Essentials of Treasury Management, 6th Edition



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This newly reorganized text updates the fifth edition to reflect the many changes that have taken place in the last three years to the responsibilities of treasury management professionals.

Here's some of what's new in the 20 chapters of the sixth edition: 

  • The Legal and Regulatory Environment has been revised to reflect increasing coverage of global regulators and taxes, trends in regulations and the safety and soundness of the financial system
  • The Banks and Financial Institutions section has been rewritten to focus more on global financial institutions.
  • The Payments Systems, Money Markets and Capital Markets sections have been expanded to increase coverage of global instruments.
  • The section on Relationship Management and FSP Selection now includes more information on types of bank accounts as well as a sample RFP for Global Treasury Services.
  • Treasury’s role in budgeting and performance management sections have been added to the Financial Planning and Analysis section.
  • The Disbursements, Collections and Concentrations section has expanded coverage of Zero Balance and Target/Threshold Balance accounts as well as credit transfers, wage payment and payment factories.  An increased emphasis on payments fraud includes a new section on the tools for payments fraud prevention and detection.
  • The Technology in Treasury section now includes sections on program management and evolving technologies.
  • The Financial Risk Management section includes expanded coverage of pricing options, managing interest rate exposure and hedging policies.
  • The Capital Structure and Decision Management section has an increased emphasis on raising and managing long-term capital.

As with any publication there are errors found after printing.  To view the Errata please Click Here.

AFP Publication Return Policy

2020-2022 CTP Exam Knowledge Domains

Content AreaPercentage of Test Items

I. Maintain corporate liquidity required to meet current and future obligations in a timely and cost effective manner.


II. Manage capital structure, manage costs of long-term capital, and quantitatively evaluate long-term capital resource investments.


III. Manage internal and external relationships.


IV. Monitor and control corporate exposure to financial, regulatory and operational risk (including emerging and reputational risk).



V. Assess impact of technologies on the treasury function.



Essentials of Treasury Management, 6th Edition Chapters


Introduction to the Study of Treasury Management

I. Introduction

II. The Evolving Role of the Treasury Professional

III. Organization of Essentials of Treasury Management

IV. Notes on Conventions Used in this Book

V. Summary

Chapter 1: The Role of Treasury Management

I. Introduction

II. The Role and Organization of Treasury Management

III. Finance and Treasury Organization

IV. Corporate Governance

V. Summary

Chapter 2: Regulatory and Legal Environment

I. Introduction

II. General Regulatory Environment

III. Primary Regulators and Standard Setters of International Financial Markets

IV. National/Regional Approaches to Legislation and Regulation

V. Tax for Treasury

VI. Bankruptcy/Insolvency Laws

VII. Trends in Regulation

VIII. Summary

Chapter 3: Banks and Financial Institutions

I. Introduction

II. Financial Institutions: Functions and Services

III. Summary

Chapter 4: Payment Systems

I. Introduction

II. Payment Overview

III. Payment Instruments

IV. Payment Systems

V. Summary

Chapter 5: Money Markets

I. Introduction

II. Money Market Participants

III. Money Market Instruments

IV. Summary

Chapter 6: Capital Markets

I. Introduction

II. Structure of the Capital Markets

III. Debt Market

IV. Equity Market

V. Summary

Chapter 7: Relationship Management and Financial Service Provider Selection

I. Introduction

II. Bank Relationship Management

III. FSP Selection

IV. Assessing the Risk of FSPs

V. Summary

Chapter 8: Financial Accounting and Reporting

I. Introduction

II. Uses of Financial Statements

III. Accounting Concepts and Standards

IV. Financial Statement Reporting

V. Accounting for Derivatives, Hedges, and Foreign Exchange (FX) Translation

VI. Accounting for Governmental and Not-For-Profit (G/NFP) Organizations

VII. Summary

Chapter 9: Financial Planning and Analysis

I. Introduction

II. Time Value of Money

III. Capital Budgeting

IV. Budgeting

V. Cost Behavior

VI. Financial Statement Analysis

VII. Summary

Chapter 10: Introduction to Working Capital Management

I. Introduction

II The Link Between Cash and Working Capital

II. Components of the Capital Cash Conversion Cycle (CCC)

IV. How Changes in Current Balance Sheet Accounts Impact External Financing

V. Strategies for Investing In and Financing Working Capital

VI. Management of Trade Credit and Accounts Receivable (A/R)

VII. Management of Inventory

VIII. Management of Accounts Payable (A/P)

IX. International Working Capital Management Tools

X. Summary

Chapter 11: Working Capital Metrics

I. Introduction

II. Fundamental Working Capital Metrics

III. The Cash Conversion Cycle (CCC)

IV. Calculations for Trade Credit Decisions

V. Accounts Receivable (A/R) Monitoring

VI. Summary

Chapter 12:  Disbursements, Collections, and Concentration

I. Introduction

II. Disbursements

III Collections

IV. Concentration of Funds

V. Summary

Chapter 13: Short-Term Investing and Borrowing

I. Introduction

II. Managing Short-Term Investments

III. Pricing and Yields on Short-Term Investments

IV. Managing Short-Term Borrowing

V. Debt Financing

VI. Market Information for Investors and Borrowers

VII. Summary

Chapter 14: Cash Flow Forecasting

I. Introduction

II. Purpose of Cash Flow Forecasting

III Types of Forecasts

IV. Forecasting Process

V. Forecasting Methods

VI. Best Practices for Cash Flow Forecasting

VII. Summary

Chapter 15: Technology in Treasury

I. Introduction

II. Information Technology for Treasury

III Treasury Management Systems (TMSs)

IV. Project Management

V. Communications and Technology Developments

VI. Summary

Chapter 16: Enterprise Risk Management

I. Introduction

II. Risk Management

III. Categories of Risk

IV. Techniques Used to Measure Risk

V. Managing Insurable Risks

VI. Disaster Recovery and Business Continuity

VII. Summary

Chapter 17: Financial Risk Management

I. Introduction

II. Types of Financial Risk

III. Managing Financial Risk

IV. Derivative Instruments as Financial Risk Management Tools

V. Managing Interest Rate Exposure

VI. Managing Foreign Exchange (FX) Exposure

VII. Managing Commodity Price Exposure

VIII. Accounting and Tax Implications of Financial Risk Management

IX. Hedging Policy Statement

X. Summary

Chapter 18: Treasury Policies and Procedures

I. Introduction

II. Overview of Treasury Policies and Procedures

III. Creating a Treasury Policy Document

IV. Overview of Key Treasury Policies Policy Development Example: Short Term Investment Policy

V. Overview of Key Treasury Policies

VI. Summary

Appendix 18.1 – Sample Short-Term Investment Policy

Chapter 19: Long-Term Investments

I. Introduction

II. Valuation of Capital Market Securities

III. Managing Capital Market Investments

IV. Summary

Chapter 20: The Capital Structure Decision and Management

I. Introduction

II. Capital Structure

III. Raising and Managing Long-Term Capital

IV. The Weighted Average Cost of Capital (WACC)

V. Lease Financing

VI. Equity Financing and Management

VII. Miscellaneous Corporate Finance Topics

VIII. Summary


Essentials of Treasury Management, 6th edition, Chapter 13: Short -Term Investing and Borrowing 

III. Pricing and Yields on Short-Term Investments

Factors Influencing Investment Pricing

Yield is a measure of the return an investor derives from a financial instrument. Typically, an investment yield is stated as an annual percentage rate of return. Many factors can influence the pricing and, ultimately, the yield of an investment. These factors include default, liquidity, and price risk; the general shape of the yield curve; and the tax status of the investment. The concept of yield curves and the impact of an investment’s tax status are described below.

A. Yield Curves

A yield curve is a plot of the yields to maturity on the same investment instrument or class of instruments, but with varying maturities, as of a specific date. For example, a yield curve for US Treasury instruments is a plot of yields to maturity for US Treasury bond issues with varying maturities as of the close of business on a particular date. Similarly, a plot of yields to maturity for AA-rated industrial bonds with various maturities is a yield curve for that class of instruments.

Exhibit13.3-Yield Curves

Refer to Exhibit 13.3. The curve in the graphs of the various yields to maturity illustrates what is called the term structure of interest rates. In the left panel of Exhibit 13.3, the yield to maturity on the instrument or class of instruments increases with maturity, whereas it declines with maturity in the right panel.


The slope, or shape, of the yield curve at a point in time has decision implications for those managing the short-term investment portfolio. Since short-term interest rates are typically lower than long-term rates, an upward-sloping yield curve is referred to as a normal yield curve. The liquidity preference theory of the term structure of interest rates holds that investors demand a yield premium in compensation for the lower liquidity that is associated with a longer maturity. Thus, long-term rates are normally higher than short-term rates.


A downward-sloping yield curve is referred to as an inverted yield curve. In this case, investors are shifting their preferences to long-term securities (or conversely, issuers are shifting their preferences to short-term borrowing). This increased demand for long-term securities causes their prices to increase and long-term yields to decline, thus pushing down the long-term end of the curve and causing an inversion. An inverted yield curve is typically a sign that the market is expecting a recession in the near future and is investing in longer-term securities to attempt to lock in interest rates or avoid any reduced interest rate that may occur in the short run. It is also a sign of low expectations with regards to future inflation, as expectations of high inflation would automatically increase the yields required on long-term securities (to offset the expected inflation) and create a normal, upward-sloping yield curve. An inverted yield curve may occur as the result of Federal Open Market Committee (FOMC) open market operations in the United States. If the US Federal Reserve (the Fed) is attempting to raise interest rates, and the target rate is a short-term interest rate, short-term rates will tend to increase before the actions affect longer-term interest rates. This may result in a downward-sloping yield curve until long-term rates increase.