Payments Netting in Multinational Cash Management

Abstract

Lintock Corporation is a small multinational enterprise with a holding company and main operating subsidiary located in the United Kingdom, together with wholly-owned subsidiaries in France, Switzerland and Italy. At the end of June 1989, debts owed as between the British, French, Swiss and Italian subsidiaries were all translated into sterling at a common set of exchange rates. This enabled the following table to be drawn up, showing the amounts owed in units of £10 000. By way of illustration, note that the table shows the French subsidiary to have indebtedness to the British subsidiary of £190 000, while the British subsidiary’s indebtedness to the French subsidiary amounts to £230 000.