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 inter-affiliate cash flows,stated in Singapore dollars,was forecasted. $$\begin{array} { | l | c | c | c | }
\hline{ \text { ABC Trading Company Puyments Matrix (S\$000) } } \
\hline &{ \text { Disbursements by: } } \
\hline & \text { Sinqupore } & \text { Hang Kong } & \text { U.S. } \
\hline \text { Receipts by: } & & & \
\hline \text { Bingapore } & & 80 & 110 \
\hline \text { Hong Kong } & 16 & & 44 \
\hline \text { U.S. } & 22 & 50 & \
\hline
\end{array}$$ Calculate,in Singapore dollars,the amount that the inter-affiliate foreign exchange transaction will be reduced by with multilateral netting.

Question

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 inter-affiliate cash flows,stated in Singapore dollars,was forecasted. $$\begin{array} { | l | c | c | c | } 
\hline{ \text { ABC Trading Company Puyments Matrix (S\$000) } } \
\hline &{ \text { Disbursements by: } } \
\hline & \text { Sinqupore } & \text { Hang Kong } & \text { U.S. } \
\hline \text { Receipts by: } & & & \
\hline \text { Bingapore } & & 80 & 110 \
\hline \text { Hong Kong } & 16 & & 44 \
\hline \text { U.S. } & 22 & 50 & \
\hline
\end{array}$$ Calculate,in Singapore dollars,the amount that the inter-affiliate foreign exchange transaction will be reduced by with multilateral netting.

Quizplus · Accepted Answer

Multilateral netting reduces the total inter-affiliate cash flows by offsetting payments and receipts among the affiliates. The total payments without netting are S$322,000 (80+110+16+44+22+50). After netting, the remaining transactions are S$152,000 (Singapore to U.S. 110 - 22 = 88, Hong Kong to U.S. 44 - 50 = -6, Singapore to Hong Kong 80 - 16 = 64). The reduction is S$322,000 - S$152,000 = S$170,000.

ABC Trading Company of Singapore Purchases Spices in Bulk from Around