What are some factors that make cash management more complicated in a multinational corporation than in a purely domestic corporation?

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What are some factors that make cash management more complicated in a multinational corporation than in a purely domestic corporation?

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What are some factors that make cash management more complicated in a multinational corporation than in a purely domestic corporation?

Explanation & AnswerSolution by a verified expert

Explanation

The basic objective of the cash management is to ensure sufficient liquidity of the firm throughout the course of the business. It is not tedious to manage cash for a domestic company, but when it comes to managing the cash of the foreign business then it's a complicated operation. The monetary policies of the host countries may restrict its foreign currency transactions, thereby limiting the flow of cash to the parent country. The unfavourable foreign economic conditions may lead to less movement of cash in the host country and thus it may slow down the process of cash collection. The unfavorable banking system in the host country, may lead to unavailability of funds in the times of urgency. Thus, these factors make the management of cash for a multinational corporation more difficult than for a purely domestic business.

Verified Answer

Factors that make cash management difficult for a multinational corporation include restrictions on foreign cash flows, unfavourable banking system and financial instability of foreign countries.

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