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ACCA Strategic Professional · Advanced Financial Management · Management of international trade and finance

A group has the following intra-group balances at the settlement date, all translated into GBP: Subsidiary A owes Subsidiary B GBP 500,000; B owes C GBP 300,000; C owes A GBP 400,000; A owes C GBP 100,000. Under multilateral netting, what is the net position of Subsidiary A?

Subsidiary A is a net payer of GBP 200,000. It owes 600,000 in total (500,000 to B and 100,000 to C) and is owed 400,000 by C. Multilateral netting settles only this net amount through the netting centre.

  1. AA pays GBP 200,000Correct
  2. BA pays GBP 600,000
  3. CA receives GBP 200,000
  4. DA pays GBP 100,000

Explanation

A pays 500,000 to B and 100,000 to C, total payments 600,000. A receives 400,000 from C. Net: A pays 200,000. Check: B receives 500,000 and pays 300,000 so net receives 200,000; C receives 300,000+100,000=400,000 and pays 400,000 so nets zero. Totals reconcile.

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