Certified Treasury Professional Practice Exam 2025 - Free CTP Practice Questions and Study Guide.

The choice of lending receivables from the German subsidiary is a strategic response to the situation of a stable US dollar coupled with a depreciating Euro. When the Euro is losing value, any revenues or receivables that the German subsidiary collects in Euros are effectively worth less in US dollar terms when converted. By lending these receivables, the US parent company can potentially improve cash flow and manage currency exposure more effectively.

This strategy allows the parent company to access cash flows from the German operations in a way that mitigates the impact of the depreciating currency. By effectively managing the timing and currency in which funds are accessed, the US company can optimize its overall liquidity and reduce the risk associated with Euro-denominated receivables, enhancing its financial position in a challenging currency environment.

Other options, while viable in different contexts, do not directly address the issues posed by a declining Euro. For instance, pooling excess funds in the US might not be beneficial if the US dollar remains stable while facing currency depreciation. Implementing a dollar-based multilateral netting system could help manage intercompany transactions but wouldn't necessarily address the immediate issue of currency depreciation affecting the subsidiary's profits. Establishing a multi-currency account in the US may offer flexibility but does not solve