Question

Firms generally prefer that each foreign subsidiary hold cash balances at a centralized depository rather than holding it themselves

A TRUE
B FALSE

Answer 1

Firms generally prefer that each foreign subsidiary hold cash balances at a centralized depository rather than holding it themselves. This statement is true.

Step-by-step explanation:

Firms generally prefer that each foreign subsidiary hold cash balances at a centralized depository rather than holding it themselves.

This statement is TRUE.

There are several reasons why firms prefer this arrangement:

1. Efficiency: By centralizing cash balances at a depository, firms can better manage their cash and have a clearer picture of their overall financial position.
2. Risk Management: Having cash balances at a centralized depository helps to reduce the risk of loss or theft. It also allows for better monitoring and control of cash flows.
3. Cost Savings: By centralizing cash balances, firms can take advantage of economies of scale and negotiate better terms with financial institutions.

Overall, holding cash balances at a centralized depository provides firms with better financial control, risk management, and cost savings.