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1、Chapter 19Multinational Cash ManagementTrue/False Questions1.Many of the skills necessary for effective cash management are the same regardless of whetherthe firm has only domestic operations or if it operates internationally.True False2.The cash manager of a domestic firm should source funds intern
2、ationally to obtain the lowestborrowing cost and to place excess funds wherever the greatest return can be earned regardlessof currency.True False3.A netting center necessarily implies that the MNC has a central cash manager.True False4.A multilateral netting system is beneficial in reducing the num
3、ber of and the expense associatedwith interaffiliate foreign exchange transactions.True False5.A central cash manager has a global view of the most favorable borrowing rates and mostadvantageous investment rates.True False6.A centralized cash pool assists in reducing the problem of mislocated funds
4、and in fundsmobilization.True False7.A centralized cash management system with a cash pool can reduce the investment the MNChas in precautionary cash balances,saving the firm money.True FalseMultiple Choice Questions8.Efficient cash management techniques canA.reduce the investment in cash balances a
5、nd foreign exchange transaction expenses.B.provide for maximum return from the investment of excess cash.C.result in borrowing at lowest rate when a temporary cash shortage exists.D.all of the above9.Cash management refers toA.the decision to grant credit to customers or to remain cash and carry.B.t
6、he investment the firm has in transaction balances and precautionary balances.C.a domestic firms investment in foreign currency.D.none of the above10.Precautionary cash balancesA.are necessary in case the firm has underestimated the amount of cash need to covertransactions.B.are necessary to cover s
7、cheduled outflows of funds during a cash budgeting period.C.both a and bD.none of the above11.Precautionary cash balancesA.represent an increasingly-important source of interest income for many MNCs.B.are necessary in case the firm has underestimated the amount needed to cover transactions.C.are syn
8、onymous with speculative cash balances.D.none of the above12.Multinational cash managementA.is really no different for a MNC than for a purely domestic firm in a closed economy.B.concerns itself with the size of cash balances,their currency denominations,and where thesecash balances are located amon
9、g the MNCs affiliates.C.concerns itself with the size of cash balances and their currency denominations,but not wherethese cash balances are located among the MNCs affiliates,since intra-affiliate default risk isnot an issue.D.none of the above13.Good cash management boils down toA.investing excess
10、funds at the most favorable interest rate and borrowing at the lowest ratewhen there is a temporary cash shortage.B.investing excess funds at the lowest rate and borrowing at the highest rate when there is atemporary cash shortage.C.hedging currency exposure with judicious use of futures,forwards,an
11、d currency optioncontracts.D.none of the aboveABC Trading Company of Singapore purchases spices in bulk from around the world,packagesthem into consumer size quantities and sells them through sales affiliates in Hong Kong and theUnites States.For a recent month,the following payments matrix of inter
12、affiliate cash flows,stated in Singapore dollars,was forecasted.ABC Trading Company Paxments Matrix(S$000)Disbursements Iv:SingaporeHorg KongU.S.Receipts by:Singapore80110Hong Kong1644U.S.225014.Calculate,in Singapore dollars,the amount that the interaffiliate foreign exchange transaction willbe red
13、uced by with multilateral netting.A.S$152,000B.S$170,000C.S$322,000D.S$405,00015.If foreign exchange transactions cost ABC 0.45 percent,what savings results from netting?A.S$684B.S$765C.S$1,449D.S$1,82316.Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactionsshown
14、 at left.Use BILATERAL netting to reduce the number of foreign exchange transactions byhalf.D.None of the above17.Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactionsshown at left.Use MULTILATERAL netting to reduce the number of foreign exchangetransactions.c.D.
15、None of the above18.Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactionsshown at left.Use MULTILATERAL netting WITH A CENTRAL DEPOSITORY to reduce theD.None of the above19.ABC Trading Company of Singapore purchases spices in bulk from around the world,packagesth
16、em into consumer size quantities and sells them through sales affiliates in Hong Kong and theUnites States.For a recent month,the following payments matrix of interaffiliate cash flows,stated in Singapore dollars,was forecasted.ABC Trading Company Payments Matrix(S$000)Disbursements by:Singapore Hon
17、g Kong U.S.Receipts by:SingaporeHong KongU.S.一 80 11016-4422 50 Which of the following is an accurate chart of their current situation?c.20.Find the net exposure of the U.S.MNC with the following intra affiliate transactions shown:A.$55B.$65C.$800D.None of the above21.Find the net exposure of the Br
18、itish subsidiary of the U.S.MNC with the following intra affiliatetransactions shown:A.$40 outB.$65 inC.20 outD.None of the above22.Benefits of a multilateral netting system include:A.The decrease in the expense associated with funds transfer,which in some cases can be over$1,000 for a large interna
19、tional transfer of foreign exchange.B.The reduction in the number of foreign exchange transactions and the associated cost ofmaking fewer but larger transactions.C.The reduction in intra-company float,which is frequently as high as five days even for wiretransfers.D.The benefits that accrue from the
20、 establishment of a formal information system,which servesas the foundation for centrally managing transaction exposure and the investment of excessfunds.E.All of the above23.With a CENTRALIZED CASH DEPOSITORYA.there is less chance for an MNC*s funds to be denominated in the wrong currency.B.the cen
21、tral cash manager has a global view of the MNCs overall cash position.C.there is less chance of mislocated funds.D.All of the above24.With a CENTRALIZED CASH DEPOSITORYA.a MNC can facilitate fund mobilization.B.system-wide excess cash are invested at the most advantageous rates.C.system-wide cash sh
22、ortages are borrowed at the most advantageous rates.D.all of the above25.Not all countries allow MNCs the freedom to net payments,A.by limiting netting,more needless foreign exchange transactions flow through the local bankingsystem.B.MNCs can avoid these restrictions by using a Centralized Cash Dep
23、ository.C.MNCs can avoid these restrictions by using wire transfers.D.both b and c26.With regard to cash management systems in practice,studies suggest that the benefits of amultilateral netting system includeA.the decrease in the expense associated with funds transfer,which in some cases can be ove
24、r$1,000 for a large international transfer of foreign exchange.B.the savings in administrative time.C.the reduction in intra company float,which is frequently as high as five days,even for wiretransfers.D.all of the above27.Several international banks offer multilateral netting software packages.The
25、se packagesA.calculate the net currency positions of each affiliate.B.can integrate the netting function with foreign exchange exposure management.C.only work on the Mac platform.D.both a and b28.MNCs can reduce their exchange rate expenseA.by using bilateral netting.B.by using a centralized cash ma
26、nagement system.C.by using multilateral netting.D.all of the above29.Which of the following statements about multilateral netting system are correct?(i)-Each affiliate nets all its interaffiliate receipts against all its disbursements(ii)-Each affiliate transfers or receives a balance,depending on w
27、hether it is a net payer orreceiver(iii)-The net funds to be received by the affiliates will equal the net disbursements to be made bythe affiliates(iv)-Only two foreign exchange transactions are necessary since the affiliates*net receipts willalways be equal to zero(v)-Only two foreign exchange tra
28、nsactions are necessary since the affiliates net disbursementswill always be equal to zeroA.(i)and(ii)B.(i),(ii),and(iii)C.(i),(ii),(iii),and(iv)D.(i),(ii),(iii),and(v)30.Assuming that the interaffiliate cash flows are uncorrelated with one another,calculate thestandard deviation of the portfolio of
29、 cash held by the centralized depository for the followingaffiliate members:AffiliateExpectedTransactionsStandardDexiationU.S.$100,000$40.000Canada$150,000$60,000Mexico$175,000$30,000Chile$200,000$70,000A.$34,960.33B.$139,841.33C.$104,880.88D.None of the above31.Assuming that the interaffiliate cash
30、 flows are uncorrelated with one another,calculate theminimum cash balance to have if the firm follows a conservative policy of having three standarddeviations of cash for precautionary purposes.AffiliateExpectedTransactionsStandardI)e iationU.S.$109,000$40.00CCanada$153,000S60.00CMexico$175,000$30.
31、00CChile$209,000$70.00CA.$34,960.33B.$314,642.65C.$104,880.88D.None of the above32.If French-based Affiliate A owes U.S.-based affiliate B$1,000 and Affiliate B owes Affiliate A2,000 when the exchange rate is$1.10=1.00.The net payment between A and B should beA.1,091 from B to A.B.1,091 from A to B.
32、C.$1,200 from B to A.D.None of the above33.For a recent month,the following payments matrix of interaffiliate cash flows was forecasted:Receipts by:Disbursement From:France Britaii U.S.FranceBritainU.S.500 800300 400$1,000$500Use multilateral netting to find the net payment from the British affiliat
33、e to the U.S.affiliate.The spot exchange rates are$1.20=1.00 and$1.80=1.00;affiliates get paid in homecurrency.A.$60B.$20C.$0D.None of the above34.The U.S.IRS allows transfer prices to be set using Comparable uncontrolled price method.Thismethod requiresA.finding the price that an unrelated willing
34、seller would accept from an unrelated willing buyer.B.the price at which the good is resold by the distribution affiliate is reduced by an amountsufficient to cover overhead costs and a reasonable profit.C.an appropriate profit is added to the cost of the manufacturing affiliate.D.financial models a
35、nd econometric techniques.35.The U.S.IRS allows transfer prices to be set using the resale price methodA.finding the price that an unrelated willing seller would accept from an unrelated willing buyer.B.the price at which the good is resold by the distribution affiliate is reduced by an amountsuffic
36、ient to cover overhead costs and a reasonable profit.C.an appropriate profit is added to the cost of the manufacturing affiliate.D.financial models and econometric techniques.36.The U.S.IRS allows transfer prices to be set using the cost plus approachA.finding the price that an unrelated willing sel
37、ler would accept from an unrelated willing buyer.B.the price at which the good is resold by the distribution affiliate is reduced by an amountsufficient to cover overhead costs and a reasonable profit.C.an appropriate profit is added to the cost of the manufacturing affiliate.D.financial models and
38、econometric techniques.37.For a recent month,the following payments matrix of interaffiliate cash flows was forecasted:Disbursement From:Receipts by:FranceBritainU.S.France500800Britain300400U.S.$1.000$500The spot exchange rates are$1.20=1.00 and$1.80=1.00;affiliates get paid in homecurrency.Use mul
39、tilateral netting to find the net payments to and from all parties.Which of the following is an accurate chart of their current situation?A.B.D.None of the others.38.For a recent month,the following payments matrix of interaffiliate cash flows was forecasted:Disbursement From:Receipts by:FranceBrita
40、nU.S.France500F800Britain480300U.S.$600$960The spot exchange rates are$1.20=1.00 and$2.00=1.00;affiliates get paid in homecurrency.Use multilateral netting to find the net payments to and from all parties.Which of the following is an accurate chart of their current situation?U.S.D.None of the others
41、.39.Simplify the following set of intra company cash flows for this U.S.Firm.Use the following exchange rates.1.00=$2.001.00=$1.50SFr 1.00=$0.80The fewest number of intra-affiliate cash flows isA.Zero.B.One.C.Two.D.Three.E.Four.40.Simplify the following set of intra company cash flows for this Swiss
42、 Firm.Use the following exchange rates.1.00=$2.00fl.00=$1,50SFr 1.00=$0.80The fewest number of intra-affiliate cash flows isA.Zero.B.One.C.Two.D.Three.E.Four.41.Which w川 reduce the number of foreign exchange transaction the mostfor a MNC?A.Multilateral nettingB.Bilateral nettingC.Fish nettingD.None
43、of the above42.Under multilateral nettingA.each affiliate nets all its inter-affiliate receipts against all its disbursements.It then transfers orreceives the balance,respectively,if it is the net payer or receiver.B.each pair of affiliates determines the net amount due between them,and only the net
44、 amountis transferred.C.no inter-affiliate payments are made or even computed,since no real cash flows are involved.D.all of the above43.One benefit of a centralized cash depository isA.the MNC*s investment in precautionary cash balances can be substantially reduced without areduction in its ability
45、 to cover unforeseen expenses.B.each affiliate will have greater autonomy in managing its own cash balances.C.exchange rate restrictions can be easily circumvented.D.none of the above44.If French-based Affiliate A owes U.S.-based affiliate B$1,000 and Affiliate B owes Affiliate A2,000 when the excha
46、nge rate is$1.50=1.00.The net payment between A and B should beclosest toA.$2,000 from B to A.B.2,000 from A to B.C.$1,000 from B to A.D.none of the above45.For the U.S.affiliate shown below,net all its inter-affiliate receipts against all its disbursements.Use the following exchange rates.1.00=$2.0
47、0ei.oo=$1.50SFr 1.00=$0.80The net inter-affiliate cash flow for the U.S.affiliate is1135A.$0.B.-$135C.$135.D.$405.E.$90.46.The U.S.IRS allows transfer prices to be set using comparable uncontrolled price method.Thismethod is difficult to apply in practice because many factors enter into the pricing
48、of goods andservices.Examples includeA.differences in the terms of sale.B.differences in quantity and or quality sold.C.differences in location or date of sale.D.all of the above47.Ad valorem are best described asA.an ad valorem duty is a percentage tax levied at customs on the assessed value of the
49、imported good.B.a value-added tax on domestic production.C.a percentage tax levied at customs on the value added by shipping the good.D.none of the above48.According to a recent survey by Ernst and Young,the most important tax issue that multinationalenterprises now face isA.transfer pricing.B.choic
50、e of accounting method to use in preparing consolidated income statements when firmshave subsidiaries in countries with different tax treatments of expense items.C.choice of accounting method to use in preparing consolidated income statements when firmshave subsidiaries in countries with different t