UNIVERSITY OF DAR ES SALAAM

BUSINESS SCHOOL
Department of Finance

COURSE FN 307: Treasury Management

Seminar & Review: Cash Pooling, Concentration & Intercompany Netting

Group 10
1. What are the differences between physical and notional pooling?
2. Broadly discuss the four categories of cost associated with pooling that must be assessed
before deciding on using pooling as a technique for efficient cash management.
3. Discuss the reasons as to why treasurers should adopt multilateral netting.
4. Consider the following Monthly amounts in 000s
Payer UK USA Euro Zone Japan
Receiver
UK 867 926 542
USA 1897 1085
Euro Zone 1335 789
Japan 195000 156600
Australia
924
Sport rates verses UK £
UK£/US$ 1.6563
UK£/JPY 217.6
€/UK£/ 0.7093
UK£/AU$ 2.2634
Borrowing costs in UK are 5.5 per cent
Transaction cost are UK pound 6 per transfer
FX spread is 0.01 of 1 per cent
Paying countries pay in the currency of creditor (receiver) country
Required:
a) What is each country net position?
b) What are the annual costs savings from the introduction of a netting system?

NB: Seminar Queations are in Bold.

1
2