International Finance Unit 6-Currency Risk Management/Unit 7

Currency Risk exists whenever we are due to receive or pay a quantity in a foreign currency in a few months’ time and do not know what the price of this currency will be when that happens.
Cash Management refers to the investment the firm has in transaction balances to cover scheduled outflows of funds during a cash budgeting period and the funds the firm has tied up in precautionary cash balances.
Precautionary cash balances necessary in case the firm has underestimated the amount needed to cover trans- actions.
Cash budget Is a plan detailing the time and the size of expected cash receipts and dis- bursements.
Interafilliate Transactions effectively represent taking money out of one pocket of the MNC and putting it into another
bilateral netting system each pair of affiliates determines the net amount due between them, and only the net amount is transferred.
multilateral netting system each affiliate nets all its interaffiliate receipts against all its disbursements. It then transfers or receives the balance, respectively, if it is a net payer or receiver.
netting center manager determines the amount of the net payments and which affiliates are to make or receive them
Transfer Price Book value assigned to a product or service to be moved from one subsidiary to another.

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