

80. A company has grown quickly in the

euro zone market. It wants to maximize

its excess cash. Which would be the

BEST method of concentrating funds?

(A) Bank Overlay

(B) Notional Pooling

(D) Scheduled Transfer

81. Which of the following global cash

concentration methods would be MOST

appropriate for a single company

with operations in the United States,

Germany, Mexico, and Japan looking to

minimize expenses?

(A) Multilateral netting

(B) Bank overlay structure

(D) Physical pooling

82. Financing decisions in a budget are used

to construct all of the following pro

forma financial statement components

EXCEPT:

(A) debt.

(B) interest expense.

(D) inventory.

83. ABC Company is a national retail

company and uses XYZ Bank for its

collections and payroll services. XYZ

has recently experienced financial

problems; what is the greatest risk to

ABC Company?

(A) Damage to their working

relationship

(B) Deterioration of service quality

(D) Loss of assets

84. The rate of interest commercial banks

charge their best credit rated customers

is called the:

(A) discount rate.

(B) call rate.

(D) real interest rate.

85. A wholesale foods supplier receives

an order from ABC Foods located in

Minnesota. The supplier’s policy is to

bill upon fulfillment of the order and

not at delivery. ABC Foods pays upon

receipt of goods. A blizzard has closed

the manufacturing facility and roads;

delivery will be delayed by two days.

Which type of float occurs between

the receipt of an invoice by ABC Foods,

including the credit period, and the time

ABC Burgers’ account is debited?

(A) Payment

(B) Invoicing

(D) Disbursement

86. Company ABC experienced a loss in the

past when an employee in the treasury

department was able to transfer $1.5

million to a personal account offshore.

The company is working with a security

agent to prevent this from happening

in the future. ABC also accepts a large

number of checks as payment. The

agent has suggested upgrades to ABC’s

payment process. What step should be

taken to help mitigate this type of risk

in the future?

(A) Securely store check stock.

(B) Set up international bank security.

(D) Implement data security standards.

87. A company wants to gather daily

balance reporting from its international

subsidiaries’ bank accounts. Which of

the following systems would allow the

company’s bank to gather the balance

positions from the local banks?

(A) SWIFT

(B) CHIPS

(D) EDI

88. Treasury policies should be approved

by the:

(A) audit committee.

(B) controller.

(D) external auditors.

89. The company currently calculates

its Days’ Receivables at 42 days, its

Days’ Payables at 31 days, and its Days

Inventory at 58 days. What is the cash

conversion cycle for the company?

(A) 131 days

(B) 15 days

(D) 47 days

90. Using the above information, what is

the cash turnover for the company?

(A) 5.3 times

(B) 7.7 times

(D) 2.7 times

91. In order to be defined as independent, a

corporate director:

(A) cannot have owned preferred

stock shares in the company.

(B) cannot have a material

relationship with the company.

executive management

outside of board meetings.

(D) cannot have been an employee

with the company during

the past three years.

92. After several internal discussions about

treasury management systems (TMSes),

ABC Company has determined that it

has no need for customization but that

it does want a backup for high priority

capabilities. The company needs access

to knowledgeable IT support resources

but wants to reduce overall IT costs.

These parameters will MOST LIKELY

result in what kind of TMS?

(A) An ERP module TMS

(B) An integrated TMS

(D) Development of its own TMS

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions (continued)

93. Which of the following trade payment

methods virtually eliminates the seller’s

credit risk?

(A) Bankers’ acceptance

(B) Cash before delivery

(D) Consignment

94. Company A has $1,375,000.00 that it

plans to invest for three years at an

interest rate of 4%, with all interest paid

at maturity. How much interest will the

company receive at the end of the third

year?

(A) $16,566.09 (C) $55,000

(B) $165,000 (D) $171,688

95. ABC Company’s treasury department

outsourced its overnight investment

duties to XYZ Money Management.

XYZ placed the funds received from

ABC into corporate commercial paper,

which has recently gone into default

after numerous ratings downgrades.

The investment policy of ABC Company

states that all investments must be in

investment grade commercial paper;

however, the agreement gives XYZ

the ability to make exceptions with

the approval of the treasurer of ABC

Company. The treasurer was never

notified of the ratings downgrades.

What role or responsibility, if any, was

violated with regards to the investment

policy?

(A) Exposure horizon monitoring

(B) Valuation of investment vehicles

exception management

(D) No violation occurred

96. Company XYZ is a manufacturer of

industrial equipment and has enjoyed

a large percentage increase in profits

from a small increase in revenues.

Sales recently plummeted resulting in

steep decline in profitability. Which of

the following BEST describes the cost

structure of the company?

(A) Low contribution margin

(B) High financial leverage

(D) High operating leverage

97. A company hires an investment firm to

fully underwrite a new stock issuance.

Which of the parties carries the MOST

risk?

(A) The public

(B) The company

(D) The investment firm

98. Which of the following is a KEY

operational advantage of short-term

debt?

(A) It can be arranged

quickly and easily.

(B) It improves the current

ratio for debt covenant and

compliance purposes.

rate fluctuation and lowers

interest expense.

(D) It improves the overall liquidity

position and reduces risk.

99. In a typical swap transaction, two

parties agree to exchange:

(A) notional principal amounts.

(B) amortization schedules.

(D) cash flows at future points in time.

100. Company R has an AR balance pattern

of 8% in the current month, 47% in the

first month, 30% in the second month,

10% in the third month, and 5% in the

fourth month. If AR for July is $598,000,

what amount of cash do they expect to

collect in October?

(A) $281,060

(B) $59,800

(D) $47,840

101. Which two of the following are optimal

uses for short-term excess cash?

I. Pay down credit lines.

II. Make overnight investments.

III. Repurchase stock.

IV. Make capital expenditures.

(A) I and II

(B) I and III

(D) II and IV

102. Over the past 3 years XYZ Company

has expanded into multiple countries

and significantly grown its banking

relationships. The company now incurs

significant expenses related to payment

transaction costs and maintaining

multiple bank connections. What should

the company use to combat these rising

costs?

(A) SWIFT network

(B) ACH network

(D) Treasury workstation

103. Company ABC needs external capital to

finance a new product line. Its operating

leverage is high, and its revolving credit

agreement contains a ratings trigger.

What will Company ABC MOST LIKELY

do to finance its new product line?

(A) Issue convertible debentures.

(B) Issue long-term notes.

(D) Use retained earnings.

104. The risk-free rate of return is 2.15% and

the historical stock market average rate

of return is 6%. If Company M has a

beta of 1.36, what is their required rate

of return for capital asset pricing?

(A) 8.083% (C) 0.42%

(B) 7.39% (D) 0.04%

105. Which of the following is an example of

a Eurobond?

(A) A bond that is denominated

in euros, issued in France

by a French company

(B) A bond that is denominated

in pounds, issued in the

U.K. by a U.S. company

in Japanese Yen, issued in the

U.K. by a U.S. company

(D) A bond that is denominated

in euros, issued in a European

market by a U.S. company

106. A treasury manager has $5 million

that is not needed for 6 months. The

treasury manager has decided to invest

the funds in a liquid instrument, using

the current portion of a 5-year AA rated

corporate bond that is subject to U.S.

Securities and Exchange Commission

(SEC) regulations. In what market would

the treasury manager purchase this

investment?

(A) IPO Market

(B) Private Market

(D) Secondary Market

107. A company with high operating leverage

reduces its average cost per unit by 20%

as its sales volume increases by 40%

annually. This is an example of:

(A) low fixed costs.

(B) low variable costs.

(D) equal distribution of fixed and

variable costs per item.

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample CTP Examination Questions (continued)

108. Banks often control information flow,

records and assets, therefore it is critical

that banks have:

(A) backup systems and disaster

recovery procedures.

(B) controlled disbursement procedures

electronic submission.

(D) timetables for service

implementation.

109. The yield on any short-term investment

instrument is a function of the maturity

or holding period, the amount paid and:

(A) the cash flows received.

(B) the money market yield.

(D) the issuing price.

110. A treasurer decides to use notional

pooling across wholly-owned multiple

legal entities instead of wiring money

between entity accounts. What specific

section in the company’s policy allowed

the treasurer to make this decision?

(A) Regulatory and legal considerations

(B) Liquidity strategy

(D) Concentration practices

and strategies

111. Company T pays $12.00 for a wire and

$2.00 for an ACH transaction. They

receive a wire one day sooner than they

do an ACH and they earn 1.75% on the

funds. What is the break-even amount

for a wire instead of an ACH?

(A) $246,114.29 (C) $2,085.71

(B) $208,571.43 (D) $20,857.14

112. Company XYZ is a high technology

company. It is planning on acquiring

another company in the high technology

sector. Company XYZ does not have

enough cash to acquire the company

and is planning on financing the

acquisition through a bond offering.

Which of the following measures is

company XYZ MOST LIKELY to use in its

analysis of operating profits considering

it is a high debt transaction?

(A) Long-term debt to capital

(B) EBITDA margin

(D) Return on equity

113. A company enters into a cash

flow hedge to offset fluctuations

in the value of foreign currency

transactions occurring in two years.

How should the company record

the gains and/or losses on the cash

flow hedge in the current year?

(A) The hedged gains and losses are

reported in comprehensive income.

(B) The hedged gains and losses are

reported in current period income.

reported in current period income

together with the offsetting gains

and losses of the foreign currency.

(D) The hedged gains and losses are

reported in comprehensive income

together with the offsetting gains

and losses of the foreign currency.

114. Which of the following is a characteristic

of giro systems used in countries

throughout Europe?

(A) They operate through

postal systems.

(B) They are primarily used for

company-to-company payments.

for the payment of bills.

(D) They do not allow the use of

direct debits and credits.

115. The CFO asks the treasurer to create

a new collections and concentration

policy for their company. Following

implementation of the policy, the

company finds that reporting of

receivables values is taking 10% longer,

with no improvement in the company’s

cash flow or liquidity. What step in

developing the policy could have been

executed to reduce this risk?

(A) Delegation of authority

(B) Clarify roles and responsibilities

(D) Identify issues and conduct analysis

116. A company is evaluating its employee

healthcare expense and payroll

applications. If the company wishes to

provide maximum convenience to its

employees, which payment method is

the BEST choice?

(A) Purchasing cards

(B) Checks

(D) Stored value cards

117. XYZ Holdco has multiple credit facilities

with a bank under a borrowing

agreement that includes certain

covenants. A fire has destroyed the

manufacturing plant owned by ABC, one

of the XYZ subsidiaries that is part of

the credit facilities. All loans, including

the ABC loan, are up to date and being

repaid as required. However, after the

fire, the bank notified XYZ that it was

in default. Which one of the following

covenants is MOST LIKELY a term of the

borrowing agreement?

(A) Technical default

(B) Cross-default provisions

(D) Total liabilities to assets

ratio default

118. An internal auditor discovers that

employees can enter and approve

their own wire transfers. This practice

violates what internal control?

(A) Adequate segregation of duties

(B) Accurate reporting of

cash transactions

covenant compliance

(D) Proper authorization of

investment transactions

119. EML Inc., which has $600 million in

outstanding debt, is preparing to issue

commercial paper in excess of $100

million within the next six months. The

new assistant treasurer has recently

spent time getting to know the issuing

and paying agent, the rating agency

analyst, and the legal counsel, and has

been following the financial markets.

What is this is an example of?

(A) Benchmarking with peers

(B) External collaboration

(D) Risk transfer

120. Which of the following is NOT true for

both bankers’ acceptances and trade

acceptances?

(A) They are both used to finance

the shipment of goods.

(B) They both may be sold to

an investor at a discount

prior to maturity.

forms of financing than loans.

(D) They both transfer the buyer’s

credit risk to a third party.

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions (continued)

121. Company ABC, with a current debt

rating of BBB- from Standard &

Poor’s, is negotiating a new revolving

credit agreement with its lenders.

The company anticipates closing

on a small acquisition within a year

of executing this new agreement

and would like maximum flexibility

to determine its capital structure.

The company is MOST concerned

about the lenders’ inclusion of a:

(A) ratings trigger.

(B) growth rate covenant.

(D) limit on internal financing.

122. An arrangement in which a borrower

makes periodic payments to a separate

custodial account that is used to repay

debt is known as a:

(A) sinking fund.

(B) balloon payment.

(D) zero-coupon bond.

123. The MOST common way that companies

structure their treasury operations is as

a(n):

(A) cost center.

(B) profit center.

(D) in-house bank.

124. Why would a company establish a

short-term credit facility?

(A) Short-term interest rates

are expected to rise.

(B) The company would like to

improve bank relationships.

forecasted due to seasonality.

(D) There is an anticipated failure of the

company’s main depository bank.

125. EDI infrastructure includes which of the

following four PRIMARY components?

(A) Communication networks and

standards, computer hardware, EDI

software, and standard formats

(B) Business-to-business banking

services, EDI e-commerce,

EDI software, and electronic

payments networks

receipts settlement, firewalls, and

single sourcing arrangements

(D) File transfer protocol, hypertext

transfer protocol, uniform

resource locator, and Extensible

Markup Language (XML)

126. Which of the following is true when a

company purchases goods using trade

credit from suppliers?

(A) The buyer incurs no added

cost if it pays on time.

(B) The supplier will charge

interest to the buyer.

as a long-term liability.

(D) The supplier places a lien on the

goods sold until payment.

127. A furniture company maintains a large

inventory during the summer sales

season. One of the PRIMARY benefits

of this approach is that the company

avoids which of the following costs?

(A) Holding

(B) Opportunity

(D) Stock-out

128. In order to increase liquidity, ABC

Motor Company bundled its customers’

installment payments and resold them

to other investors. This is known as:

(A) factoring.

(B) securitization.

(D) secondary distribution.

129. A $100,000 T-bill currently sells for

$98,600 and matures in 90 days. What

is the discount rate for this investment?

(A) 5.51%

(B) 5.57%

(D) 5.68%

130. RAL Industries is a manufacturing

company that currently has locations in

Canada and Latin America and has just

completed an acquisition of a company

located in Europe. As a result of the

acquisition, they have a large number of

financial service providers. In an effort

to reduce the number of providers and

services used globally, RAL has decided

to develop a formal selection process

to consolidate its many global banking

services. In order to reduce the amount

of time the selection process takes,

determine which services providers

can offer, and the number of providers

involved in the process, what should

RAL Industries issue?

(A) Request for Quote

(B) Request for Proposal

(D) Request for Participation

131. To arrive at today’s projected closing

cash position, a cash manager starts

with:

(A) the opening bank available balance.

(B) yesterday’s projected

closing cash position.

(D) today’s expected settlements.

132. An analyst for a landscaping company

wants to adjust her cash-flow

forecast to account for the seasonality

of outflows. How can this be

accomplished?

(A) Simple moving average

(B) Regression analysis

(D) Contingency forecasting

133. Two months after a government

overthrow, the new Minister of Industry

and Culture took over the country’s

largest steel company and compensated

the owners at 50% of book value. What

is the government’s action called?

(A) Consolidation

(B) Deregulation

(D) Nationalization

134. Today’s modern cash management

systems would include which of the

following?

(A) Full integration to ERP systems

(B) Performance management

systems and support

software

(D) Full customer relationship

management (CRM) capability

135. A treasurer has been advised that his

privately held company has just lost

its largest customer, which will have

a significant impact on earnings. The

treasurer applies an aggressive working

capital strategy. Presently, the yield

curve is upward sloping. Given this

information, the treasurer should ensure

that the company has:

(A) short-term non-committed lines.

(B) short-term committed lines.

(D) long-term committed lines.

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample CTP Examination Questions (continued)

136. All of the following are advantages of

using traditional financial ratios for

analysis EXCEPT:

(A) they can easily be computed from

the information found in publicly

available financial reports.

(B) they usually reflect accounting

rather than economic values.

trends and availability over time.

(D) they allow comparisons to be

made between like companies.

137. Which of the following are important

uses of variance analysis in comparing

actual cash flows with projected cash

flows?

I. Identifying unanticipated changes

in inventory

II. Enhancing short-term investment

income

III. Validating a capital budget

IV. Identifying delays in accounts

receivable collections

(A) I and II only (C) II and IV only

(B) I and IV only (D) I, II, III, and IV

138. A multinational company (MNC) that

operates a shared service center charges

its foreign subsidiaries a management fee.

This management fee may need to be:

(A) manipulated to locate profits

in low-tax countries.

(B) paid through a third-

party intermediary.

host government.

(D) significantly taxed by the

host government.

139. Upon entering into an interest rate swap

with a notional principal of $10,000,000,

what is the initial amount of money the

counterparties must exchange at the

beginning of the swap?

(A) $0

(B) $5,000,000

(D) $10,000,000 discounted

140. Which of the following is NOT a drawback

to using ROI as a performance measure?

(A) It may be misleading when

cash flows are not evenly

distributed over time.

(B) It does not consider the profit

generated by a project.

for cost of capital.

(D) It may lead to rejection of

a positive NPV project.

SAMPLE INCOME STATEMENT

Revenue $18,000,000

Less: COGS $9,750,000

Gross Profit $8,250,000

Less: Operating Expenses $5,900,000

EBITDA $2,350,000

Less: Depreciation & Amort $200,000

EBIT (Operating Income) $2,150,000

Less: Interest Expense $300,000

Net Profit before Taxes $1,850,000

Less: Provision for Taxes $850,000

Net Income $1,000,000

SAMPLE CASH FLOW STATEMENT

Net Income $1,000,000

Adj to reconcile Net Income to Cash:

Depreciation/Amort $200,000

Increase in A/R ($650,000)

Increase in Inv ($500,000)

Increase in A/P $375,000

Net Cash from Operations $425,000

Capital Expenditures ($900,000)

Decrease in Short Term Inv $200,000

Cash used in Investments ($700,000)

Short Term Notes Pay $500,000

Issuance of Long Term Debt $400,000

Dividends Paid ($250,000)

Cash from Financing $650,000

Net Cash Inc/(Dec) $375,000

Cash at Beginning of Year $1,000,000

Cash at End of Year $1,375,000

141. What is the ROI for the company

represented in the Income Statement

above if the Long Term Debt & Equity

for the period was $11,875,000.00?

(A) 7.75 %

(B) 8.03%

(D) 8.97%

142. Based on the information provided

above, what is the free cash flow for the

period this company?

(A) ($1,000,000.00)

(B) ($475,000.00)

(D) $1,000,000.00

143. Company XYZ is conservative when

investing in their short-term portfolio.

XYZ is looking to add the following

money market instruments in their

own country: a reverse re-purchase

agreement, a floating-rate note, and a

negotiable certificate of deposit. What

types of investment risks are associated

with these instruments?

(A) Default and reinvestment risk

(B) Liquidity and price risk

(D) Default and payment risk

144. A company is based in the United States

and has an operating subsidiary in

Germany. With a stable U.S. dollar and

a depreciating euro, the company’s cash

manager may elect to:

(A) pool excess funds in the United

States to offset German deficits.

(B) implement a dollar-based

multilateral netting system.

the German subsidiary.

(D) establish a multicurrency

account in the United States.

145. A company is looking for a way to

finance their inventory. What is the

BEST funding match?

(A) Long-term private placement

(B) Short-term debt

(D) Stock split

146. Which one of the following ties a user’s

private key to a user’s public key?

(A) A digital signature

(B) A digital certificate

(D) A digital token

147. A treasury professional is deciding

between two investment opportunities.

The first is a taxable security in the

amount of $2,000,000 with a yield

of 3.6%. The second is a tax-exempt

security for the same amount with a

yield of 2.85%. Both securities have the

same maturity and a similar risk profile.

The marginal income tax rate is 35%.

What is the taxable equivalent yield for

the tax exempt security?

(A) 5.54% (C) 1.15%

(B) 4.38% (D) 4.15%

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions (continued)

148. The accounting requirement that a

product’s selling costs be recorded in the

same period as the product’s revenue is

recorded, regardless of when the cash is

paid, is an example of the:

(A) full disclosure principle.

(B) historical cost principle.

(D) revenue recognition principle.

149. A UK based manufacturer has

a subsidiary in Belgium and a

manufacturing plant in Italy. The

subsidiary wants to sell its products

in Sweden. How would the UK parent

best structure the movement of funds

within the organization to optimize

management of working capital while

ensuring recourse?

(A) Internal factoring

(B) Re-invoicing

(D) Multilateral netting

150. XYZ Company is a U.S. based company

that has just issued some euro-

denominated bonds in London. The

bonds have a duration of 10 years at

a rate of 3.5% with a par value of EUR

50 million. An FX swap contract was

created on the date of the issuance in

EUR/USD, with a spot rate of 1.2908 and

a forward rate of 1.1102. This bond is

subject to what type of risk?

(A) Interest rate

(B) Currency

(D) Duration

151. The goal of a successful investor

relations program is to ensure:

(A) achievement of the company’s

earnings-per-share objective.

(B) accurate preparation of

financial statements.

(D) effective two-way communication

between a company, the

financial community, and

other constituencies.

152. Capital budgeting is defined as the:

(A) determination of the optimal

level of debt versus equity.

(B) process of evaluating alternative

investment projects.

borrowing facilities to meet

transaction requirements.

(D) addition of capital to the firm

which results in a cash inflow.

153. The treasurer for XYZ Manufacturing,

Inc. recently exchanged a portion of

its euro holdings into U.S. dollars to

purchase gas futures contracts. This

was done in anticipation of an assumed

rise in gas prices due to the continued

weakening of the U.S. dollar. Which

of the following types of risk is being

mitigated?

(A) Sovereign

(B) Operational

(D) Foreign exchange

154. A U.S.-based electronics company

that buys components from one of its

foreign subsidiaries at a price above

market is likely to:

(A) be paid large dividends

by the subsidiary.

(B) be sheltering profits in

a low-tax country.

act as intermediaries.

(D) make payment with an

intracompany loan.

155. An increasing number of multinational

companies have adopted formal

multilateral netting systems for which

of the following reasons?

(A) To facilitate management of

foreign exchange exposure

(B) To improve check clearing times

and banking channels

(D) To eliminate duplicate

payments to vendors

156. XYZ Bank would like to conduct some

foreign exchange transactions with

JKL Bank. JKL isn’t the most liquid and

could have some credit risk. XYZ Bank

should suggest which of the following in

order to eliminate risk?

(A) Pre-authorized draft

(B) Straight-through processing

(D) Continuous Linked Settlement

157. A company in the market to purchase

a treasury management system (TMS)

has issued a request for proposal to

evaluate various vendors. One of the

evaluation factors focuses on the

long-term viability of the vendor. The

company may have to choose between

an untested new vendor with a superior

product and an established vendor

with an incomplete product suite. This

dimension of the RFP is measuring what

type of risk?

(A) Reputational risk

(B) Supplier risk

(D) Financial risk

158. Buying a security with the intent of

selling it prior to its maturity date to

increase the return is an example of:

(A) active investment strategy.

(B) matching investment strategy.

(D) a diversification program.

159. Company ABC is a restaurant chain that

has enjoyed a surge in customers’ dining

with not much of a profitability increase

in the last couple of years. Following a

bad restaurant review, customer traffic

deteriorated with not much change in

profitability. Which of the following

BEST describes the cost structure of the

company?

(A) Low variable costs

(B) Economies of scale

(D) Low operating leverage

160. Company R has a $50,000,000.00 line of

credit with a 5% compensating balance.

They have outstanding borrowings of

$37,000,000.00. The fee on the unused

portion of the line of credit is 25 bps

and the interest rate on the borrowings

is LIBOR of 28 bps plus 3.25%. What is

the annual interest rate for the line of

credit?

(A) 0.46%

(B) 3.64%

(D) 3.81%

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample CTP Examination Questions (continued)

161. Examples of fixed assets include which

of the following?

I. Inventory

II. Treasury bills

III. Forklift

IV. Goodwill

(A) III only

(B) I and III only

(D) I, III, and IV only

162. XYZ Company has incurred a financially

devastating event because of a typhoon

at its offshore manufacturing plant

where the majority of its products

are developed. Due to the impact on

liquidity, the company may not be able

to survive. What should the Treasurer

have done in order to assess the risk

associated with this type of event?

(A) Evaluated insurance

coverage amounts

(B) Negotiated back-up lines of credit

funding plan

(D) Increased reserves

163. When a subsidiary borrows money, the

parent, sister subsidiary, or other entity

is often used in order to:

(A) diversify the risk of the investment.

(B) guarantee the obligations

of the borrower.

(D) prevent a covenant violation.

164. Some treasury management systems

are capable of initiating investment

purchases and loan drawdowns

automatically. The automating of these

transactions is related to which of

the following treasury management

functions?

(A) Payment management

(B) Liquidity management

(D) Capital budget management

165. When a buyer receives goods, but

payment is not due to the supplier until

some later date, this is defined as:

(A) factoring.

(B) bank credit.

(D) intercompany loan.

Annual Revenue $158,000.00

Annual Cost of

Goods Sold

$92,400.00

Cash Flow from

Operations

$850.00

Ending Inventory $23,600.00

Ending Accounts

Receivable

$19,300.00

Ending Accounts

Payable

$16,950.00

166. Using the chart above what is the Day’s

Inventory (DI)?

(A) $446.32 (C) $93.23

(B) $1,429.07 (D) $508.20

167. Using the chart above what is the Days’

Receivables (DR)?

(A) $2,988.08 (C) $44.59

(B) $298.50 (D) $76.24

168. Using the chart above what is the Days’

Payables (DP)?

(A) $262.15 (C) $39.16

(B) $93.23 (D) $66.96

169. Due to a loss of proprietary information

held for clients, ABC Company has been

named in a billion dollar lawsuit. It was

determined that the loss of information

was due to a breach in its computer

system firewalls by outside parties.

When the lawsuit became public, the

company experienced a steep drop in its

stock price. This scenario is an example

of what kind of risk?

(A) Internal technology

(B) Compliance

(D) Market

170. Kahuna Boards Co. has just experienced

a very profitable year and wants to

share the success with its shareholders.

In order to pay dividends, a sequence

of events must occur. Which of the

following chronological sequence of

events is correct?

1. Stock is sold without the

upcoming dividend attached

2. Dividend is paid.

3. Board of directors announces

the dividend.

4. Holders of record are specified.

(A) 3, 4, 1, 2

(B) 3, 4, 2, 1

(D) 4, 3, 1, 2

Certified Treasury Professional Revised 5/2015

Sample CTP Examination Questions (continued)

Q A Domain

1 B 4.B

2 A 2.A

3 D 4.C

4 A 3.B

5 C 4.D

6 B 3.A

7 B 3.A

8 D 1.A

9 D 5.C

10 A 1.D

11 B 1.D

12 A 2.B

13 C 5.B

14 B 2.A

15 B 1.D

16 C 5.B

17 C 4.B

18 A 1.F

19 C 5.B

20 D 3.B

21 A 4.A

22 D 4.B

23 C 1.D

24 B 3.B

25 A 2.B

26 C 3.C

27 D 3.B

28 A 2.A

29 D 4.A

30 D 5.A

31 D 2.B

32 B 1.G

33 A 2.A

34 C 3.A

Q A Domain

35 A 4.B

36 B 3.B

37 C 2.A

38 D 1.F

39 B 3.B

40 A 3.B

41 B 1.G

42 B 3.B

43 C 4.D

44 A 4.D

45 C 4.D

46 B 3.B

47 D 3.B

48 D 4.C

49 B 2.B

50 D 4.B

51 C 2.A

52 A 5.B

53 A 1.C

54 A 3.A

55 A 3.A

56 C 1.A

57 B 5.B

58 B 1.F

59 A 4.D

60 B 4.D

61 A 1.G

62 D 5.A

63 A 1.B

64 A 5.A

65 A 4.D

66 A 5.C

67 C 2.B

68 B 2.B

Q A Domain

69 D 4.B

70 B 3.A

71 B 3.C

72 D 2.B

73 A 5.C

74 A 1.A

75 D 2.A

76 A 2.A

77 B 3.B

78 C 4.B.

79 C 2.B

80 C 2.A

81 B 2.A

82 D 4.D

83 D 1.D

84 C 1.D

85 A 3.A

86 C 5.B

87 A 2.B

88 C 5.C

89 C 3.A

90 A 3.A

91 B 1.A

92 C 5.A

93 B 3.A

94 D 3.B

95 C 5.C

96 D 3.A

97 D 4.B

98 A 3.B

99 D 1.G

100 B 2.A

101 A 2.A

102 A 2.B

Q A Domain

103 C 4.A

104 B 4.D

105 C 4.C

106 D 4.B

107 C 4.D

108 A 5.B

109 A 3.B

110 D 2.A

111 B 2.A

112 B 4.D

113 A 1.E

114 A 2.B

115 D 2.B

116 D 2.B

117 C 4.D

118 A 5.C

119 B 1.A

120 D 2.B

121 A 4.D

122 A 4.D

123 A 1.B

124 C 2.A

125 A 5.A

126 A 4.B

127 D 2.A

128 B 2.B

129 C 3.B

130 C 1.D

131 A 2.A

132 B 2.A

133 C 1.C

134 A 5.A

135 B 2.B

136 B 3.A

Q A Domain

137 B 2.A

138 C 4.D

139 A 4.D

140 B 4.D

141 C 4.D

142 B 4.D

143 C 3.B

144 C 3.C

145 B 3.B

146 B 5.A

147 B 3.B

148 C 1.E

149 A 3.A

150 A 4.D

151 D 1.B

152 B 1.B

153 C 5.B

154 B 4.D

155 A 2.A

156 D 2.B

157 B 5.B

158 A 4.C

159 D 3.A

160 D 3.B

161 A 1.E

162 C 5.B

163 B 4.B

164 B 5.A

165 C 2.B

166 C 4.D

167 C 4.D

168 D 4.D

169 C 5.B

170 A 4.A

Revised 5/2015 2014 – 2016 Examination Preparation Guide

Sample Test Answer Key

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