11. Quinlan Company (France). The following events take place. March 1: Quinlan Company seeks a sale at
Question:
11. Quinlan Company (France). The following events take place. March 1: Quinlan Company seeks a sale at a price of 10,000,000 for items to be sold to a long-standing client in Poland. To achieve the order, Quinlan offered to denominate the order in zlotys (Z), Poland's currency, for Z20,000,000. This price was arrived at by multiplying the euro price by Z2.00/, the exchange rate on the day of the quote. The zloty is expected to fall in value by 0.5% per month versus the euro. April 1: Quinlan receives an order worth Z20,000,000 from that customer. On the same day, Quinlan places orders with its vendors for 4,000,000 of components needed to complete the sale. May 1: Quinlan receives the components and is billed 4,000,000 by the vendor on terms of 2/20, net 60. During the next two months, Quinlan assigns direct labor to work on the project. The expense of direct labor was 5,000,000. July 1: Quinlan ships the order to the customer and bills the customer Z20,000,000. On its corporate books, Quinlan debits accounts receivable and cred- its sales. Sept 1: Quinlan's customer pays Z20,000,000 to Quinlan.
a. Draw a cash flow diagram for this transaction in the style of Exhibit 22.1 and explain the steps involved.
b. What working capital management techniques might Quinlan use to better its position vis--vis this particular customer?
Step by Step Answer:
Fundamentals Of Multinational Finance
ISBN: 9780321541642
3rd Edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman