Question 1

Not all countries allow MNCs the freedom to net payments,

Accepted Answer

Some countries may require MNCs to ask for permission or restrict netting. Option A is incorrect as it only mentions three countries and their netting policies. Option C is also incorrect as netting is generally considered a cost-effective way to reduce transaction costs for MNCs. Option D is incorrect as option C is not correct.

Question 2

Bilateral netting can reduce the number of foreign exchange transactions among a MNC with N affiliates to

Accepted Answer

The answer of Bilateral netting can reduce the number of...

Question 3

Mislocated funds are defined as:

Accepted Answer

The answer of Mislocated funds are defined as:
...

Question 4

Find the net cash flow in (out of) the Canadian affiliate.

Accepted Answer

The answer of Find the net cash flow in (out...

Question 5

Find the net cash flow in (out of) the U.K. affiliate.

Accepted Answer

The answer of Find the net cash flow in (out...

Question 6

Find the net cash flow in (out of) the German affiliate.

Accepted Answer

The answer of Find the net cash flow in (out...

Question 7

Find the net cash flow in (out of) the U.K. affiliate.

Accepted Answer

From the table given in the question, we can calculate the net cash flow by subtracting the total cash outflows from the total cash inflows. 
Total cash inflows = $155,000 ($100,000 from parent company and $55,000 from U.K. customers)
Total cash outflows = $195,000 ($150,000 to U.S. suppliers and $45,000 for operating expenses)
Net cash flow = Total cash inflows - Total cash outflows = $155,000 - $195,000 = -$40,000
Since the net cash flow is negative (-$40,000), it means that there is more cash flowing out of the U.K. affiliate than flowing into it. So, the correct answer is D) $40,000 out.

Question 8

Find the net cash flow in (out of) the Canadian affiliate.

Accepted Answer

The net cash flow is calculated by subtracting the cash outflows from the cash inflows. If the net result is negative, it indicates a cash outflow. In this case, the net cash flow is $15,000 out.

Question 9

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

Accepted Answer

The answer of Which one of the following is a...

Question 10

Find the net cash flow in (out of) the German affiliate.

Accepted Answer

From the table, we can see that the German affiliate had a cash outflow of 50,000 for investment in new equipment, and a cash inflow of only 20,000 from operating activities. Therefore, the net cash flow is (50,000 - 20,000) = 30,000 out. So, option C is correct.

Question 11

The formula for the standard deviation of cash held by the centralized depository for N affiliates is

Accepted Answer

The formula for standard deviation assumes that the interaffiliate cash flows have a correlation coefficient of 0. This means that there is no linear relationship between the cash flows of the affiliates, which is the standard assumption made in finance when estimating standard deviation. If the correlation coefficient is -1 or +1, it suggests that the cash flows of the affiliates are perfectly negatively or positively correlated respectively, which is not a realistic assumption.

Question 12

Find the net cash flow in (out of) the U.S. affiliate.

Accepted Answer

The net cash flow is $5,000 in because the U.S. affiliate received $30,000 from the parent company and paid out $25,000 in dividends.

Question 13

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 larger precautionary cash balance increases the firm's ability to meet unexpected expenses (A), reduces the risk of financial embarrassment and loss of credit standing (B), but also increases the potential opportunity cost due to idle cash not being invested (C).

Question 14

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

Accepted Answer

The number of foreign exchange transactions cannot always be reduced to a specific number (such as 11ea736f_4360_c242_8d35_7138eda32bec_TB2454_11_TB2454_11) as it depends on the number of affiliates and their respective transactions. A) and C) are true statements about bilateral netting.

Question 15

Find the net cash flow in (out of) the Canadian affiliate.

Accepted Answer

The answer of Find the net cash flow in (out...

Question 16

Find the net cash flow in (out of) the U.S. affiliate.

Accepted Answer

The net cash flow is $55,000 in. This is because the U.S. affiliate has a net income of $40,000 and depreciation of $15,000.

Question 17

Some countries allow interaffiliate transactions to be settled only on a gross basis. That is,

Accepted Answer

Inter-affiliate transactions settled on a gross basis means that all receipts and disbursements for a settlement period must be grouped into a single large receipt and payment respectively. This is the definition given in option A. Option B is incorrect because it suggests that each transaction is handled individually, which is not the case with gross settlement. Option C suggests that netting occurs before settlement, which is not the case with gross settlement. Option D describes net settlement, which is not the same as gross settlement.

Question 18

Find the net cash flow in (out of) the German affiliate.

Accepted Answer

The net cash flow is $0 in or out, indicating that the inflows and outflows are balanced.

Question 19

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

Accepted Answer

The answer of Which one of the following is a...

Question 20

Find the net cash flow in (out of) the U.S. affiliate.

Accepted Answer

The answer of Find the net cash flow in (out...

Quiz 19: Multinational Cash Management

Not all countries allow MNCs the freedom to net payments,

Bilateral netting can reduce the number of foreign exchange transactions among a MNC with N affiliates to

Mislocated funds are defined as:

Find the net cash flow in (out of) the Canadian affiliate.

Find the net cash flow in (out of) the U.K. affiliate.

Find the net cash flow in (out of) the German affiliate.

Find the net cash flow in (out of) the U.K. affiliate.

Find the net cash flow in (out of) the Canadian affiliate.

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

Find the net cash flow in (out of) the German affiliate.

The formula for the standard deviation of cash held by the centralized depository for N affiliates is

Find the net cash flow in (out of) the U.S. 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?

Find the net cash flow in (out of) the Canadian affiliate.

Find the net cash flow in (out of) the U.S. affiliate.

Some countries allow interaffiliate transactions to be settled only on a gross basis. That is,

Find the net cash flow in (out of) the German affiliate.

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

Find the net cash flow in (out of) the U.S. affiliate.