MultinationalFinancialManagement（跨国公司财务管理）ch19Short-TermFinancingManagingCurrentAssets.ppt

1、CHAPTER 19,Short-Term Financing: Managing Current Assets,PART 1International Cash Management,INTERNATIONAL CASH MANAGEMENT,I.INTERNATIONAL CASH MANAGEMENT A.Seven Key Areas Involve Issues about 1.Organization 2.Collection/Fund Disbursement 3.Interaffiliate Payments 4. Investment of Excess Funds 5.Op

2、timal Global Cash Balances 6.Cash Planning/Budgeting 7.Bank Relations,INTERNATIONAL CASH MANAGEMENT,B.Goals of an International Cash Manager: similar to domestic manager 1.Quick and efficient cash control 2.Optimal conservation and usage response,INTERNATIONAL CASH MANAGEMENT,Issue (#1): Centralize

3、Organization 1.Advantages: a.Efficient liquidity levels b.Enhanced profitability c.Quicker headquarter,INTERNATIONAL CASH MANAGEMENT,1.Advantages (cont) d.Decision making enhanced e.Better volume currency quotes f.Greater cash management expertise g.Less political risk,INTERNATIONAL CASH MANAGEMENT,

4、Issue (#2): Collection/Disbursement of Funds 1.Key Element: Accelerate collections 2.Acceleration Methods: a.Electronic fund transfers b.Mobilization centers,INTERNATIONAL CASH MANAGEMENT,3.Methods to Expedite Cash Payments a.Wire cash transfers b.Establish accounts in clients bank c.Negotiate with

5、banks - obtain value dating,INTERNATIONAL CASH MANAGEMENT,Issue (#3): Interaffiliate Payments Use Payments Netting 1.Definition: -offset payments of affiliate receivables/payables -net amounts only are transferred.,INTERNATIONAL CASH MANAGEMENT,2.Create Netting Center a.set up a subsidiary in a loca

6、tion with minimal exchange controls b.Coordinate interaffiliate payment flows c.Netting Centers value: a direct function of the volume of transfers.,INTERNATIONAL CASH MANAGEMENT,Issue (#4): Excess Funds Investment 1.Major task:a.determine minimum cash balances b.short-term investment of excess bala

7、nces,INTERNATIONAL CASH MANAGEMENT,2.Requirements: a.Forecast of cash needs b.Knowledge of minimum cash position,INTERNATIONAL CASH MANAGEMENT,3.Investment Selection Criteria: a.Degree of Government regulations b.Market structure c.Leniency of Foreign tax laws,INTERNATIONAL CASH MANAGEMENT,Issue (#5

8、) Optimal Global Cash Balances 1.Establish centrally managed cashpool 2.Require affiliates to hold minimum amounts,INTERNATIONAL CASH MANAGEMENT,3.Benefits of Optimal Global Cash Balances a.Less outside borrowing needed b.More excess fund for investment c.Reduced internal expense d.Reduced currency

9、exposure,INTERNATIONAL CASH MANAGEMENT,Issue (#6) Cash Planning and Budgeting,INTERNATIONAL CASH MANAGEMENT,Issue (#7) Bank Relations 1.Good Relations Will Avoid a.Lost interest income b.Overpriced services c.Redundant services,INTERNATIONAL CASH MANAGEMENT,2.Common Bank Relations Problems a.Too man

10、y banks b.High costs such as compensating balances c.Inadequate reporting d.Excessive clearing delays,ACCOUNTS RECEIVABLE MANAGEMENT,II.ACCOUNTS RECEIVABLE MANAGEMENT A.Trade Credits extended in anticipation of profit by 1.expanded sales volume 2.retaining existing customers,ACCOUNTS RECEIVABLE MANA

11、GEMENT,B.Credit Terms Should Consider 1.Sales force customer selection criteria 2.Adjusting sales bonuses for cost of credit sales.,INVENTORY MANAGEMENT,III.INVENTORY MANAGEMENT A.Problems: MNCs seem to have more difficulties due to 1.Long,variable transits 2.Lengthy customs procedures,INVENTORY MAN

12、AGEMENT,B.Issue: Production Location 1.Overseas location may lead to higher inventory carrying costs due to a.larger amounts of work-in- process b.more finished goods 2.Why?,INVENTORY MANAGEMENT,C.Subsidiary Practice known as: AdvancedInventory Purchases or inventory stockpiling,INVENTORY MANAGEMENT

13、,D.Reason for Stockpiling: reduce risk of shipping delays Results of Stockpiling: Higher carrying costs F.Solution to higher carrying costs: Adjust affiliates profit margins to reflect added costs.,CHAPTER 19,PART 2 Short-Term Financing,SHORT-TERM FINANCING,IV.SHORT-TERM FINANCING A.Strategy 1.Ident

14、ify: 3 key factors 2.Formulate/evaluate:objectives 3.Describe: available options 4.Develop a methodology: to calculate/compare costs,EIR = The Effective Interest Rate,SHORT-TERM FINANCING,B.Key Factors 1. Deviations from Intl Fisher Effect? a. If yes trade-off required between cost and exchange risk

15、 b. If no costs are same everywhere,SHORT-TERM FINANCING,2.Does Interest Rate Parity Hold? a.Yes. Currency is irrelevant. b.No. Cover costs may differ -added risk may mean the forward premium/discount does not offset interest rate differentials.,SHORT-TERM FINANCING,3.Political Risk: If high, a.MNCs

16、 should 1.)maximize local financing. 2.)Faced with confiscation or currency controls, fewer assets at risk,SHORT-TERM FINANCING OBJECTIVES,C.Short-Term Financing Objectives 1.Possible Objectives: a.Minimize expected cost. b.Minimize risk without regard to cost.,SHORT-TERM FINANCING OBJECTIVES,D.Shor

17、t-Term Financing Options 1.Three Possibilities a.Inter-company loans b.Local currency loans c.Euro market,SHORT-TERM FINANCING OBJECTIVES,2.Local Currency Financing: Bank Loans a.Short-term in nature What is the role of cleanup clause? b.Forms of Local Currency bank loans 1.)Term loans 2.)Line of cr

18、edit 3.) Discounting,EFFECTIVE INTEREST RATE,3.Calculating Interest Costs a.Effective interest rate (EIR): - most efficient measure of cost b.Basic formula: EIR = Annual Interest Paid Funds Received,EFFECTIVE INTEREST RATE,Sample Problem #1 Pro Logic Co. receives a loan for $10,000 at 11% interest p

19、ayable at maturity at the end of one year. What is the EIR? EIR=$1,100(10,000 x.11) $10,00010,000 =11%,EFFECTIVE INTEREST RATE,Sample Problem #2Discounting the loan Pro Logic Co. receives a loan for $10,000 at 11% on a discounted basis for one year. What is the EIR? EIR=$1,100(10,000 x.11) $8,90010,000-1100 =1100 8900 =12.4%,EFFECTIVE INTEREST RATE,Sample Problem #3: Compensating Balances Pro Logic Co. receives a loan for $10,000 at 11% with a 15% compensati