Question

Can anyone answer the question and explain it thx alot

1. Treasurers of multinationals will likely demand more cash management services when a) foreign exchange markets are relatively calm b) foreign exchange transactions costs rise c) inflation rates are relatively low d) telecommunications costs rise 2. Which of the following is NOT an advantage of a centralized international cash management program. a) Pools of excess liquidity are eliminated b) Financing costs can be reduced c) Information at the level of the operating unit is better utilized d) Cash management is decentralized 3. All of the following are major forms of bank financing EXCEPT a) overdrafts b) factoring c) discounting d) term loans 4. Netting can do all of the following EXCEPT a) reduce foreign exchange risk b) reduce foreign exchange costs c) reduce float d) reduce individual cable charges

Answer 1

1. a

More cash management services will be needed when foreign markets are calm because that would lead to more foreign trade which would result in more inflow and outflow of cash.

2. d

Centralized international cash management helps in centralizing the international transactions rather than decentralizing cash management.

3. b

Factoring is a financial transaction or type of debtor finance but is not a type of bank.

4. d

Netting is used to offset multiple payments that are exchanged between two or more parties. It reduces float, foreign exchange costs and risks but not individual cable charges.

5. c

Cash in advance is the most secure payment for the exporter although it is not widely used because the buyer cannot inspect the goods before making the payment

6. c

Forfeiting is when an exporter (Caterpillar) wants to receive immediate cash by selling the long-term receivable (promissory note that the Polish firm owes to Caterpillar) at a discount through an intermediary (Deutsche Bank)

7. d

Letter of credit is when an economic guarantee is given in an international transaction from a bank to an exporter.