Chat with AIExam 19: Working Capital Management
Central depositories are used for international cash management. What is a central depository? Identify and provide examples of at least three advantages to MNEs of having a central depository.
(89) 
VerifiedA central depository for cash management allows the parent firm to manage cash in a manner that maximizes the benefit to the entire firm rather than specific affiliates. Typically, a firm will order each affiliate to maintain only those cash balances necessary for its own transactions and to forward the balance to a centralized location.
The central depository is typically located in a world money center where it has ready and inexpensive access to information. Central depositories can reduce the size of total precautionary funds for the MNE. If the need for precautionary funds by the affiliates is not perfectly correlated, a central pool of funds will be smaller than if each of the affiliates independently held their desired precautionary balances.
Managers of a central pool of funds can seek out the lowest costs for borrowing required funds, and the highest rates for parking excess cash more efficiently than can affiliate managers who may be limited by local laws as to where they can put their funds. Finally, location is important for either cost purposes, such as low taxes or a physically central presence, or for access to information.
An Edge Act corporation is a subsidiary of a U.S. bank located outside of the U.S. and incorporated to engage in international banking and financing operations.
(90) VerifiedFalse
In an inflationary economy, demand for credit usually exceeds supply.
(80) VerifiedTrue
Which of the following is NOT a precautionary motive for holding cash?
(91) Because they are direct payments, dividends are among the most efficient way for foreign subsidiaries to remit funds back to the parent.
(74) For disbursement purposes, it is to the benefit of the firm to minimize float.
(64) Increases to cash flows can be anticipated if which of the following occurs?
(79) Amundsen of Norway receives raw materials from their corporate parent in the U.S. with payment terms of net 60 days. Most of their sales are to firms in Norway where normal payment terms are net 30 days. This causes a problem for the subsidiary with working capital management because:
(76) The period in the cash cycle where the customer places the order, and the firm determines what materials for manufacture are NOT in inventory is called the ________ period.
(75) The operating cycle begins with the quotation period and ends with the accounts payable period.
(76) If all investment inputs are unbundled, part of what might have been classified as residual profits may turn out to be tax-deductible expenses related to a specific purchased benefit.
(79) In anticipation of a foreign exchange loss, an MNE may speed up the transfer of funds out of the company via dividends. When undertaking such an activity the MNE must be concerned with all of the following EXCEPT:
(90) A significant problem with centralized cash depositories is that they are isolated from the rest of the firm and tend to be at an information disadvantage.
(90) The before-tax/after-tax distinction is quite significant to a parent company attempting to repatriate funds in the most tax-efficient method if it is attempting to manage its own foreign tax credit/deficits between foreign units.
(83) TABLE 19.1
Use the information to answer following question(s).
TrinityApps Corporation Balance Sheet December 31, 20xx 
-Refer to Table 19.1. The NWC for TrinityApps is:
-Refer to Table 19.1. The NWC for TrinityApps is: (78) A foreign banking office that is separately incorporated in the host country is:
(76) ________ allows a multinational firm to recover funds from subsidiaries without piquing host country sensitivities over large dividend drains.
(84) 
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