Working capital management in the multinational corporations

The firms? being able to continue their activities in an uninterrupted manner and their capability of making use of profitable investment opportunities can be possible by means of the implementation of an efficient cash management. Investments should be realized in terms of the working capital in such a way that the value of the firm should be rendered as maximum. While the working capital management is a difficult task even for the national firms; this task turns out to be more difficult for the multinational companies with exchange rate and political risks. Both the number and the amount of the exchange- related transactions are reduced by means of the central cash pool management and clearance system and thus cost and time saving can be in question. Moreover, cash availability kept by the multinational companies for reserve purposes is reduced to the minimum level and this renders it possible to make use of more cash in terms of financial instruments. For the central management to be more effective, it ought to be active in a country of which financial market is quite developed in terms of the convenience and cost of the fund transfers and making use of more funds as well.The currency unit and term of sales attach importance within the setting of the credit management of the multinational companies. While the multinational companies prefer to sell their goods through strong monetary units, they may also have an inclination to prolong the sales term by using a currency of which value would be increased or to shorten the sales term by means of a currency of which value would be decreased after all.If the devaluation of the local currency is expected in the stock management of the multinational companies; amount of the goods stocked can be increased before such a devaluation occurs. Apart from this, exemption might be acquired in terms of certain customs duties and taxes by making use of the Free Trade Zones in sales transactions.In-house banks are also in question apart from the classical credit institutions amongst the financing resources of the working capital. In the in-house banking implementation, the affiliates bestow their excessive cash in this institution and on the other hand, the affiliates with cash requirements use credit from this institution.Briefly, the difference in the working capital composition of the multinational corporations renders it obligatory to employ different techniques. By means of working capital management, the amount of cash kept for discretion purposes will be reduced to the minimum level; amount of the open positions exposed to the risk of exchange rate shall be reduced; a natural protection shall be achieved by making the forward sales through strong currencies; transaction exposure shall be tried to be reduced by curtailing the terms of forward sales by means of the insubstantial currencies; the most proper time for purchasing the goods to be stocked shall be determined in accordance with the possibility of devaluation/ revaluation of the local currency.