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A group of companies controlled from the UK includes subsidiaries in Country X, Y and Z. It is forecast

that, at the end of the month, intra-company indebtedness will be as follows:

  • Subsidiary in X will be owed X$144,381,000 by the subsidiary in Y and will owe the subsidiary in Z an amount of Z$1,060,070.
  • Subsidiary in Y will be owed Y$14,438,000 by the subsidiary in Z and will owe it Z$800,000

 

Suppose you are given the following exchange rates:

         X$:£ = 68.10

         Y$:£ = 10.215

         Z$:£ = 1.415

 

What are the net payments to be made in respect of the above balances, and what are the possible advantages and disadvantages of such multilateral netting?

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Subsidiaries in Country X, Y, and, Z Subsidiary X X$144,381,000 Subsidiary Y Y$14,438,000 Subsidiary Z... View the full answer

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