Question 1

Find the net cash flow in (out of)the Canadian affiliate.

Accepted Answer

A) $0 in or out 
B) $20,000 out 
C) $15,000 in 
D) $30,000 out 
E) None of the above 
A) $0 in or out 
B) $20,000 out 
C) $15,000 in 
D) $30,000 out 
E) None of the above A

Question 2

Find the net cash flow in (out of)the German affiliate.

Accepted Answer

A) $0 in or out 
B) $5,000 out 
C) $30,000 in 
D) $30,000 out 
E) None of the above receipts = disbursements 
A) $0 in or out 
B) $5,000 out 
C) $30,000 in 
D) $30,000 out 
E) None of the above receipts = disbursements A

Question 3

"Unbundling fund transfers" from an MNC and to its affiliates refers to the following activity:

Accepted Answer

A) instead of lumping all costs into a single transfer price, for the MNC (parent firm) to recognize the cost of the physical good and each service separately that it provides to its affiliates. 
B) in addition to charging for the cost of the physical good, for the parent firm to charge for technical training of the affiliates' staff, cost of worldwide advertising, royalty, licensing fee, and technology, whenever applicable, to facilitate for the MNC to present and support to the taxing authority of a host country that each charge is legitimate and can be well substantiated. 
C) used for removing blocked funds from a host country that is enforcing foreign exchange restrictions. 
D) all of the above 
A) instead of lumping all costs into a single transfer price, for the MNC (parent firm) to recognize the cost of the physical good and each service separately that it provides to its affiliates. 
B) in addition to charging for the cost of the physical good, for the parent firm to charge for technical training of the affiliates' staff, cost of worldwide advertising, royalty, licensing fee, and technology, whenever applicable, to facilitate for the MNC to present and support to the taxing authority of a host country that each charge is legitimate and can be well substantiated. 
C) used for removing blocked funds from a host country that is enforcing foreign exchange restrictions. 
D) all of the above D

Question 4

If foreign exchange transactions cost ABC 0.45 percent,what savings results from netting?

Accepted Answer

A) S$684 
B) S$765 
C) S$1,449 
D) S$1,823 
A) S$684 
B) S$765 
C) S$1,449 
D) S$1,823

Question 5

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000):  
-Using your results to the last question,use multilateral netting to simplify.

Accepted Answer

@#IMG-DLM& notice that the $5

Question 6

With a CENTRALIZED CASH DEPOSITORY

Accepted Answer

A) There is less chance for an MNC's funds to be denominated in the wrong currency. 
B) The central cash manager has a global view of the MNC's overall cash position. 
C) There is less chance of mislocated funds. 
D) All of the above 
A) There is less chance for an MNC's funds to be denominated in the wrong currency. 
B) The central cash manager has a global view of the MNC's overall cash position. 
C) There is less chance of mislocated funds. 
D) All of the above

Question 7

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000):  
-Fill out the following figure with the initial situation shown in the table.

Accepted Answer

The answer of Your firm's interaffiliate cash receipts and disbursements...

Question 8

A centralized cash management system with a cash pool can reduce the investment the MNC has in precautionary cash balances,saving the firm money.
Multiple Choice Questions

Accepted Answer

A) True 
 B)False

Question 9

For a recent month,the following payments matrix of interaffiliate cash flows was forecasted:   Use multilateral netting to find the net payment from the British affiliate to the U.S.affiliate. The spot exchange rates are $1.20 = €1.00 and $1.80 = £1.00; affiliates get paid in home currency.

Accepted Answer

A) $60 
B) $20 
C) $0 
D) None of the above 
A) $60 
B) $20 
C) $0 
D) None of the above

Question 10

If French-based Affiliate A owes U.S.-based affiliate B $1,000 and Affiliate B owes Affiliate A €2,000 when the exchange rate is $1.50 = €1.00.The net payment between A and B should be closest to

Accepted Answer

A) $2,000 from B to A. 
B) €2,000 from A to B. 
C) $1,000 from B to A. 
D) none of the above 
A) $2,000 from B to A. 
B) €2,000 from A to B. 
C) $1,000 from B to A. 
D) none of the above

Question 11

The U.S.IRS allows transfer prices to be set using comparable uncontrolled price method.This method requires

Accepted Answer

A) finding the price that an unrelated willing seller would accept from an unrelated willing buyer. 
B) the price at which the good is resold by the distribution affiliate is reduced by an amount sufficient to cover overhead costs and a reasonable profit. 
C) an appropriate profit is added to the cost of the manufacturing affiliate. 
D) financial models and econometric techniques. 
A) finding the price that an unrelated willing seller would accept from an unrelated willing buyer. 
B) the price at which the good is resold by the distribution affiliate is reduced by an amount sufficient to cover overhead costs and a reasonable profit. 
C) an appropriate profit is added to the cost of the manufacturing affiliate. 
D) financial models and econometric techniques.

Question 12

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000):  
-Using your results to the last question,use bilateral netting.

Accepted Answer

The answer of Your firm's interaffiliate cash receipts and disbursements...

Question 13

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000):  
-Using your results to the last question,use bilateral netting to simplify.

Accepted Answer

The answer of Your firm's interaffiliate cash receipts and disbursements...

Question 14

Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactions shown at left.Use MULTILATERAL netting WITH A CENTRAL DEPOSITORY to reduce the number of foreign exchange transactions.

Accepted Answer

A)    
B)    
C)    
D) None of the above 
A)    
B)    
C)    
D) None of the above

Question 15

Assuming that the interaffiliate cash flows are uncorrelated with one another,calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members:

Accepted Answer

A) $34,960.33 
B) $139,841.33 
C) $104,880.88 
D) None of the above 
A) $34,960.33 
B) $139,841.33 
C) $104,880.88 
D) None of the above

Question 16

Under multilateral netting

Accepted Answer

A) each affiliate nets all its inter-affiliate receipts against all its disbursements.It then transfers or receives the balance, respectively, if it is the net payer or receiver. 
B) each pair of affiliates determines the net amount due between them, and only the net amount is transferred. 
C) no inter-affiliate payments are made or even computed, since no real cash flows are involved. 
D) all of the above 
A) each affiliate nets all its inter-affiliate receipts against all its disbursements.It then transfers or receives the balance, respectively, if it is the net payer or receiver. 
B) each pair of affiliates determines the net amount due between them, and only the net amount is transferred. 
C) no inter-affiliate payments are made or even computed, since no real cash flows are involved. 
D) all of the above

Question 17

Assuming that the interaffiliate cash flows are uncorrelated with one another,calculate the minimum cash balance to have if the firm follows a conservative policy of having three standard deviations of cash for precautionary purposes.

Accepted Answer

A) $34,960.33 
B) $314,642.65 
C) $104,880.88 
D) None of the above 
A) $34,960.33 
B) $314,642.65 
C) $104,880.88 
D) None of the above

Question 18

Find the net cash flow in (out of)the U.S.affiliate.

Accepted Answer

A) $5,000 in 
B) $5,000 out 
C) $30,000 in 
D) $30,000 out 
E) None of the above 
A) $5,000 in 
B) $5,000 out 
C) $30,000 in 
D) $30,000 out 
E) None of the above

Question 19

The U.S.IRS allows transfer prices to be set using the resale price method.This method requires

Accepted Answer

A) finding the price that an unrelated willing seller would accept from an unrelated willing buyer. 
B) the price at which the good is resold by the distribution affiliate is reduced by an amount sufficient to cover overhead costs and a reasonable profit. 
C) an appropriate profit is added to the cost of the manufacturing affiliate. 
D) financial models and econometric techniques. 
A) finding the price that an unrelated willing seller would accept from an unrelated willing buyer. 
B) the price at which the good is resold by the distribution affiliate is reduced by an amount sufficient to cover overhead costs and a reasonable profit. 
C) an appropriate profit is added to the cost of the manufacturing affiliate. 
D) financial models and econometric techniques.

Question 20

Why can blocked funds can be detrimental to all concerned?

Accepted Answer

A) Host countries want to attract foreign industries that benefit their economic development; blocked funds make MNCs less willing to invest. 
B) MNCs should not be expected to make beneficial investment where they may not be able to receive an appropriate return. 
C) Local competitors may be able to reap monopoly profits. 
D) Both a) and b) 
A) Host countries want to attract foreign industries that benefit their economic development; blocked funds make MNCs less willing to invest. 
B) MNCs should not be expected to make beneficial investment where they may not be able to receive an appropriate return. 
C) Local competitors may be able to reap monopoly profits. 
D) Both a) and b)

Exam 19: Multinational Cash Management

Find the net cash flow in (out of)the Canadian affiliate.

Find the net cash flow in (out of)the German affiliate.

"Unbundling fund transfers" from an MNC and to its affiliates refers to the following activity:

If foreign exchange transactions cost ABC 0.45 percent,what savings results from netting?

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000): -Using your results to the last question,use multilateral netting to simplify.

With a CENTRALIZED CASH DEPOSITORY

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000): -Fill out the following figure with the initial situation shown in the table.

A centralized cash management system with a cash pool can reduce the investment the MNC has in precautionary cash balances,saving the firm money. Multiple Choice Questions

For a recent month,the following payments matrix of interaffiliate cash flows was forecasted: Use multilateral netting to find the net payment from the British affiliate to the U.S.affiliate. The spot exchange rates are $1.20 = €1.00 and $1.80 = £1.00; affiliates get paid in home currency.

If French-based Affiliate A owes U.S.-based affiliate B $1,000 and Affiliate B owes Affiliate A €2,000 when the exchange rate is $1.50 = €1.00.The net payment between A and B should be closest to

The U.S.IRS allows transfer prices to be set using comparable uncontrolled price method.This method requires

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000): -Using your results to the last question,use bilateral netting.

Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000): -Using your results to the last question,use bilateral netting to simplify.

Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactions shown at left.Use MULTILATERAL netting WITH A CENTRAL DEPOSITORY to reduce the number of foreign exchange transactions.

Assuming that the interaffiliate cash flows are uncorrelated with one another,calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members:

Under multilateral netting

Assuming that the interaffiliate cash flows are uncorrelated with one another,calculate the minimum cash balance to have if the firm follows a conservative policy of having three standard deviations of cash for precautionary purposes.

Find the net cash flow in (out of)the U.S.affiliate.

The U.S.IRS allows transfer prices to be set using the resale price method.This method requires

Why can blocked funds can be detrimental to all concerned?

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

International Trade Finance

International Tax Environment and Transfer Pricing

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