CTP - Module 1-6 Exam with Questions
and Correct Answers Latest 2026
Board of directors - CORRECT ANSWERS-A group of individuals that are elected as, or
elected to act as, representatives of the stockholders to establish corporate management-
related policies and to make decisions on major company issues. Such issues include the
hiring/firing of executives, dividend policies, options policies, and executive compensation.
Every public company must have this.
Cash management - CORRECT ANSWERS-The subset of treasury management that
specifically deals with managing the daily liquidity (available cash) of a company or
organization to ensure the company or organization can meet its short-term obligations.
Chief financial officer (CFO) - CORRECT ANSWERS-The senior manager who is
responsible for overseeing the financial activities of an entire company. This includes
signing checks, monitoring cash flow, and financial planning.
Economies of scale - CORRECT ANSWERS-A relationship that occurs when an increase
in sales lowers the average cost per unit sold.
Capital - CORRECT ANSWERS-The more permanent sources of funds used by a
company, such as long-term debt, preferred stock, and common equity.
Chief executive officer (CEO) - CORRECT ANSWERS-The highest ranking executive in a
company whose main responsibilities include developing and implementing high-level
strategies, making major corporate decisions, managing the overall operations and
resources of a company, and acting as the main point of communication between the
board of directors and the corporate operations.
Disaster recovery - CORRECT ANSWERS-The restoration of systems and
communications after an event causes an outage.
Financial planning - CORRECT ANSWERS-An organizational function that involves
determining the need for present and future funding to support operations. An important
part of this function is the forecasting of revenues, income, and external financing required
to support the company's planned growth.
,Liquidity - CORRECT ANSWERS-The ability of an organization to convert assets into cash
quickly and without a significant risk of loss.
Outsourcing - CORRECT ANSWERS-Utilizing a third party to perform all or part of a core
function.
Working capital gap - CORRECT ANSWERS-The time gap between a cash outflow and a
cash inflow.
Independent director - CORRECT ANSWERS-Under New York Stock Exchange
standards, this is a director who has no material relationship with the listed company,
either directly or as a partner, shareholder, or officer of the organization.
Operating cycle - CORRECT ANSWERS-A representation of the flow of funds through a
company from the acquisition of raw materials, through the production cycle and the sale
of products or services, and finally to the collection of payments from customers.
Shared services center (SSC) - CORRECT ANSWERS-A department or operation within a
multiunit organization tasked with supplying multiple business units and their respective
divisions and departments with specialized services, such as information technology (IT),
human resources (HR), or accounts payable (A/P) services. In some companies this
includes day-to-day treasury operations (cash management) and other treasury functions,
which may be operated as this.
Working capital - CORRECT ANSWERS-The sum of a company's current asset accounts
(primarily cash, accounts receivable, and inventory) less the sum of its current liability
accounts (primarily payables and accrual accounts). Also known as net working capital.
Accounting Standards Codification (ASC) - CORRECT ANSWERS-The detailed set of
rules in the United States, referred to as Generally Accepted Accounting Principles, that
are developed, agreed upon, and published in the form of ASC Topics by the Financial
Accounting Standards Board, an independent, self-regulating organization formed in
1973.
Accrual accounting - CORRECT ANSWERS-The accounting approach under which
expenses must be reported when the revenues with which they are associated are
recognized. Long-lived or fixed assets are capitalized (i.e., recorded as assets on the
balance sheet) and depreciated over time because they produce revenues over many
accounting periods. This practice matches an asset's cost to the revenues it produces.
Under the revenue recognition and matching principles, sales are reported even though
,cash has not been received. Similarly, expenses are reported even though cash has not
been paid out.
Accumulated depreciation - CORRECT ANSWERS-An asset account that records the
amount of depreciation previously expensed on a company's assets. It appears on the
asset side of the balance sheet, but it is a source of funds when it increases. While
depreciation is technically a noncash expense (i.e., there is no actual payment for
depreciation), it does have a cash flow impact because it reduces the company's income
taxes by lowering pretax income.
Auditor's opinion - CORRECT ANSWERS-An opinion on a company's financial
statements that is provided by an independent auditor (or audit firm) based on a financial
audit. The purpose of conducting an audit is to produce an audit report in which an
independent audit firm indicates the scope of the audit and renders an opinion regarding
the relevance, completeness, and accuracy of the income statement, statement of
financial position, statement of cash flows, any other statements, and all supporting
material. In addition, the auditor will examine the strengths of the organization's internal
controls and processes. The auditor's opinion does not comment on the company's
financial fitness, but rather on whether the financial statements fairly reflect the company's
financial position and are comparable to prior periods.
Break-even analysis - CORRECT ANSWERS-A type of cost/benefit analysis that
establishes the level of activity at which benefits and costs are equal.
Capital budgeting - CORRECT ANSWERS-The process by which proposed large-dollar
investments in long-term assets are evaluated.
Cash basis accounting - CORRECT ANSWERS-A major accounting method that
recognizes revenues and expenses at the time physical cash is actually received or
disbursed.
Cash conversion efficiency - CORRECT ANSWERS-An efficiency/asset management
ratio that measures how effectively a company has converted sales (or revenues) into
cash. It is computed as cash flow from operations divided by revenues.
Common-size financial statement - CORRECT ANSWERS-A financial statement analysis
technique that involves stating line items as percentages rather than amounts. This
expresses every line item on the statement as a percentage of revenue, and a common-
size balance sheet expresses each account as a percentage of total assets. These enable
direct comparisons of financial data for firms of different sizes.
, Comprehensive income - CORRECT ANSWERS-The sum of net income and other items
that must bypass the income statement because they have not been realized, including
items like an unrealized holding gain or loss from available-for-sale securities and foreign
currency translation gains or losses.
Cost of goods sold (COGS) - CORRECT ANSWERS-The expense associated with
providing the goods or services whose sale is recognized as revenues. It includes labor
and material directly used in manufacturing the product sold, as well as any indirect or
allocated manufacturing expenses.
Coverage ratios - CORRECT ANSWERS-Financial ratios concerned primarily with
measuring a company's ability to make payments on (i.e., service) its debt.
Current asset turnover ratio - CORRECT ANSWERS-An efficiency/asset management
ratio that measures how many times the firm has turned over the stock of its most liquid
assets with the flow of revenue. It is computed as revenues divided by current assets.
Debt management ratio - CORRECT ANSWERS-A type of ratio that measures the firm's
degree of indebtedness and its ability to service its debt.
Debt to tangible net worth ratio - CORRECT ANSWERS-A type of debt management ratio
that reflects the impact of intangible assets (e.g., goodwill, patents, trademarks, and
copyrights) on the balance sheet. It is computed as total debt divided by total equity minus
intangible assets.
Derivative - CORRECT ANSWERS-A financial product that acquires its value by inference
through a formulaic connection to another asset. The other asset is termed the underlying
asset, and can be a financial instrument (e.g., a stock or bond), currency, or commodity.
DuPont equation - CORRECT ANSWERS-An integrated ratio analysis technique that
looks at the return on total assets (ROTA) ratio as a product of the return on sales (i.e., net
profit margin) and total asset turnover.
Earnings before interest and taxes (EBIT) - CORRECT ANSWERS-A measure of
operating income or profit that is calculated as gross profit less operating expenses,
depreciation, and amortization. It has traditionally been the measure used to evaluate a
firm's ability to generate operating profits and to meet its financial and tax obligations.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) - CORRECT
ANSWERS-A measure of operating profitability that is calculated as gross profit less
operating expenses (but not subtracting depreciation and amortization). It first came into
and Correct Answers Latest 2026
Board of directors - CORRECT ANSWERS-A group of individuals that are elected as, or
elected to act as, representatives of the stockholders to establish corporate management-
related policies and to make decisions on major company issues. Such issues include the
hiring/firing of executives, dividend policies, options policies, and executive compensation.
Every public company must have this.
Cash management - CORRECT ANSWERS-The subset of treasury management that
specifically deals with managing the daily liquidity (available cash) of a company or
organization to ensure the company or organization can meet its short-term obligations.
Chief financial officer (CFO) - CORRECT ANSWERS-The senior manager who is
responsible for overseeing the financial activities of an entire company. This includes
signing checks, monitoring cash flow, and financial planning.
Economies of scale - CORRECT ANSWERS-A relationship that occurs when an increase
in sales lowers the average cost per unit sold.
Capital - CORRECT ANSWERS-The more permanent sources of funds used by a
company, such as long-term debt, preferred stock, and common equity.
Chief executive officer (CEO) - CORRECT ANSWERS-The highest ranking executive in a
company whose main responsibilities include developing and implementing high-level
strategies, making major corporate decisions, managing the overall operations and
resources of a company, and acting as the main point of communication between the
board of directors and the corporate operations.
Disaster recovery - CORRECT ANSWERS-The restoration of systems and
communications after an event causes an outage.
Financial planning - CORRECT ANSWERS-An organizational function that involves
determining the need for present and future funding to support operations. An important
part of this function is the forecasting of revenues, income, and external financing required
to support the company's planned growth.
,Liquidity - CORRECT ANSWERS-The ability of an organization to convert assets into cash
quickly and without a significant risk of loss.
Outsourcing - CORRECT ANSWERS-Utilizing a third party to perform all or part of a core
function.
Working capital gap - CORRECT ANSWERS-The time gap between a cash outflow and a
cash inflow.
Independent director - CORRECT ANSWERS-Under New York Stock Exchange
standards, this is a director who has no material relationship with the listed company,
either directly or as a partner, shareholder, or officer of the organization.
Operating cycle - CORRECT ANSWERS-A representation of the flow of funds through a
company from the acquisition of raw materials, through the production cycle and the sale
of products or services, and finally to the collection of payments from customers.
Shared services center (SSC) - CORRECT ANSWERS-A department or operation within a
multiunit organization tasked with supplying multiple business units and their respective
divisions and departments with specialized services, such as information technology (IT),
human resources (HR), or accounts payable (A/P) services. In some companies this
includes day-to-day treasury operations (cash management) and other treasury functions,
which may be operated as this.
Working capital - CORRECT ANSWERS-The sum of a company's current asset accounts
(primarily cash, accounts receivable, and inventory) less the sum of its current liability
accounts (primarily payables and accrual accounts). Also known as net working capital.
Accounting Standards Codification (ASC) - CORRECT ANSWERS-The detailed set of
rules in the United States, referred to as Generally Accepted Accounting Principles, that
are developed, agreed upon, and published in the form of ASC Topics by the Financial
Accounting Standards Board, an independent, self-regulating organization formed in
1973.
Accrual accounting - CORRECT ANSWERS-The accounting approach under which
expenses must be reported when the revenues with which they are associated are
recognized. Long-lived or fixed assets are capitalized (i.e., recorded as assets on the
balance sheet) and depreciated over time because they produce revenues over many
accounting periods. This practice matches an asset's cost to the revenues it produces.
Under the revenue recognition and matching principles, sales are reported even though
,cash has not been received. Similarly, expenses are reported even though cash has not
been paid out.
Accumulated depreciation - CORRECT ANSWERS-An asset account that records the
amount of depreciation previously expensed on a company's assets. It appears on the
asset side of the balance sheet, but it is a source of funds when it increases. While
depreciation is technically a noncash expense (i.e., there is no actual payment for
depreciation), it does have a cash flow impact because it reduces the company's income
taxes by lowering pretax income.
Auditor's opinion - CORRECT ANSWERS-An opinion on a company's financial
statements that is provided by an independent auditor (or audit firm) based on a financial
audit. The purpose of conducting an audit is to produce an audit report in which an
independent audit firm indicates the scope of the audit and renders an opinion regarding
the relevance, completeness, and accuracy of the income statement, statement of
financial position, statement of cash flows, any other statements, and all supporting
material. In addition, the auditor will examine the strengths of the organization's internal
controls and processes. The auditor's opinion does not comment on the company's
financial fitness, but rather on whether the financial statements fairly reflect the company's
financial position and are comparable to prior periods.
Break-even analysis - CORRECT ANSWERS-A type of cost/benefit analysis that
establishes the level of activity at which benefits and costs are equal.
Capital budgeting - CORRECT ANSWERS-The process by which proposed large-dollar
investments in long-term assets are evaluated.
Cash basis accounting - CORRECT ANSWERS-A major accounting method that
recognizes revenues and expenses at the time physical cash is actually received or
disbursed.
Cash conversion efficiency - CORRECT ANSWERS-An efficiency/asset management
ratio that measures how effectively a company has converted sales (or revenues) into
cash. It is computed as cash flow from operations divided by revenues.
Common-size financial statement - CORRECT ANSWERS-A financial statement analysis
technique that involves stating line items as percentages rather than amounts. This
expresses every line item on the statement as a percentage of revenue, and a common-
size balance sheet expresses each account as a percentage of total assets. These enable
direct comparisons of financial data for firms of different sizes.
, Comprehensive income - CORRECT ANSWERS-The sum of net income and other items
that must bypass the income statement because they have not been realized, including
items like an unrealized holding gain or loss from available-for-sale securities and foreign
currency translation gains or losses.
Cost of goods sold (COGS) - CORRECT ANSWERS-The expense associated with
providing the goods or services whose sale is recognized as revenues. It includes labor
and material directly used in manufacturing the product sold, as well as any indirect or
allocated manufacturing expenses.
Coverage ratios - CORRECT ANSWERS-Financial ratios concerned primarily with
measuring a company's ability to make payments on (i.e., service) its debt.
Current asset turnover ratio - CORRECT ANSWERS-An efficiency/asset management
ratio that measures how many times the firm has turned over the stock of its most liquid
assets with the flow of revenue. It is computed as revenues divided by current assets.
Debt management ratio - CORRECT ANSWERS-A type of ratio that measures the firm's
degree of indebtedness and its ability to service its debt.
Debt to tangible net worth ratio - CORRECT ANSWERS-A type of debt management ratio
that reflects the impact of intangible assets (e.g., goodwill, patents, trademarks, and
copyrights) on the balance sheet. It is computed as total debt divided by total equity minus
intangible assets.
Derivative - CORRECT ANSWERS-A financial product that acquires its value by inference
through a formulaic connection to another asset. The other asset is termed the underlying
asset, and can be a financial instrument (e.g., a stock or bond), currency, or commodity.
DuPont equation - CORRECT ANSWERS-An integrated ratio analysis technique that
looks at the return on total assets (ROTA) ratio as a product of the return on sales (i.e., net
profit margin) and total asset turnover.
Earnings before interest and taxes (EBIT) - CORRECT ANSWERS-A measure of
operating income or profit that is calculated as gross profit less operating expenses,
depreciation, and amortization. It has traditionally been the measure used to evaluate a
firm's ability to generate operating profits and to meet its financial and tax obligations.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) - CORRECT
ANSWERS-A measure of operating profitability that is calculated as gross profit less
operating expenses (but not subtracting depreciation and amortization). It first came into
