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CTP Chapter 3
Certified Treasury Professional Chapter 3
14
Finance
Professional
06/02/2012

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Cards

Term
Describe 5 types of political risk
Definition
1. Nationalization - Government takeover of all companies in a specific industry.

2. Exppropriation - Government take over of a single company, with or without compensation.

3. Blocked Currencies - Profits cannot be converted from the local currency into a major trading currency

4. Forced Reinvestment: Funds cannot be transfereed out of the country in any form, or the amount that can be transferred is limited.

5. Required Majority Ownership - Companies must be owned by resident nationals
Term
What are 2 ways that Banks present service charges
Definition
1. Account Analysis Statement - The bank debits the account for any fees owed

2. TWIST - Global billing where the bank facilitates a monthly electronic communication of banking fees
Term
What are the different types of trade services offered in the US commercial banks?
Definition
1. Trade or Commercial Letters of Credit

2. Documentary Collection

3. Banker's acceptance
Term
What are the 3 main services provided by Investment banks in the United States?
Definition
Origination, Underwriting, Distribution
Term
What Type of information does an account analysis in the US corporate banking system provide to the treasury professional?
Definition
Services Provided
Balances Maintained
Volumes processed
Charges assessed
Earnings credit allowances
Term
Three Functions that collectively comprise treasury management
Definition
1. Liquidity Management
2. Capital Management
3. Risk Management
Term
Four Phases in the Operating Cycle
Definition
1. Acquire materials or resources
2. Convert materials to goods, convert resources to services
3.Sell goods or services
4. Collect Payment for goods and services
Term
Describe eight major objectives of treasury management
Definition
1. Maintain Liquidity
2. Optimize cash resources
3. Manage Risk
4.Maintain access to short term financing
5. Maintain investments
6. Maintain access to medium and long term financing to support investments in capital assets
7. Coordinate financial functions and share financial information
8.Enhance global & Cross border focus
Term
Describe five sections that can be taken to mitigate risk
Definition
1. Add to the number of counterparties to increase diversification
2. Eliminate specific counterparties
3. Implement or adjust a single counterparty balance limits
4. Rebalance liquidity allocations among counterparties
5. Adopt third-party custodian for investments
Term
Describe four methods companies are using to optimize their treasury obligation
Definition
1. Improving internal processes
2. Implement new or upgrade technology
3. Adopting new or improved bank/financial services product
4. Outsourcing selected treasury functions
Term
Describe five items that the board of directors must grant to managemenf the authority to do.
Definition
1. Open, close,and modify bank accounts
2. Establish borrowing facilifies
3. Oversee investments
4. Issue debt and equity securities
5. Devise, implement and execute risk managemenf strategies through board approved policy statements
Term
Describe six tasks typical to daily funds management
Definition
1. Prepare a cash position worksheet
2. Monitoring cash balances on deposit at financial institutions
3. Collecting, concentrating and disbursing cash
4. Investing and borrowing funds on a short term basis
5. Research and reconcile exception reports
6. Coordinate functions with other finance areas, such as accounts receiveable, accounts payable and accounting
Term
Describe eight areas of internal collaboration for treasury department
Definition
1. Accounts receiveable
2. Accounts payable
3. Pension management
4. Risk managemenf
5. Internal audit
6. Accountingt0
7. Tax department
8. Purchasing
Term
Describe ten areas of external collaboration for treasury department
Definition
1. Financial institutions
2. Third party providers
3. Rating agencies
4. External auditors
5. External investment managers
6. Regulatory agencies
7. Industry trade groups
8. Suppliers and customers
9. Legal counsel
10. Financial markets
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