Multinational Cash Management

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Question 1
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True/False

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.

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Question 2
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The cash manager of a domestic firm should source funds internationally to obtain the lowest borrowing cost and to place excess funds wherever the greatest return can be earned regardless of currency.

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Question 3
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A netting center necessarily implies that the MNC has a central cash manager.

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Question 4
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True/False

A multilateral netting system is beneficial in reducing the number of and the expense associated with interaffiliate foreign exchange transactions.

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Question 5
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A central cash manager has a global view of the most favorable borrowing rates and most advantageous investment rates.

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Question 6
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A centralized cash pool assists in reducing the problem of mislocated funds and in funds mobilization.

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Question 7
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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

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True
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Question 8
Multiple Choice

Efficient cash management techniques can

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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
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Question 9
Multiple Choice

Cash management refers to

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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
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Question 10
Multiple Choice

Precautionary cash balances

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A
are necessary in case the firm has underestimated the amount of cash need to cover transactions.
B
are necessary to cover scheduled outflows of funds during a cash budgeting period.
C
both a) and b)
D
none of the above
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Question 11
Multiple Choice

Precautionary cash balances

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A
represent an increasingly-important source of interest income for many MNCs.
B
are necessary in case the firm has underestimated the amount needed to cover transactions.
C
are synonymous with speculative cash balances.
D
none of the above
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Question 12
Multiple Choice

Multinational cash management

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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
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Question 13
Multiple Choice

Good cash management boils down to

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A
investing excess funds at the most favorable interest rate and borrowing at the lowest rate when there is a temporary cash shortage.
B
investing excess funds at the lowest rate and borrowing at the highest rate when there is a temporary cash shortage.
C
hedging currency exposure with judicious use of futures, forwards, and currency option contracts.
D
none of the above
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Question 14
Multiple Choice

Calculate,in Singapore dollars,the amount that the interaffiliate foreign exchange transaction will be reduced by with multilateral netting.

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A
S$152,000
B
S$170,000
C
S$322,000
D
S$405,000
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Question 15
Multiple Choice

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

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A
S$684
B
S$765
C
S$1,449
D
S$1,823
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Question 16
Multiple Choice

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

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A
image
B
image
C
image
D
None of the above
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Question 17
Multiple Choice

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. image

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A
image
B
image
C
image
D
None of the above
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Question 18
Multiple Choice

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. image

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A
image
B
image
C
image
D
None of the above
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Question 19
Multiple Choice

ABC Trading Company of Singapore purchases spices in bulk from around the world,packages them into consumer size quantities and sells them through sales affiliates in Hong Kong and the Unites States.For a recent month,the following payments matrix of interaffiliate cash flows,stated in Singapore dollars,was forecasted. image Which of the following is an accurate chart of their current situation?

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A
image
B
image
C
image
D
image
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Question 20
Multiple Choice

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

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A
$55
B
$65
C
$800
D
None of the above
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