Question 1

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

Accepted Answer

A) $55,000 in 
B) $15,000 out 
C) $0 in or out 
D) $40,000 out 
E) None of the above 
A) $55,000 in 
B) $15,000 out 
C) $0 in or out 
D) $40,000 out 
E) None of the above

Question 2

For a recent month,the following payments matrix of interaffiliate cash flows was forecasted: $$\begin{array} { c | c c c } 
&{ \text { Disbursement From: } } \
\text { Receipts by: } & \text { France } & \text { Britain } & \text { U.S. } \
\hline \text { France } & - & € 500 & € 800 \
\text { Britain } & £ 300 & - & £ 400 \
\text { U.S. } & \$ 1,000 & \$ 500 & -
\end{array}$$ The spot exchange rates are $1.20 = €1.00 and $1.80 = £1.00; affiliates get paid in home currency.Use multilateral netting to find the net payments to and from all parties. Which of the following is an accurate chart of their current situation?

Accepted Answer

A)    
B)    
C)    
D) None of the others. 
A)    
B)    
C)    
D) None of the others.

Question 3

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

Accepted Answer

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

Question 4

Bilateral Netting of Internal and External Net Cash Flows
Your firm's interaffiliate cash receipts and disbursements matrix is shown below ($000): $$\begin{array} { r r c c c c } 
& &{ \text { Disbursements } } \
\text { Receipts } & \text { U.S. } & \text { Canada } & \text { Germany } & \text { U.K. } \
\text { U.S. } & - & 5 & 5 & 5 \
\text { Canada } & 10 & - & 5 & 5 \
\text { Germany } & 10 & 10 & - & 5 \
\text { U.K. } & 10 & 10 & 10 & -
\end{array}$$
-Using your results to the last question,use bilateral netting to simplify.

Accepted Answer

The answer of Bilateral Netting of Internal and External Net...

Question 5

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 6

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

Accepted Answer

@#IMG-DLM& notice that the $5

Question 7

Bilateral netting can reduce the number of foreign exchange transactions among a MNC with N affiliates to

Accepted Answer

A)  $\frac { N ! ( N - 1 ) ! } { 2 }$ or less 
B)  $\frac { N ! } { ( N - 1 ) ! }$ or less 
C)  $\frac { N \times ( N - 1 ) } { 2 }$ or less 
D) None of the above 
A)  $\frac { N ! ( N - 1 ) ! } { 2 }$ or less 
B)  $\frac { N ! } { ( N - 1 ) ! }$ or less 
C)  $\frac { N \times ( N - 1 ) } { 2 }$ or less 
D) None of the above

Question 8

Which one of the following is a false statement when engaged in bilateral netting?

Accepted Answer

A) Total interaffiliate receipts need not always equal total interaffiliate disbursements. 
B) We can reduce the number of foreign exchange transactions among a MNC with N affiliates to $\frac { N \times ( N - 1 ) } { 2 }$ or less. 
C) Each affiliate nets all its interaffiliate receipts against all its disbursements.It then transfers or receives the balance, respectively, if it is a net payer or receiver. 
D) All of the above 
A) Total interaffiliate receipts need not always equal total interaffiliate disbursements. 
B) We can reduce the number of foreign exchange transactions among a MNC with N affiliates to $\frac { N \times ( N - 1 ) } { 2 }$ or less. 
C) Each affiliate nets all its interaffiliate receipts against all its disbursements.It then transfers or receives the balance, respectively, if it is a net payer or receiver. 
D) All of the above

Question 9

Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactions shown at left.Use MULTILATERAL netting 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 10

A central cash manager has a global view of the most favorable borrowing rates and most advantageous investment rates.

Accepted Answer

A) True 
 B)False

Question 11

A netting center necessarily implies that the MNC has a central cash manager.

Accepted Answer

A) True 
 B)False

Question 12

Cash management refers to

Accepted Answer

A) the decision to grant credit to customers or to remain "cash and carry". 
B) the investment the firm has in transaction balances and precautionary balances. 
C) a domestic firm's investment in foreign currency. 
D) none of the above 
A) the decision to grant credit to customers or to remain "cash and carry". 
B) the investment the firm has in transaction balances and precautionary balances. 
C) a domestic firm's investment in foreign currency. 
D) none of the above

Question 13

Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used.

Accepted Answer

A) $250,000 
B) $500,000 
C) $1,000,000 
D) $1,250,000 
A) $250,000 
B) $500,000 
C) $1,000,000 
D) $1,250,000

Question 14

The U.S.IRS allows transfer prices to be set using comparable uncontrolled price method.This method is difficult to apply in practice because many factors enter into the pricing of goods and services.Examples include

Accepted Answer

A) differences in the terms of sale. 
B) differences in quantity and or quality sold. 
C) differences in location or date of sale. 
D) all of the above 
A) differences in the terms of sale. 
B) differences in quantity and or quality sold. 
C) differences in location or date of sale. 
D) all of the above

Question 15

Multinational cash management

Accepted Answer

A) is really no different for a MNC than for a purely domestic firm in a closed economy. 
B) concerns itself with the size of cash balances, their currency denominations, and where these cash balances are located among the MNC's affiliates. 
C) concerns itself with the size of cash balances and their currency denominations, but not where these cash balances are located among the MNC's affiliates, since intra-affiliate default risk is not an issue. 
D) none of the above 
A) is really no different for a MNC than for a purely domestic firm in a closed economy. 
B) concerns itself with the size of cash balances, their currency denominations, and where these cash balances are located among the MNC's affiliates. 
C) concerns itself with the size of cash balances and their currency denominations, but not where these cash balances are located among the MNC's affiliates, since intra-affiliate default risk is not an issue. 
D) none of the above

Question 16

For a recent month,the following payments matrix of interaffiliate cash flows was forecasted: $$\begin{array} { c | c c c } 
& \ { \text { Disbursement From: } } \
\text { Receipts by: } & \text { France } & \text { Britain } & \text { U.S. } \
\hline \text { France } & - & € 500 & € 800 \
\text { Britain } & £ 300 & - & £ 400 \
\text { U.S. } & \$ 1,000 & \$ 500 & -
\end{array}$$ 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 17

On blocked funds strategy is

Accepted Answer

A) transferring personnel from corporate headquarters to the subsidiary offices. 
B) using the national airlines of the host country when possible for the international travel of all MNC executives. 
C) holding business conferences of the MNC in the host country, where all expenses are paid by the local subsidiary. 
D) all of the above 
A) transferring personnel from corporate headquarters to the subsidiary offices. 
B) using the national airlines of the host country when possible for the international travel of all MNC executives. 
C) holding business conferences of the MNC in the host country, where all expenses are paid by the local subsidiary. 
D) all of the above

Question 18

Simplify the following set of intra company cash flows for this Swiss Firm. Use the following exchange rates. $$\begin{aligned}
£ 1.00 & = \$ 2.00 \
€ 1.00 & = \$ 1.50 \
\text { SFr } 1.00 & = \$ 0.80
\end{aligned}$$   The fewest number of intra-affiliate cash flows is

Accepted Answer

A) Zero 
B) One 
C) Two 
D) Three 
E) Four 
A) Zero 
B) One 
C) Two 
D) Three 
E) Four

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

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

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

Bilateral netting can reduce the number of foreign exchange transactions among a MNC with N affiliates to

Which one of the following is a false statement when engaged in bilateral netting?

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

A central cash manager has a global view of the most favorable borrowing rates and most advantageous investment rates.

A netting center necessarily implies that the MNC has a central cash manager.

Cash management refers to

Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used.

The U.S.IRS allows transfer prices to be set using comparable uncontrolled price method.This method is difficult to apply in practice because many factors enter into the pricing of goods and services.Examples include

Multinational cash management

On blocked funds strategy is

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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Exam 19: Multinational Cash Management

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

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

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

Bilateral netting can reduce the number of foreign exchange transactions among a MNC with N affiliates to

Which one of the following is a false statement when engaged in bilateral netting?

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

A central cash manager has a global view of the most favorable borrowing rates and most advantageous investment rates.

A netting center necessarily implies that the MNC has a central cash manager.

Cash management refers to

Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used.

The U.S.IRS allows transfer prices to be set using comparable uncontrolled price method.This method is difficult to apply in practice because many factors enter into the pricing of goods and services.Examples include

Multinational cash management

On blocked funds strategy is

Simplify the following set of intra company cash flows for this Swiss 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

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

Filters