Question

Discuss how the following aspects differ for a domestic firm and a multinational firm:

Cash management

Credit management

Inventory management

Use Walt Disney (DIS) for illustration

Can someone please answer these aspects using information and data from DIS and a link to the references. Much appreciated

Answer 1

Differences between domestic & multinational companies:

Cash management in case of domestic companies has the following objectives:

• Bringing the cash resources of the company within control as early & efficiently as possible – this requires adequate forecasting, improving cash collections, reducing the cost of moving funds etc.
• Achievement of optimum conservation & utilization of these funds – this can be achieved by minimizing the cash balances.

Cash management in case of MNC’s:

This is influenced by many factors like multiple tax jurisdictions, multiple currencies & exchange facilities for cash moving from one place to another. However advanced techniques of management help MNC’s to take advantage of various benefits in different countries. All this will help in increasing the overall returns & reducing the level of cash & marketable securities.

Credit management:

Credit management in a mnc is more difficult when compared to a domestic company. It is difficult to evaluate the credit worthiness of the customers in case of mnc’s when compared to domestic companies. Apart from default risk, mnc’s will have to bother about the fluctuating currency rates during the receivables. They can hedge the risk but it can cost to the company. But for better business, the mnc’s are required to grant credit to its customers when compared to domestic companies.

Inventory management:

Like credit management, inventory management for mnc’s are difficult when compared to domestic companies. The key issues can be on the choice of physical location of inventories. The other criteria are the level of inventory that has to be maintained. This choice is difficult to be decided.

references:

https://books.google.co.in/books?id=hleyL7OKn4UC&pg=PA939&lpg=PA939&dq=credit+management+differs+for+domestic+%26+multinational+firm?&source=bl&ots=HfzJd1NHaZ&sig=oH-RmjHd4gjyGW1-FLDyPAgVMjI&hl=en&sa=X&ved=0ahUKEwjdkLGwxp7cAhVVfn0KHZcrAw8Q6AEIsQEwEQ#v=onepage&q=credit%20management%20differs%20for%20domestic%20%26%20multinational%20firm%3F&f=false

https://www.mbaknol.com/international-finance/centralized-cash-management-operations-of-multinational-corporations/