CTP (ABC) cheat sheet

Bank ledger balance differs from available balance by holds, float, and reserves; the company's book balance differs from both by deposits in transit and outstanding disbursements.

Net float = collected (available) balance − book balance; positive float means disbursements have cleared the bank before the books record them.

Concentration rule: sweep all balances above the operating target (compensating balance requirement plus disbursement needs) into a concentration account each day.

Zero balance account: target balance of zero; the parent account is funded each morning only for that day's expected clearings.

Physical pooling commingles funds and transfers legal ownership, creating intercompany loans; notional pooling offsets balances for interest calculation only, without commingling.

Forecast horizon mapping: daily (1–7 days) for positioning, weekly (2–6 weeks) for liquidity, monthly (1–12 months) for funding, annual or multi-year for strategic planning.

Bank discount yield = (par − price) ÷ par × 360 ÷ days to maturity; bond equivalent yield restates the same instrument on a 365-day, coupon-comparable basis.

In-house bank centralizes intercompany payments, netting, and internal funding, reducing external accounts and fees while creating transfer-pricing and tax documentation requirements.

Fedwire settles large-value USD payments in real time gross and irrevocably; CHIPS nets and settles multilateral positions; SWIFT only carries messages, not funds.

ACH entries follow NACHA rules covering origination agreements, effective dates, and return codes; consumer entries also fall under Regulation E error-resolution rules.

Same-day ACH provides several daily submission windows and a per-payment dollar cap; standard ACH settles on the next business day.

Positive pay matches issued items against a company file; payee-name matching adds name verification; reverse positive pay has the bank present items to the company for approval before paying.

ACH debit filters and blocks restrict which originators may debit an account; ACH positive pay authorizes listed originators within set dollar limits.

Regulation CC sets maximum holds on deposited checks, for example next-day availability for cashier's checks and certain low-risk items, and governs substitute checks under Check 21.

Wire fraud controls: call-back verification to a previously known number, dual approval, separation of initiation from release, and beneficiary account validation services.

Payment method decision rule: wires for high-value time-critical irrevocable payments, ACH for low-cost recurring items, cards for small purchases with data capture, checks where law or counterparty requires.

Cash conversion cycle = days inventory outstanding + days sales outstanding − days payables outstanding; a lower cycle means less cash is tied up in operations.

Days sales outstanding = (accounts receivable ÷ credit sales) × days in period; best possible DSO uses only current, non-past-due receivables.

Cost of forgoing a discount = d ÷ (1 − d) × 360 ÷ (N − D); for terms 2/10 net 30 the annualized cost is about 36.7%.

Economic order quantity = square root of (2 × annual demand × cost per order ÷ holding cost per unit per year).

Lockbox decision rule: adopt when the annual value of float reduced plus processing savings exceeds the bank's fees.

Terms 2/10 net 30 mean a 2% discount if paid within 10 days, with the full amount due on day 30.

Supply chain finance (reverse factoring) lets suppliers sell approved receivables at a rate based on the buyer's credit; dynamic discounting uses the buyer's own cash to take early-payment discounts.

Working capital ratios: current ratio = current assets ÷ current liabilities; quick ratio excludes inventory; net working capital = current assets − current liabilities.

Money market instruments include Treasury bills, commercial paper, negotiable CDs, repurchase agreements, banker's acceptances, and municipal notes, generally maturing in one year or less.

Bond prices and yields move inversely; a bond trades at a premium when its coupon exceeds the market yield and at a discount when the coupon is below it.

Modified duration = Macaulay duration ÷ (1 + yield per period); approximate price change ≈ −modified duration × change in yield (decimal).

Convexity adjusts duration: price change ≈ −modified duration × Δy + ½ × convexity × (Δy)².

Covered interest rate parity: forward ÷ spot = (1 + interest rate of price currency) ÷ (1 + interest rate of base currency); persistent deviation signals a basis or capital controls.

Yield curve shapes are normal (upward), inverted (downward), and flat; explanatory theories are expectations, liquidity preference, and market segmentation.

Credit spread = corporate bond yield − government benchmark yield of matched maturity; widening spreads raise new-issue cost and lower existing bond prices.

The primary market is issuance (IPO, bond offering) where proceeds go to the issuer; the secondary market is trading among investors, supplying price discovery and liquidity.

Funding pecking order: internal cash, then committed bank lines, then commercial paper, then term debt or bonds, then equity issuance.

Committed lines carry a fee but must be honored by the bank unless the borrower defaults; uncommitted lines can be withdrawn or denied at the bank's discretion.

WACC = (equity ÷ total capital) × cost of equity + (debt ÷ total capital) × pre-tax cost of debt × (1 − tax rate), using marginal after-tax costs.

Investment policy ranks objectives as safety, liquidity, then yield, and specifies eligible instruments, minimum credit ratings, maximum maturity, and per-issuer concentration limits.

Money market fund NAV: government and retail funds may maintain a stable $1 NAV; institutional prime funds use a floating NAV and may impose liquidity fees or redemption gates.

Ladder strategy: distribute maturities evenly across the horizon, for example monthly or quarterly rungs, to smooth reinvestment rate risk.

Covenant types: maintenance covenants are tested each reporting period (leverage, interest coverage); incurrence covenants apply only when an action such as new debt or a dividend is taken.

A commitment fee is charged on the undrawn portion of a committed facility; drawn pricing is a spread over a benchmark such as SOFR plus an undrawn fee.

Market risk covers FX, interest rate, and commodity moves; credit risk is counterparty nonpayment; liquidity risk is inability to meet obligations as they fall due.

FX exposure types: transaction (specific foreign-currency contracts), translation (consolidating foreign statements), and economic (competitive impact of rate changes).

Value at Risk states a loss threshold, confidence level, and horizon; it says nothing about losses beyond that threshold, so stress testing and scenario analysis complement it.

Hedge accounting: fair value hedges offset changes in a recognized asset, liability, or firm commitment; cash flow hedges defer effective gains and losses in other comprehensive income.

Hedge documentation must be in place at inception and state the risk management objective, hedged item, hedging instrument, and method of assessing effectiveness.

TMS core modules: cash positioning, forecasting, payments and bank connectivity, debt and investment management, accounting entries, and management reporting.

Bank connectivity options are SWIFT for corporates, host-to-host links, bank APIs, and bank portals; statement formats include MT940, BAI2, and ISO 20022 camt.053.

Segregation of duties in treasury: payment initiation, approval, release, and reconciliation should sit with different people, enforced by system limits and dual authorization.

Days cash on hand = (unrestricted cash + marketable securities) ÷ (annual operating expenses ÷ 365).