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Globalization and the Multinational Firm, why do we need study IF - Coggle…
Globalization and the Multinational Firm
Goals for International Financial Management
Secondary Objectives
Forex risk management
Political risk management
Optimal interest rate
Effective use of the expanded chance set
Proper tax planning
Effective inflation risk management
Maximizing shareholder value
Basic goal
Maximize shareholder wealth
One of the most important goals
It's a long term goal
Means the company makes all the business and investment decisions with the aim of making the owners of the company richer than before.
Example
Australia, Canada, the United Kingdom and especially the United States of America.
Note
While managers are hired to run the company for the benefit of shareholders, there is no guarantee that they will actually do so.
Ex: Some of corporate scandals: Enron, WorldCom, Parmalat and Global Crossing
A company cannot continue in business to maximize shareholder wealth if it treats its employees poorly, produces shoddy goods.
IV. Multinational Corporations(MNC)
Receive funding from major money centers around the world
In various currencies
To finance the activity
Global activities
The treasurer's office must establish international banking relationships
Place short-term funds in multiple currency denominations
Effectively manage forex risk
A major dominant force in the globalization of the world economy.
A business firm incorporated in one country that has production and sales operations in many other countries.
Financial capital from another country
Production of goods by labor
Capital equipment in a third country
A company obtains raw materials from this national market
Semi-finished products in other national markets
MNC's profit
Benefit from economies of scale
Allocation of R&D and advertising costs across their global sales
Aggregate global purchasing power compared to suppliers
Use their technology and management knowledge globally with minimal additional costs
Their global conservation
Take advantage of lower prices and labor services available in some developing countries.
Access to exceptional R&D capabilities in advanced countries abroad
Risk
Economic globalization trends
Globalization of technology
Financial globalization
Resource globalization
Commercialization Capacitors
Advantage
Learn
Happiness, satisfying needs
Create a low-cost competitive advantage
Developing the country's economy
Remove barriers
Resource optimization
Easy transportation and circulation
Disadvantage
Economic imbalance
Being negatively affected by the countries concerned
Relations between countries
Special about International Finance
Special about IF
Foreign Exchange Risk
The risk that profits in foreign currencies may evaporate in dollar terms due to unforeseen adverse exchange rate movements.
Political risk
Sovereign governments have the power to regulate the movement of goods, capital and people across their borders.
Market imperfections
The world markets are highly imperfect have a variety of barriers that still hamper the free movements of people, goods, services, capital,...
Expanded Opportunity Set
It doesn't make sense to play in only one corner of the sandbox.
True for corporations as well as individual investors .
why do we need study IF
Globalization requires the study of international finance.
An important part of financial economics.
An important tool to find the exchange rates,...