Where Cash Balances are located . Should the firm have centralized cash management in the home country? Or should the firm let each affiliate handle it locally? Where are borrowing costs lowest and investment returns highest? McGraw-Hilylrwoin 18-5 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-5 Where Cash Balances are Located. ⚫ Should the firm have centralized cash management in the home country? ⚫ Or should the firm let each affiliate handle it locally? ⚫ Where are borrowing costs lowest and investment returns highest?
Cash management Systems in Practice ● Multilateral Netting Is an efficient and cost-effective mechanism for settling interaffiliate foreign exchange transactions o Not all countries allow MNCs to net payments By limiting netting, more unnecessary foreign exchange transactions flow through the local banking system McGraw-Hilylrwoin 18-6 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-6 Cash Management Systems in Practice ⚫ Multilateral Netting ◼ Is an efficient and cost-effective mechanism for settling interaffiliate foreign exchange transactions. ⚫ Not all countries allow MNCs to net payments ◼ By limiting netting, more unnecessary foreign exchange transactions flow through the local banking system
Multilateral Netting Consider a u.s. mnc with three subsidiaries and the following foreign exchange transactions $20 $30 $40 $10$35 $10 $30$40 $25 60 $20 $30 云图 McGraw-Hilylrwoin 18-7 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-7 Multilateral Netting Consider a U.S. MNC with three subsidiaries and the following foreign exchange transactions: $10 $35 $30 $40 $20 $25 $60 $40 $10 $30 $20 $30
Multilateral Netting Bilateral Netting would reduce the number of foreign exchange transactions by half $20 $30 $40 $10$35 $10 $30$40 $25 60 $20 $30 云图 McGraw-Hilylrwoin 18-8 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-8 Multilateral Netting Bilateral Netting would reduce the number of foreign exchange transactions by half: $10 $35 $30 $40 $20 $25 $60 $40 $10 $30 $20 $30
Multilateral Netting Bilateral Netting would reduce the number of foreign exchange transactions by half $10 $40 $10$35 $10 $30$40 $25 60 $20 $30 云图 McGraw-Hilylrwoin 18-9 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 18-9 Multilateral Netting Bilateral Netting would reduce the number of foreign exchange transactions by half: $10 $35 $30 $40 $25 $60 $40 $10 $10 $20 $30