Scribd Logo
Upload

Welcome to Scribd!

  • 4K views

    International Cash Management

    Uploaded by

    Sushil Regmi
    The presentation discussed techniques for optimizing international cash flows, such as accelerating cash inflows, managing blocked funds, leading and lagging payments, and netting transactions between subsidiaries. It also covered minimizing taxes on cash flows and investing excess funds. The objective is to control cash resources efficiently, achieve optimum utilization, and minimize currency and country risks across a multinational corporation's subsidiaries.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    International Cash Management

    Uploaded by

    Sushil Regmi
    4K views21 pages
    The presentation discussed techniques for optimizing international cash flows, such as accelerating cash inflows, managing blocked funds, leading and lagging payments, and netting transactions between subsidiaries. It also covered minimizing taxes on cash flows and investing excess funds. The objective is to control cash resources efficiently, achieve optimum utilization, and minimize currency and country risks across a multinational corporation's subsidiaries.

    Original Description:

    international cash management by sushil regmi

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The presentation discussed techniques for optimizing international cash flows, such as accelerating cash inflows, managing blocked funds, leading and lagging payments, and netting transactions between subsidiaries. It also covered minimizing taxes on cash flows and investing excess funds. The objective is to control cash resources efficiently, achieve optimum utilization, and minimize currency and country risks across a multinational corporation's subsidiaries.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    4K views21 pages

    International Cash Management

    Uploaded by

    Sushil Regmi
    The presentation discussed techniques for optimizing international cash flows, such as accelerating cash inflows, managing blocked funds, leading and lagging payments, and netting transactions between subsidiaries. It also covered minimizing taxes on cash flows and investing excess funds. The objective is to control cash resources efficiently, achieve optimum utilization, and minimize currency and country risks across a multinational corporation's subsidiaries.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 21

    INTERNATIONAL CASH

    MANAGEMENT

    Presented By:
    Sushil Regmi
    MBA (Finance)
    Flow of presentation
    Objectives
    Centralized perspective of cash flow analysis
    Benefit of centralised cash system
    Techniques to optimize cash flows
    Accelerating cash inflows
    Managing Blocked Funds
    Leading and lagging
    Netting
    Minimizing tax on cash flow
    Investing excess cash
    OBJECTIVES
    To manage and control the cash resources of the
    company as quickly and efficiently as possible.
    Achieve the optimum utilization and conservation
    of the funds.
    The first one can be achieved by:
     Improving the cash collections & disbursements
     By accurate and timely forecast of cash flow
    pattern
    The second objective by:
     Making money available when and where it is
    needed
     Minimising the required level of cash balances
     Increasing the risk adjusted return on funds that
    can be invested
    OBJECTIVES
    Minimise the currency exposure risk.
    Minimise the country and political risk.
    Minimise the overall cash requirement of the
    company as a whole without disturbing the
    smooth operation of subsidiary or its affiliate.
    Minimise the transaction costs.
    Full benefits of economies of scale as well as
    the benefit of superior knowledge.

    CENTRALIZED PERSPECTIVE
    OF CASH FLOW ANALYSIS
    Centralised cash management group is needed
    to monitor and manage the parent subsidiary
    and intersubsidiary cash flows.
    Centralisation refers to centralisation of
    information, reports and more specifically the
    decision making process as to cash
    mobilization, movement and investment
    outlets.
    This role is critical since it can often benefit
    individual subsidiaries in need of funds or
    overly exposed to exchange rate risk.
    Benefit of centralised
    cash system
    Maintaining minimum cash balance during the
    year.
    Helping the centre to generate maximum
    possible return by investing all cash
    resources optimally.
    Judiciously manage the liquidity requirements
    of centre.
    Helping centre to take complete advantage of
    netting.
    Optimally utilizing the various hedging
    strategies to minimize the foreign exchange
    exposure.
    Achieve max. utilization of transfer pricing
    mechanism to enhance the profitability and
    Cash flow of overall mnc
    Interest and/or principal on
     excess cash invested by subsidiary Purchase of
    securities
    Loans
     Short term securities
    Funds recd. From
    sales of
    Subsidiary 1 securities
    Ex Long term
    be ces investment
    in s c
    ve a s
    Long term projects
    st h
    ed t o
    Parent
    Funds for
    supplies

    Repayment on loans
    sh
    ca

    Sources of debt
    ed
    ss

    Loans
    st
    to xc e

    ve
    in
    E
    be

    Subsidiary 2 Fees and part Funds paid by new


    Of earnings Stock issues

    Sources of debt
    Loans Cash dividends

    Interest and/or principal on


    excess
    Techniques to optimize cash
    flows
    Accelerating cash inflows
    Managing blocked funds
    Leading and lagging
    Netting
    Minimizing tax on cash flow
    Accelerating cash inflows
    The more quickly the inflows are received, the
    more quickly they can be invested or used for
    other purposes
    MNC may establish lockboxes around the world
    Preauthorized payment, which allows a
    corporation to charge a customer’s bank
    account up to some limit
    Online payment solution
    Managing Blocked Funds
    In some cases, the host country may block
    funds that the subsidiary attempts to send to
    the parent.
    The parent may instruct the subsidiary to
    obtain financing from a local bank rather than
    from the parent
    Prior to making a capital investment in a
    foreign subsidiary, the parent firm should
    investigate the potential of future fund
    blockage.
    The various methods for moving blocked funds
    are transfer pricing strategies, leading and
    LEADING AND LAGGING
    Used to optimise cash flow movements by
    adjusting the timing of payment to reflect
    expectations about future currency
    movements.
    MNCs can accelerate (lead) the timing of
    foreign currency payments by modifying the
    credit terms extended by one unit to another.
    It is adopted by MNCs in order to reduce
    foreign exchange exposure or to increase
    available working capital.
    Co. generally accelerate the hard currency
    payables and delay the payments of soft
    currency payables so as to reduce foreign
    exchange exposure.
    It is also a means of shifting liquidity among
    affiliates and the technique depends on
    opportunity cost of both the paying unit and
    the receipient.
    NETTING
    Netting, is a technique of optimising cash flow
    movements with the joint effort of
    subsidiaries.
    It involves the reduction of administration and
    transaction costs that result from currency
    conversion.
    Netting is of two type:
    Bilateral netting system and multilateral
    netting system
    BILATERAL NETTING
    It involves transaction between the parent and
    a subsidiary or between two subsidiaries.

    MULTILATERAL NETTING

    Under this system, each affiliate nets all its


    interaffiliate receipts against all its
    disbursements.
    It then transfer or receives the balance,
    depending on whether it is a net receiver or a
    payer.
    Bilateral netting: an
    Example
     Bilateral Netting would reduce the number of
    foreign exchange transactions by half:

    $2
    $1
    0$ 3
    0
    0
    $4
    0$ 2 0 $1
    $1
    $ 1$ 2$ 3 5 $ 3 $0 1$04 0
    0 5 5 $2 0
    5 $60
    $2
    $0$ 13
    00
    Multilateral Netting: an
    Example
    Consider simplifying the bilateral netting with

    multilateral netting:

    $ 1$ 01 $1
    0 5
    $$$$44324 $1
    $$11$$21 0000 5 $10
    55 50
    $1
    0
    $1
    0
    Netting with Central
    Depository
    Some firms use a central depository as a cash

    pool to facilitate funds mobilization and reduce


    the chance of misallocated funds.

    $55 $15
    Central
    deposito
    ry
    $40
    Netting with Central
    Depository
    Some firms use a central depository as a cash

    pool to facilitate funds mobilization and reduce


    the chance of misallocated funds.

    $55 $15
    Central
    deposito
    ry
    $40
    Minimizing tax on cash
    flow
    MNC must consider the tax consequences of
    altering its cash flow
    Another possible strategy to deal with such
    high taxation is to adjust the transfer pricing
    policy
    Some limitations on an adjustment in the
    transfer pricing policy
    Financing strategy may be used to deal with
    high taxation
    Establishment of a reinvoicing center
    Investing excess cash
    Treasury Bills
    Govt. agency notes
    Demand deposits
    Time deposits
    Deposits with NBFCs
    Certificate of deposits
    Commercial paper
    Temporary corporate loans

    BIBLIOGRAPHY
    International Financial Management
    • EUN / RESNICK

    International Financial Management


    • MADHU VIZ

    Multinational Financial Management


    • ALAN C. SHAPIRO

    You might also like