CTP Exam Q&A

Candidates may request any explanation or clarification on content from the Essentials of Treasury Management, Second Edition. Requests can be submitted to ctpqa@afponline.org. Those written inquiries are the submitted anonymously to subject matter experts and a response is provided to the candidates within three to five business days. Please note, however, that volunteers are not in a position to provide a detailed tutorial in a topic area. Questions and answers submitted through this service will be posted on this page.

Questions:

1. What are the differences between the first and second editions of Essential of Treasury Management?

The Essentials of Treasury Management, 2nd edition (ETM2), not only updates the first edition to reflect the many changes that have taken place in the last three years to what treasury professionals do and how they do, it also now provides many of the "whys". This edition shows the reader why things are done; particularly regarding how they impact the economic value of the business.
At 754 pages, ETM2 includes nearly 100 pages of additional material, including:

1. Introduction of the relationship between treasury activities, broader financial decisions, and firm value; and threading this theme throughout the book.
2. Explanation of how the Federal Reserve uses its ability to alter liquidity in the commercial banking system, thereby influencing the supply of money, credit, and interest rates in the macro-economy.
3. Expanded discussion of the interpretation of financial ratios and how ratios are used in combination to interpret and evaluate performance.
4. Incorporation of the many important changes in payment systems, especially through the use of imaging technology.
5. Expanded section on cash forecasting methods including additional techniques to assist in anticipating and controlling future events.
6. Expanded description of the forms of long-term financing, and the appropriate use of specific forms. The importance, calculation, and use of a firm's cost of capital, how to calculate the cost of different sources of funds and how to use the difference sources of capital.
7. More detailed description of lease types, use of leasing in lieu of borrowing funds, and a detailed explanation of the lease vs. borrow-and-buy decision.
8. Expanded discussion of dividend policy and its variants - especially stock (as opposed to cash) dividends and share repurchase programs.
9. Expanded and updated description of the procedures and regulations associated with international payment systems, including changes particular to the Economic and Monetary Union (EMU) in Europe and the Single Euro Payments Area (SEPA).
10. Expansion and clarification of the presentation of operational and insurance risk management.
11. Expanded treatment of ethics, especially regarding specific areas of responsibility and concerns in the treasury area.
12. An updating of the laws and regulations that govern retirement funds management. Emphasis is on fiduciary responsibility in this area, and a clarification of the new requirements relating to education and advice that may be provided to retirement plan participants.
13. Elaboration of the process for selecting a financial service provider, and how to assess the financial stability and durability of service providers.