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CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management

In treasury management, the term 'netting' in the context of a multinational group's cash management refers to:

Netting means offsetting inter-company receivables and payables within a group so that only the net balance is settled. This reduces the number of transfers, bank charges and foreign exchange conversion costs. Speeding up cheque collection is a different technique, concentration or lockbox banking.

  1. AOffsetting inter-company receivables and payables so that only the net amount is settledCorrect
  2. BInvesting surplus cash only in government securities
  3. CBorrowing from several banks at the same time to reduce interest cost
  4. DSpeeding up collection of cheques through post-office boxes

Explanation

Netting is a technique where mutual inter-unit receivables and payables are set off and only the net balance is transferred, reducing transaction and conversion costs. Lockbox-type collection speed-up is a separate float-reduction technique, so the last option is wrong.

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