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Chapter 21
International Cash Management
Lecture Outline
Multinational Working Capital Management
Subsidiary Expenses
Subsidiary Revenue
Subsidiary Dividend Payments
Subsidiary Liquidity Management
Centralized Cash Management
Accommodating Cash Shortages
Optimizing Cash Flows
Accelerating Cash Inflows
Minimizing Currency Conversion Costs
Managing Blocked Funds
Managing Intersubsidiary Cash Transfers
Complications in Optimizing Cash Flows
Investing Excess Cash
Benefits from Investing in a Foreign Currency
Risk f Investing in a Foreign Currency Hedging the Investment in a Foreign Currency
Break-even Point from Investing in a Foreign Currency
Using a Probability Distribution to Enhance the Investment Decision
Dynamic Hedging
Chapter Theme
This chapter emphasizes the decisions involved in the management of cash by an MNC. The additional
opportunities and risks of cash management for an MNC versus a domestic firm should be stressed.
There are actually three key components of the chapter. The first is distinguishing between subsidiary
control over excess cash versus centralized control. An argument is made in favor of centralized control.
The second component is optimizing cash flow. Several techniques are recommended to optimize cash
flow. Finally, the decision of where to invest excess cash should be discussed with consideration of all
factors that need to be incorporated for this decision.
