Question 1

Find the net cash flow in (out of) the Canadian 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 2

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 3

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.

Accepted Answer

A) The larger the precautionary cash balance, the greater is the firm's ability to meet unexpected expenses. 
B) The larger the precautionary cash balance, the less is the risk of financial embarrassment and loss of credit standing. 
C) The larger the precautionary cash balance, the greater the potential opportunity cost. 
D) All of the above 
A) The larger the precautionary cash balance, the greater is the firm's ability to meet unexpected expenses. 
B) The larger the precautionary cash balance, the less is the risk of financial embarrassment and loss of credit standing. 
C) The larger the precautionary cash balance, the greater the potential opportunity cost. 
D) All of the above

Question 4

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   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   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 5

Ad valorem duties are best described as

Accepted Answer

A) an ad valorem duty is a percentage tax levied at customs on the assessed value of the imported good. 
B) a value-added tax on domestic production. 
C) a percentage tax levied at customs on the value added by shipping the good. 
D) none of the above 
A) an ad valorem duty is a percentage tax levied at customs on the assessed value of the imported good. 
B) a value-added tax on domestic production. 
C) a percentage tax levied at customs on the value added by shipping the good. 
D) none of the above

Question 6

Using your results to the last question, use multilateral netting to simplify.

Accepted Answer

Notice that the $5 t

Question 7

Several international banks offer multilateral netting software packages. These packages

Accepted Answer

A) calculate the net currency positions of each affiliate. 
B) can integrate the netting function with foreign exchange exposure management. 
C) only work on the Mac platform. 
D) both a and b 
A) calculate the net currency positions of each affiliate. 
B) can integrate the netting function with foreign exchange exposure management. 
C) only work on the Mac platform. 
D) both a and b

Question 8

Using your results to the last question, use bilateral netting to simplify.

Accepted Answer

The answer of Using your results to the last question,...

Question 9

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 10

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 11

Fill out the following figure with the initial situation shown in the table.

Accepted Answer

The answer of Fill out the following figure with the...

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

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

Find the net exposure of the British subsidiary of the U.S. MNC with the following intra affiliate transactions shown:

Accepted Answer

A) $40 out 
B) $65 in 
C) ₤20 out 
D) None of the above 
A) $40 out 
B) $65 in 
C) ₤20 out 
D) None of the above

Question 16

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

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 17

Using your results to the last question, use bilateral netting to simplify.

Accepted Answer

The answer of Using your results to the last question,...

Question 18

Efficient cash management techniques can

Accepted Answer

A) reduce the investment in cash balances and foreign exchange transaction expenses. 
B) provide for maximum return from the investment of excess cash. 
C) result in borrowing at lowest rate when a temporary cash shortage exists. 
D) all of the above 
A) reduce the investment in cash balances and foreign exchange transaction expenses. 
B) provide for maximum return from the investment of excess cash. 
C) result in borrowing at lowest rate when a temporary cash shortage exists. 
D) all of the above

Question 19

"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

Question 20

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

Accepted Answer

Step 1: Convert all cash flows

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 U.K. affiliate.

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.

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

Ad valorem duties are best described as

Using your results to the last question, use multilateral netting to simplify.

Several international banks offer multilateral netting software packages. These packages

Using your results to the last question, use bilateral netting to simplify.

Multinational cash management

With a CENTRALIZED CASH DEPOSITORY

Fill out the following figure with the initial situation shown in the table.

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

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

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.

Find the net exposure of the British subsidiary of the U.S. MNC with the following intra affiliate transactions shown:

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

Using your results to the last question, use bilateral netting to simplify.

Efficient cash management techniques can

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

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

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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