Exam 19: Multinational Cash Management

A firm keeps a precautionary cash balance to cover unexpected transactions during the budget period.The size of this balance depends on how safe the firm desires to be in its ability to meet unexpected transactions.

In reference to establishing "transfer prices" between the affiliates of an MNC,which of the following relates to the "resale" price approach?

Many of the skills necessary for effective cash management are the same regardless of whether the firm has only domestic operations or if it operates internationally.

The formula for the standard deviation of cash held by the centralized depository for N affiliates is $\sqrt { ( \text { Std. Dev. Affiliate } 1 ) ^ { 2 } + ( \text { Std. Dev. Affiliate } 2 ) ^ { 2 } + \cdots + ( \text { Std. Dev. Affiliate } N ) ^ { 2 } }$

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

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.

Precautionary cash balances

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

Bilateral Netting of Internal and External Net Cash Flows Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000): Disbursements Receipts U.S. Canada Germany U.K. U.S. - 5 5 0 Canada 10 - 5 0 Germany 10 10 - 5 U.K. 0 10 10 - -Using your results to the last question,use multilateral netting to simplify.

Benefits of a multilateral netting system include:

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

Assume that Y pays a tax deductible tariff of 7 percent on imported merchandise.Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used.

Which of the following statements about transfer pricing is true?

Simplify the following set of intra company cash flows for this U.S.Firm. Use the following exchange rates. £1.00 =\ 2.00 1.00 =\ 1.50 SFr 1.00 =\ 0.80 The fewest number of intra-affiliate cash flows is

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

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

Bilateral Netting of Internal and External Net Cash Flows 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

Why can blocked funds can be detrimental to all concerned?

Simplify the following set of intra company cash flows for this Swiss Firm. Consider the following exchange rates.