Is international working capital management more complex than domestic working capital management?

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justaguide eNotes educator| Certified Educator

Yes, it is. There are many issues which involve aspects like changing rates of interest, exchange change variations, among many others that are involved in international working capital management but do not play that large a role in domestic working capital management.

Working capital refers to the funds available with a company to pay for various costs like interest payments on funds that been borrowed, wages to employees, and other costs involved in the operations of the company.

In international working capital management, if a company has borrowed funds from international lenders in a foreign currency and the currency of the country in which the company is based depreciates, the interest expenses of the company goes up. So does the cost of raw material that the company may have to import. On the other hand, a subsidiary which receives funds for its working capital from the parent company based in another country would be able to receive the same funds though the outflow for the parent company would be smaller.