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Manage Working Capital

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The Acme Company is exploring many strategic options. Whichever global business strategy the Acme Company eventually chooses, the firm inevitably will require the services of a bank to help manage its working capital. Many major multinational banks provide a variety of working capital and multinational cash management services.
Some U.S. banks also have international operations. If your company acquired a company in another country, would you choose to bank with a local bank in that country, or would you select a U.S. bank with international operations? Why would you make this selection? A few US banks with international operations are below:
• Bank of America
• Citibank

Different types of foreign exchange exposure faced by the MNC.
The structure of international financial markets and institutions, the range of instruments traded therein.
How do financial management decisions of multinational firms differ from those operations.

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The response addressed the query posted in 731 words with references.

//Banking and finance play very significant role in promoting business and commerce in any developed or developing country. Banking, here, is not only confined to depositing or lending money function, but also includes many other functions. In this context, the following discussion will shed light on roles played by banks in promoting MNCs. //

Banks roles in promoting MNCs:

With industrialization, there has been an immense growth of existing firms and new firms. Now, company's growth directly or indirectly affects the economy of the nation. The economy with more rapid industrial growth is considered to be more developed. This may not be possible without adequate financial resources or financial aids. Due to this reason, more focus is now being given in making financial institutions more dynamic in terms of functions. It has been realized that only depositing and providing loan to MNCs are not sufficient; this has led to expansion of functional areas of banks. Earlier, banks were only providing loans and depository facilities, but now banks provide various other facilities to promote MNCs. The following facilities come under bank services:

Banks provide foreign exchange to promote export and import.

They provide ...

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The response addressed the query posted in 731 words with references.

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Working Capital Management

A) Dan plans to use the preceding ratios as the starting point for discussions with SKI's operating executives. He wants everyone to think about the pros and cons of changing each type of current asset and how changes would interact to affect profits and EVA. Based on the data in the table, does SKI seem to be following a relaxed, moderate, or restricted working capital policy?

b) How can one distinguish between a relaxed but rational working capital policy and a situation where a firm simply has a lot of current asset because it is inefficient? Does SKI's working capital policy seem appropriate?

c) Calculate SKI's cash conversion cycle, assuming all calculations use a 360-day year.

d) What might SKI do to reduce its cash and securities without harming operation?

Q 23-3 What are the advantages of matching the maturities of assets and liabilities? What are the disadvantages?

Q 23-4 From the standpoint of the borrower, is long-term or short-term credit riskier? Explain. Would it ever make sense to borrow on a short-term basis if short-term rates were above long-term rates?

Q 23-5 If long-term credit exposes a borrower to less risk, why would people or firms ever borrow on a short-term basis?

Q 23-9 The availability of bank credit is often more important to a small firm than to a large one. Why?

Mini Case !

a) B&B tries to match the maturity of its assets and liabilities. Describe how B&B could adopt either a more aggressive or more conservative financing policy.

b) What are the advantages and disadvantages of using short-term credit as a source of financing?

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