By Fred Butterfield, CTP
One comment made by numerous students in classes, study sessions, online, and other places is: “This example in the text isn’t real. That isn’t the way my company does this.”
Everyone making this comment is absolutely correct and completely wrong, both at the same time.
When AFP gathers its committee together to revise the content of the CTP body of knowledge, it gets well-informed, practiced, experts in the topics from as broad a spectrum of business as possible. Part of the conversation the committee engages in is what has changed since the last edition, and how it has changed. Many businesses take a basic ratio and modify it to be more meaningful for that company. They do not change the basic calculation, they simply adjust it to reflect their business more accurately.
An example could be EBITDA (earnings before income, taxes, depreciation and amortization). This is a standard ratio used by many companies and financial institutions. For a company owned by an equity fund that charges a quarterly management fee, a more accurate ratio might be EBITDAM, or exclusion of the management fee in addition to the other factors.
When compiling the information for the text, the committee acknowledges these changes and differences used in the business world by various businesses, but makes sure that the basic, underlying calculation has not changed. As long as that is true, the text teaches the basic calculation and leaves it to the participant to identify any modifications required make it fit the business specifics.
The important thing to remember is that the CTP exam is based on the text. Regardless of what the participant may do in the day to day execution of their responsibilities, the text is what determines the correctness of the answer. One of the most difficult things to remember when studying is this simple fact.
Fred Butterfield, CTP, is a treasury manager based in Denver.