A centralized cash management system with a cash pool can reduce the investment the MNC has in precautionary cash balances,saving the firm money.

Question

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A centralized cash management system allows MNCs to consolidate their cash balances into a single account, known as a cash pool. This reduces the need for precautionary cash balances held by individual subsidiaries, as any short-term cash needs can be covered by the cash pool. This can save the firm money by reducing the amount of cash tied up in precautionary balances.

A Centralized Cash Management System with a Cash Pool Can