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Sample CTP Materials

This file contains several items:
Sample overview of Essentials book Sample chapter review Sample problem drill Sample preparation tips

2004. Treasury Information Services. All rights reserved.

Overview of Essentials (excerpt)

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Essentials of Treasury Management Review/Conclusions

Chapter 1 Role of Treasury Management 2 Treasury Org. Structure 3 Financial Environment 4 Financial Accounting Comments/Conclusions Soft chapter in that it contains a lot of general material, which makes it hard to know what to study. Provides more beef to these topics than previous editions of the study guide. Pretty straightforward for bankers; lots of memorization for all test-takers. Tough for non-accountants. CPAs might blow it off and not do as well as they should.

2004. Treasury Information Services. All rights reserved.

Chapter Review (excerpt)

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Philosophy of Working Capital

CTP Review: Chapter 6

2005
Ken Parkinson Treasury Info. Services [Link]
2004. Treasury Information Services. All rights reserved.

Chapter Evaluation
Chapter(s)/ No. of questions Toughness Math content Chapters 6 7 questions Ch. 6: (moderate)

Just a little bit here cash cycle and evaluating discounts Rather wide!

Range of material

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Overview of Chapter
WC

Philosophy (ch. 6)

Overview of WC WC Strategies Basics of ST Credit Costs and Risks of Debt Financing Strategies Cash Discount Calcs.

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WC Overview

Working Capital current assets Net Working Capital current assets (cash, marketable securities, A/R, inventory, prepaid expenses) minus current liabilities (A/P, notes payable, accrued liabilities)
Link to current ratio

When we speak of working capital management, we often really mean net working capital

2004. Treasury Information Services. All rights reserved.

WC Cash Flow Cycle

Similar to a time line Cash conversion cycle components (conversion periods)

Days payables (DP): from purchase of supplies to payment for them (= A/P/COGS) Days inventory (DI): from acquisition of raw materials to sale as finished goods (= Inventory/COGS) Days receivables (DR): ave. collection period (= DSO)

Conversion period time that must be financed

Period (cash conversion cycle) = DR + DI - DP

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Cash Flow Cycle (Exhibit 6.1)

Purchase of Materials Payment for Materials Sale of Product Collect A/R

Inventory C/P Payables C/P Receivables C/P Cash Conversion Cycle

Day 1 Day 30 Day 45 Day 75

C/P = Conversion Period

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Cash Conversion Cycle Costs

Lost

sales from tighter credit Production stoppage due to lack of inventory Lost discounts on payables Higher prices charged by suppliers

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Problem Drill (excerpt)

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CTP Problems
Study Problems for CTP Candidates

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Notice/Disclaimer
These

questions were not taken from any previous CTP exams, not are they intended as equivalent problems for any current and/or future exams. In fact, they may not exactly cover all possible types of numeric questions. They are intended solely for use by CTP candidates as part of their preparation for the CTP exam. This file may only be used for personal use.

Questions? E-mail: ken@[Link]

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1. Assuming a 33% tax rate, what is the tax equivalent yield for a taxable investment to be the equivalent of a tax-exempt security with a yield of 4.50%?

4.50% (B) 6.72% (C) 6.06% (D) 13.64%

(A)

click for answer and calculation

100 x (.045)/(1 - .33) = 6.72%

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2. If a 91-day T-bill of $250,000 is offering a discount rate of 4.75%, how much will a short-term investor invest on day 1?

$247,112.01 (B) $250,000.00 (C) $247,039.38 (D) $246,998.26

(A)

click for answer and calculation

250,000 - [(.0475 x 250,000) x 91/360] = 246,998.26

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7. Commercial paper is issued for 60 days at for a discounted (nominal) rate of 5.25%. What is its nominal yield for $1 million of this CP?

(A) 5.370% (B) 5.323% (C) 5.296% (D) 5.250%

click for answer and calculation

1 MM x [1 - (.0525 x 60/360)] = 991,250 (8,750/991,250) x (365/60) = 5.370%

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12. Given credit sales of $150,000, $225,000, and $450,000 for July, August, and September (respectively), what is the company's DSO for September if September's outstanding receivables were $375,000?

(A) 40.91 days (B) 25.00 days (C) 50.00 days (D) 41.36 days

click for answer and calculation

150,000 + 225,000 + 450,000)/90 = 9,166.67 375,000/9,166.67 = 40.91 days

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Preparing for the Exam (excerpt)

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Preparing for the exam

How to establish an effective study plan How to navigate through the exam What to expect from major sections How to simplify computations Sources and resources

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Effective Study Plans

Gradual approach works best

Assess your strengths and weaknesses Group chapters Organize your plan Keep a steady pace

Develop effective study aids

Drills Tracking log Practice questions/problems

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Assess your strengths and weaknesses

Analyze chapters
Strong: You have lots of experience and know this stuff cold. You could teach the session on it! Medium: You have some experience or knowledge. Maybe you subbed for the person who does it, or you were at a meeting and it was discussed. Weak: You wouldnt know it if you tripped over it! It all looks like Greek to you!

Summarize for the framework for your study plan

Chapters to hit hard Formulas, problems to master Topics to unlearn

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For example ...

Quests Chapt on Level of Defini- InterpreExam difficulty tions tation 14 Risk 8 Fairly difficult Heavy Some, tricky Prob lems Not likely

13 Borr

10

Hard, unless?

Lots, esp. LT

Some, tricky

Yes, tricky?

16 Bk Rels

Easy Few medium simple

A little

Probably A/Anal

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Whats Unlearning?

There may be topics that you have too much experience in. Something
Youve handled for a lengthy time (e.g., cash collections or disbursements). You used to do for a long time (ST investing). You have to learn for your job (e.g., payment systems for bankers).

Unlearning is tough!
You have to read the text to see (for yourself) how basic it is, not to learn the contents. Youll have to go back over this a few times.

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What to Expect

The study guide is your basic point of reference because it is acknowledged as the "Body of Knowledge."
Go by the book!

This means that what it says is considered correct, even if you might quibble or even disagree! And you will probably find some areas.
Ignore these feelings!

Also, remember that the test is done well in advance, as is the study guide, so very latebreaking events will not be on the exam.
So, dont panic!

2004. Treasury Information Services. All rights reserved.

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Types of Questions

Regular question (varied levels of difficulty)

Only one answer is correct. There will be one other answer thats close.

Multiple correct answers (toughest questions)

Uses Roman Numerals with statements, etc. Answers are combinations of the Roman Numerals. Evaluate each Roman Numeral first, then look at the answers.

Sequencing questions (pretty tough)

Also use Roman Numerals for possible sequence of an activity (e.g, letter of credit, ACH payment). Answers are various sequences.

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Simplify Computations

Investing
Yields (of all kinds: memorize!) 360 days = money market transaction; 365 for other, including borrowings. Also 365 = bond equivalent or investors equivalent. Investment proceeds, interest

Borrowing
Effective costs of instruments Simple if you remember: what is paid divided by what is received

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Example (4)
How much should you invest if a project will return $5,000 five years from now and your cost of capital is 10%? (A) $3,402 click for answer and calculation (B) $5,000 (C) $3105 (D) $3705 PPV = ($5,000)/(1+.1)5 = $5,000/1.61051 = $3,104.61.
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Sources and Resources

Drills to help
Set aside time for straightforward drills. Repetitions or some other form of memorization technique. Mark areas in text to memorize. Use flash cards or the equivalent. Test your recall of the various lists and other details, such as responsibilities, roles, etc. Do drills faithfully and regularly, perhaps with a buddy.

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Sources and Resources

Make electronic flash cards with Power Point.

Enter the list of items you want to remember. Go to Slide Show menu, select Custom Animation. Select Text 2 (or whatever it is called), and the answer bullets should be selected. Click on Animate and On Mouse Click. Click on Effects to select how the bullets will appear. (I usually select Appear.) Then click on OK. When you click on the slide show icon (or how ever you initiate a slide show), the question will appear, and each answer bullet will appear when you click on your mouse.

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Other Resources

Preparing for Certification: New book with >300 practice questions, study tips, etc., from TISBooks CTP review sessions: Sponsored by many regional treasury associations, including TMANY, TMANE, Florida groups, offering chapter reviews, practice tests, interaction Web chat/study groups: See AFP Web site, et al. Study groups

2004. Treasury Information Services. All rights reserved.