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Lecture Principles of Managerial finance (4th edition): Chapter 16 - Lawrence J. Gitman

Chapter 16 - International managerial finance. Chapter 19 emphasizes global dimensions of financial management, starting with an overview of trading blocs and other international institutions that have a significant impact on multinational businesses. The chapter offers in-depth coverage of the financial risks associated with doing business internationally, especially risks related to movements in exchange rates, and the techniques that firms use to manage those risks. | Chapter 16 International Managerial Finance Learning Goals Understand the major factors that influence the financial operations of multinational companies (MNCs). Describe the key differences between purely domestic and international financial statements –consolidation, translation of individual accounts, and international profits. Discuss exchange rate risk and political risk, and explain how MNCs manage them. Learning Goals Describe foreign direct investment, investment cash flows and decisions, the MNCs’ capital structure, and the international debt and equity market instruments available to MNCs. Discuss the role of the Eurocurrency market in short-term borrowing and investing (lending) and the basics of international cash, credit, and inventory management. Review recent trends in international mergers and joint ventures. The MNC and its Environment In recent years, international finance has become an increasingly important element in the management of MNCs. Although the . | Chapter 16 International Managerial Finance Learning Goals Understand the major factors that influence the financial operations of multinational companies (MNCs). Describe the key differences between purely domestic and international financial statements –consolidation, translation of individual accounts, and international profits. Discuss exchange rate risk and political risk, and explain how MNCs manage them. Learning Goals Describe foreign direct investment, investment cash flows and decisions, the MNCs’ capital structure, and the international debt and equity market instruments available to MNCs. Discuss the role of the Eurocurrency market in short-term borrowing and investing (lending) and the basics of international cash, credit, and inventory management. Review recent trends in international mergers and joint ventures. The MNC and its Environment In recent years, international finance has become an increasingly important element in the management of MNCs. Although the principles of managerial finance are applicable to MNCs, certain factors unique to the international setting tend to complicate the financial management of MNCs. A simple comparison between a domestic U.S. firm and a U.S.–based MNC is given in Table 18.1. The MNC and its Environment (cont.) The MNC and its Environment (cont.) During the 1990s, three important trading blocks emerged. In 1992, the United States, Mexico and Canada signed the North American Free Trade Agreement (NAFTA). In 1992, Western Europe also strengthened previously existing European Union by forming the European Open Market which included the adoption of a common currency called the EURO in January, 1999. In 1991, the Mercosur Group of South America, including the countries of Brazil, Argentina, Paraguay and Uruguay formed a trading block. The General Agreement on Tariffs and Trade (GATT) is currently the most important international treaty governing trade. It extends free trading rules to broad areas of economic activity