Chapter Eighteen Multinational cash Management 18 Chapter objective This chapter discusses various issues associated with multinational cash management
INTERNATIONAL FINANCIAL MANAGEMENT EUN / RESNICK Second Edition 18 Chapter Eighteen Multinational Cash Management Chapter Objective: This chapter discusses various issues associated with multinational cash management
Chapter outline e The management of Multinational Cash balances o Cash management Systems in Practice o Transfer Pricing related Issues ● Blocked Funds McGraw-Hilylrwoin 18-1 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-1 Chapter Outline ⚫ The Management of Multinational Cash Balances ⚫ Cash Management Systems in Practice ⚫ Transfer Pricing & Related Issues ⚫ Blocked Funds
The Management of International Cash balances o The size of cash balances o The currency denomination Where these cash balances are located McGraw-Hilylrwoin 18-2 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-2 The Management of International Cash Balances ⚫ The size of cash balances ⚫ The currency denomination ⚫ Where these cash balances are located
The size of cash balances e The optimal size of the firms cash balances depend upon The cost of keeping too much cash on han oi.e. the opportunity costs of holding cash The cost of not keeping enough cash on hand oi. e the trading costs associated with having too little cash The variability of cash flows McGraw-Hilylrwoin 18-3 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-3 The Size of Cash Balances ⚫ The optimal size of the firm’s cash balances depend upon: ◼The cost of keeping “too much” cash on hand. ◆i.e. the opportunity costs of holding cash ◼The cost of not keeping enough cash on hand. ◆i.e. the trading costs associated with having too little cash ◼The variability of cash flows
Choice of currency o By maintaining cash balances in a particular currency, the mnc is essentially speculating(or hedging? in that currency McGraw-Hilylrwoin 18-4 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-4 Choice of Currency ⚫ By maintaining cash balances in a particular currency, the MNC is essentially speculating (or hedging?) in that currency