CTP (ABC) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Cash positioning

Daily process of determining a company's collected and available bank balances by adjusting the book balance for deposits in transit, outstanding checks, and bank adjustments.

Zero balance account

Disbursement account funded exactly for that day's clearings, ending each day at a zero balance and reducing idle cash held in operating accounts.

Net float

Difference between a company's collected bank balance and its own book balance; positive float means the bank has collected more than the books show.

Notional pooling

Bank arrangement that offsets debit and credit balances across accounts for interest calculation without legally commingling funds, preserving local ownership and often avoiding cross-border tax issues.

Available balance

Portion of a bank balance immediately usable for disbursement, net of holds, float, and reserve requirements; usually lower than the ledger balance.

In-house bank

Treasury structure where a central entity, often a subsidiary, executes intercompany payments, lending, and FX on behalf of group entities, reducing external bank accounts and fees.

Fedwire

US real-time gross settlement system operated by the Federal Reserve; transfers are irrevocable and final upon processing, used for large-value, time-critical domestic payments.

ACH return

Payment sent back by the receiving depository institution within NACHA-specified deadlines, typically for insufficient funds, closed accounts, or stop payments, and distinct from a notification of change.

Positive pay

Fraud control in which the company sends the bank a file of issued checks; the bank rejects items that do not match, optionally comparing payee names.

Regulation CC

US rule implementing Check 21 that sets maximum holds on check deposits, governs substitute checks, and provides expedited recredit procedures for consumers.

SWIFT messaging

Cooperative network that transmits standardized financial messages such as MT101, MT940, and ISO 20022 pain.001; it carries instructions but does not itself settle funds.

Same-day ACH

NACHA capability allowing domestic ACH credits and debits to settle on the same business day, using several submission windows and subject to a per-item dollar limit.

Cash conversion cycle

Days inventory outstanding plus days sales outstanding minus days payables outstanding; measures how long cash is committed to operations before customer collections arrive.

Days sales outstanding

Average accounts receivable divided by total credit sales, multiplied by the number of days in the period; indicates how quickly customers pay their invoices.

Cost of forgoing discount

Annualized cost of forgoing a trade discount, computed as the discount rate divided by one minus that rate, multiplied by 360 divided by the extra days taken.

Economic order quantity

The square root of twice annual demand times order cost, divided by holding cost per unit; the order size that minimizes combined ordering and carrying costs.

Lockbox

Bank-operated post office box where customers mail payments; the bank deposits the checks and delivers remittance data, shortening mail and processing float for a fee.

Modified duration

Macaulay duration divided by one plus yield per period; approximates the percentage change in a bond's price for a one percentage point yield change.

Interest rate parity

Relationship in which the forward premium or discount equals the ratio of domestic to foreign interest rates, preventing arbitrage between the two money markets.

Inverted yield curve

Curve where short-term yields exceed long-term yields; often associated with tight monetary policy and expectations of rate cuts, and historically a recession signal.

Credit spread

Difference between the yield on a corporate bond and a government benchmark of similar maturity; widens when issuer risk or market stress increases.

Commercial paper

Unsecured short-term promissory note sold by large corporations, usually maturing in 270 days or less and often backed by a committed bank line.

Weighted average cost of capital

Equity weight times cost of equity plus debt weight times after-tax cost of debt; used as the hurdle rate when evaluating investments and funding choices.

Investment policy statement

Document defining permitted instruments, minimum credit ratings, maturity limits, diversification rules, and reporting requirements for investing the company's surplus cash.

Laddering

Strategy that spaces investment maturities evenly across a horizon so securities mature regularly, providing reinvestment opportunities and reducing the risk of mistimed rate moves.

Committed credit facility

Contractual bank line the lender must honor unless the borrower defaults; carries a commitment fee and commonly backstops a commercial paper program.

Maintenance covenant

Financial covenant tested each reporting period, such as maximum leverage or minimum interest coverage; a breach typically creates a default or restricts dividends and buybacks.

Value at risk

Statistical estimate of the maximum loss expected over a stated horizon at a given confidence level; assumes a return distribution and understates extreme tail losses.

Cash flow hedge

Hedge of variability in future cash flows from a forecasted transaction; effective gains and losses are held in other comprehensive income until the hedged item affects earnings.

Transaction exposure

Risk that exchange rates move between contract and settlement dates, changing the home-currency value of a specific foreign-currency receivable or payable.

Treasury management system

Software that consolidates bank balances, cash forecasts, payments, debt and investment records, accounting entries, and management reporting across the treasury function.

Days cash on hand

Unrestricted cash plus marketable securities divided by average daily operating expenses; estimates how long the organization can operate without new cash inflows.