Definition
CFT and CMT are shipping terms in the field of finance that pertain to the transportation cost of goods. CFT stands for Cubic Feet, a volume measurement unit widely used in shipping for calculating the size and cost of the shipment. On the other hand, CMT is an acronym for Carriage and Insurance Paid To, a shipping term denoting that the seller pays the freight and insurance to deliver goods to a location decided by the buyer.
Key Takeaways
- The Certified Financial Technician (CFT) focuses on technical analysis and trading, emphasizing practical market knowledge and the ability to apply technical analysis skills in various financial markets such as stocks, commodities, and currencies.
- The Chartered Market Technician (CMT) requires rigorous study and the clearing of three levels of exams, similar to the CFA (Chartered Financial Analyst) structure. The program provides a deep understanding of technical analysis, behavioral finance, and risk management.
- While both certifications focus on understanding and applying technical analysis, the primary difference is the depth and structure of the programs. CMT is often recognized as more comprehensive and globally recognized, while the CFT can be seen as more practically oriented with a focus on trading strategies.
Importance
The financial terms CFT (Cost and Freight) and CMT (Cost, Manufacturing, and Transportation) are crucial in understanding costs associated with international trade and manufacturing businesses, respectively. CFT, a term used in international trade, includes the cost of purchasing goods and the freight to transport those goods to the buyer’s specified port, but not the insurance costs.
Therefore, when negotiating an international trade deal, it gives the buyer a clear understanding of the expenses up to the point of destination port. On the other hand, CMT, used in outsourcing or manufacturing industries, encompasses all costs involved in manufacturing a product in addition to transportation charges, allowing businesses to calculate break-even prices efficiently, budgeting, and comprehensive understanding of total production expenses.
Hence, both CFT and CMT are essential components in ensuring transparent, effective, and accurate cost calculation in their respective realms.
Explanation
CFT, which stands for Commodity Futures Trading, pertains to a contract that agrees to buy or sell a set amount of a commodity at a predetermined price and date. CFTs are used by producers to offset the risk of price fluctuations in the commodities they produce. They are also used by speculators in an attempt to profit off price movements.
Commodities encompass a broad range of products such as grains, gold, oil, natural gas, and more. These contracts offer a method of risk management, helping secure pricing stability for producers, suppliers, and consumers alike. On the other hand, CMT, or Certified Management Accountant, is an advanced professional certification particularly designed for financial professionals and management accountants.
CMTs are experts in the area of financial planning, analysis, control, and decision support, among other areas. The certification is often sought after by professionals who manage business finances, since the CMT certification ensures that the individual has a thorough understanding of both financial and non-financial management responsibilities. It serves as a benchmark of competency in the field and provides a competitive edge in the evolving world of business.
Examples of CFT Vs CMT
The terms CFT and CMT refer to different types of financial transactions. CFT stands for Commodity Futures Trading, while CMT stands for Certified Management Accountant. However, let’s assume you meant CMT as Constant Maturity Treasury which is a set measurement used in the bond market. Here are three real-world examples of these terms:
Commodity Futures Trading(CFT):A company like Starbucks, that needs large quantities of coffee beans, might use CFT. They might enter into a contract to buy a certain amount of coffee beans at a fixed price for delivery in the future. This helps them to hedge against potential price increases in coffee beans.
Constant Maturity Treasury(CMT):A bank might use the 1-year CMT rate as a benchmark for setting the interest rate on a variable-rate mortgage. This means that the mortgage’s rate will be adjusted each year based on changes in the 1-year CMT rate.
Another example of CMT usage, U.S. Treasury Department releases a yield curve based on CMT rates. The curve provides a benchmark for various debt in the market such as mortgage rates or bond interest rates. This helps lenders to compare the maturity and yields of their offerings with those of the U.S. government’s treasury offerings. In general, CFT and CMT are used by different types of businesses for a variety of reasons. Companies that require specific commodities to operate may use CFT to control costs, while those in the financial industry might use CMT as a benchmark for setting interest rates.
Frequently Asked Questions: CFT Vs CMT
What does CFT mean in finance?
CFT stands for Commodity Futures Trading. It is a financial concept that involves future contracts for commodities such as oil, corn, wheat, gold, and more. These contracts are legal agreements to buy or sell a commodity at a predetermined price at a specified time in future.
What does CMT mean in finance?
CMT stands for Chartered Market Technician. It is a professional designation for technical analysts of financial markets. The certification involves demonstrating proficiency in a broad range of topics in investment risk in portfolio management.
How does CFT differ from CMT?
While CFT involves dealing with commodities futures, CMT is a professional designation given to financial market analysts. A CFT is an agreement to trade a specific commodity in future, whereas a CMT is a certified professional who analyzes and interprets market trends.
Is a CFT a type of financial instrument?
Yes, a Commodity Futures Trading (CFT) is a type of financial instrument. It is a contractual agreement to buy or sell a specific commodity at a predetermined price at a specified time in the future.
What work does a CMT professional do?
A Chartered Market Technician (CMT) uses technical analysis to predict the future price direction of stocks, bonds, commodities, and other financial instruments. They may be employed by investment firms, hedge funds, or other finance-related organizations.
Related Entrepreneurship Terms
- Futures Contract: A standardized legal agreement to buy or sell something at a predetermined price at a specific future date.
- Physical Delivery: The transfer of the underlying asset of a futures contract to the contract holder on its expiration.
- Cash Market Trading (CMT): Trading in securities where delivery is taken immediately at the market price.
- Cash Forward Trading (CFT): An agreement to buy or sell an asset where delivery and payment occur at a future date.
- Settlement Price: The average price at which a contract trades, calculated at both the open and close of each trading day.
Sources for More Information
- Investopedia: An extensive resource offering definitions of terms and articles on a variety of financial issues, including CFT and CMT.
- Corporate Finance Institute (CFI): A certified provider of online financial training, with a wide range of articles and tutorials on financial topics including CFT and CMT.
- Wall Street Mojo: This website covers a broad spectrum of financial topics, including in-depth insights into CFT and CMT.
- The Balance: A personal finance website with comprehensive coverage on a variety of finance topics, including CFT and CMT.
