Intercompany debt, both long-term and short-term, arises frequently. In some cases intercorporate borrowings may arise because one affiliate can borrow at a cheaper rate than others, and lending to other affiliates may reduce the overall cost of borrowing. In other cases, intercompany receivables/payables arise because of intercompany sales of goods or services or other types of intercompany transactions.

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a. During the first quarter of 1996, Associates First Capital Corporation incurred a \(\$ 1.75\) billion intercompany debt to Ford FSG. How did this debt arise? Although Ford and Associates First Capital were affiliates in 1996, how has their relationship changed?

b. How does Campbell Soup Company finance its foreign operations?

c. What major problem might arise with intercompany debt between a domestic parent and a foreign subsidiary or between subsidiaries in different countries? How has Hershey Foods dealt with this problem?

d. Did the intercompany loans of Hershey Foods arise because of direct loans or because of intercompany sales of goods and services on credit?