This study examines the impact of cash flow instability on the firm demand for liquid assets. The instability arises from foreign sources in the form of exchange rate variability and the extent of foreign trade and domestically from inflation and interest rate volatility. We also investigate whether multinational subsidiaries react differently than domestic firms to these factors. Data from a large sample of manufacturing firms in Brazil show that multinational subsidiaries hold fewer liquid assets and respond differently than domestic firms to exchange rate variability and foreign involvement. The two groups exhibit similar behavior in response to the domestic sources of instability.