CH21InternationalCashManagement(国际金融管理,英.ppt

,International Cash Management,21,Chapter,South-Western/Thomson Learning 2003,Chapter Objectives,To explain the difference between a subsidiary perspective and a parent perspective in analyzing cash flows;To explain the various techniques used to optimize cash flows;To explain common complications in optimizing cash flows;andTo explain the potential benefits and risks of foreign investments.,Cash Flow Analysis:Subsidiary Perspective,The management of working capital has a direct influence on the amount and timing of cash flow:inventory managementaccounts receivable managementcash managementliquidity management,Subsidiary ExpensesInternational purchases of raw materials or supplies are more likely to be difficult to manage because of exchange rate fluctuations,quotas,etc.If the sales volume is highly volatile,larger cash balances may need to be maintained in order to cover unexpected inventory demands.,Cash Flow Analysis:Subsidiary Perspective,Subsidiary RevenueInternational sales are more likely to be volatile because of exchange rate fluctuations,business cycles,etc.Looser credit standards may increase sales(accounts receivable),though often at the expense of slower cash inflows.,Cash Flow Analysis:Subsidiary Perspective,Subsidiary Dividend PaymentsForecasting cash flows will be easier if the dividend payments and fees(royalties and overhead charges)to be sent to the parent are known in advance and denominated in the subsidiarys currency.,Cash Flow Analysis:Subsidiary Perspective,Subsidiary Liquidity ManagementAfter accounting for all cash outflows and inflows,the subsidiary must either invest its excess cash or borrow to cover its cash deficiencies.If the subsidiary has access to lines of credit and overdraft facilities,it may maintain adequate liquidity without substantial cash balances.,Cash Flow Analysis:Subsidiary Perspective,Centralized Cash Management,While each subsidiary is managing its own working capital,a centralized cash management group is needed to monitor,and possibly manage,the parent-subsidiary and intersubsidiary cash flows.International cash management can be segmented into two functions:optimizing cash flow movements,andinvesting excess cash.,Cash Flow of the Overall MNC,Centralized Cash Management,The centralized cash management division of an MNC cannot always accurately forecast the events that may affect parent-subsidiary or intersubsidiary cash flows.It should,however,be ready to react to any event by consideringany potential adverse impact on cash flows,andhow to avoid such adverse impacts.,Techniques to OptimizeCash Flows,Accelerating Cash InflowsThe more quickly the cash inflows are received,the more quickly they can be invested or used for other purposes.Common methods include the establishment of lockboxes around the world(to reduce mail float)and preauthorized payments(direct charging of a customers bank account).,Minimizing Currency Conversion CostsNetting reduces administrative and transaction costs through the accounting of all transactions that occur over a period to determine one net payment.A bilateral netting system involves transactions between two units,while a multilateral netting system usually involves more complex interchanges.,Techniques to OptimizeCash Flows,Intersubsidiary Payments Matrix,Managing Blocked FundsA government may require that funds remain within the country in order to create jobs and reduce unemployment.The MNC should then reinvest the excess funds in the host country,adjust the transfer pricing policy(such that higher fees have to be paid to the parent),borrow locally rather than from the parent,etc.,Techniques to OptimizeCash Flows,Managing Intersubsidiary Cash TransfersA subsidiary with excess funds can provide financing by paying for its supplies earlier than is necessary.This technique is called leading.Alternatively,a subsidiary in need of funds can be allowed to lag its payments.This technique is called lagging.,Techniques to OptimizeCash Flows,Complicationsin Optimizing Cash Flows,Company-Related CharacteristicsWhen a subsidiary delays its payments to the other subsidiaries,the other subsidiaries may be forced to borrow until the payments arrive.Government RestrictionsSome governments may prohibit the use of a netting system,or periodically prevent cash from leaving the country.,Characteristics of Banking SystemsThe abilities of banks to facilitate cash transfers for MNCs may vary among countries.The banking systems in different countries usually differ too.,Complicationsin Optimizing Cash Flows,Investing Excess Cash,Excess funds can be invested in domestic or foreign short-term securities,such as Eurocurrency deposits,bills,and commercial papers.Sometimes,foreign short-term securities have higher interest rates.However,firms must also account for the possible exchange rate movements.,Short-Term Interest Rates,Centralized Cash ManagementCentralized cash management allows for more efficient usage of funds and possibly higher returns.When multiple currencies are involved,a separate pool may be formed for each currency.The investment securities may also be denominated in the currencies that will be needed in the future.,Investing Excess Cash,Determining the Effective YieldThe effective rate for foreign investments rf=(1+if)(1+ef)1whereif=the quoted interest rate on the investmentef=the%D in the spot rateIf the foreign currency depreciates over the investment period,the effective yield will be less than the quoted rate.,Investing Excess Cash,Implications of Interest Rate Parity(IRP)A foreign currency with a high interest rate will normally exhibit a forward discount that reflects the differential between its interest rate and the investors home interest rate.However,short-term foreign investing on an uncovered basis may still result in a higher effective yield.,Investing Excess Cash,Use of the Forward Rate as a ForecastIf IRP exists,the forward rate can be used as a break-even point to assess the short-term investment decision.The effective yield will be higher if the spot rate at maturity is more than the forward rate at the time the investment is undertaken,and vice versa.,Investing Excess Cash,Use of the Forward Rate as a Forecast,*as compared to the yield for domestic investments,Use of Exchange Rate ForecastsGiven an exchange rate forecast,the expected effective yield of a foreign investment can be computed,and then compared with the local investment yield.It may be useful to use probability distributions instead of point estimates,or to compute the break-even exchange rate that will equate foreign and local yields.,Investing Excess Cash,Diversifying Cash Across CurrenciesIf an MNC is not sure of how exchange rates will change over time,it may prefer to diversify its cash among securities that are denominated in different currencies.The degree to which such a portfolio will reduce risk depends on the correlations among the currencies.,Investing Excess Cash,Use of Dynamic Hedging to Manage CashDynamic hedging refers to the strategy of hedging when the currencies held are expected to depreciate,and not hedging when they are expected to appreciate.The overall performance is dependent on the firms ability to accurately forecast the direction of exchange rate movements.,Investing Excess Cash,Current interest rates and exchange rates are available at http:/rate and exchange rate forecasts can be found at http:/,Online Application,Impact of International Cash Managementon an MNCs Value,Cash Flow Analysis:Subsidiary PerspectiveSubsidiary ExpensesSubsidiary RevenueSubsidiary Dividend PaymentsSubsidiary Liquidity ManagementCentralized Cash Management,Chapter Review,Chapter Review,Techniques to Optimize Cash FlowsAccelerating Cash InflowsMinimizing Currency Conversion CostsManaging Blocked FundsManaging Intersubsidiary Cash Transfers Complications in Optimizing Cash FlowsCompany-Related CharacteristicsGovernment RestrictionsCharacteristics of Banking Systems,Chapter Review,Investing Excess CashHow to Invest Excess CashCentralized Cash ManagementDetermining the Effective YieldImplications of Interest Rate ParityUse of the Forward Rate as a ForecastUse of Exchange Rate ForecastsDiversifying Cash Across CurrenciesUse of Dynamic Hedging to Manage Cash,Chapter Review,Impact of International Cash Management on an MNCs Value,