Working capital management CH INT FIN Prob 1 Super - Do, K.K., the Japanese subsidiary of a U.S. company has V100,000,000 in accounts receivable for sales billed to customers on terms of 2/30 n/60 . Customers usually pay in 30 days . Super - Do also has V60,000,000 of accounts payable billed to it on terms of 3/10 m/60 . Super - Do delays payment until the last minute because it is normally short of cash . Super -Do ,K. K. normally carries an average cash balance for transactions of V30,000,000 . Should Super Do utilize the suppliers cash incentive or 60 day payment plan if the company can borrow at 10 % for the short termt ? Prob 2 Alpine Ski Company of Grenoble , France , manufactures and sells in France , Switzerland and Italy , and also maintains a corporate account in Frankfurt , Germany . Alpine has been setting separate operating cash balance in each country at a level equal to expected cash needs plus two standard deviations above those needs , based on a statistical analysis of cash flow volatility . Expected operating cash needs and one standard deviation of those needs are as follows . Alpine's Frankfurt bank suggests that the same level of safety could be maintained if all precautionary balances were combined in a central account at the Frankfurt headquarters 1. How much lower would Alpine Ski Company's total cash balances be if all precautionary balances were combined ? Assume cash needs in each country are normally d distributed and are independent of each other . b. What other advantages might accrue to Alpine Ski Company from centralizing its cash holdings ? Are these advantages realistic ? Expected One Country of subsidiary cash need standard deviation Switzerland E 5,000,000 E 1,000,000 Italy 3,000,000 400,000 France 2,000,000 300,000 Germany 800,000 40,000