Multinational Financial Management

In: Business and Management

Submitted By dizzyof4
Words 6439
Pages 26
Chapter 17
Multinational Financial Management

Learning Objectives

After reading this chapter, students should be able to:

◆ Define the term “multinational corporation” and identify 7 primary reasons why firms go international.

◆ List 5 major factors that distinguish financial management in firms operating entirely within a single country from those that operate in several different countries.

◆ Briefly explain the following terms: international monetary system, exchange rate, spot exchange rate, forward exchange rate, fixed exchange rate, floating exchange rate, devaluation/revaluation of a currency, depreciation/appreciation of a currency, soft currency, and hard currency.

◆ Identify the different types of exchange rate systems.

◆ Distinguish between direct and indirect quotations, and American and European term quotations, and calculate cross rates between any two currencies.

◆ Differentiate between spot and forward rates, and explain what it means for a forward currency to sell at a discount or premium.

◆ Briefly explain the concept of interest rate parity and write the corresponding equation.

◆ Briefly explain the concept of purchasing power parity and write the corresponding equation.

◆ Explain the implications of relative inflation rates, or rates of inflation in foreign countries compared with that in the home country, on interest rates, exchange rates, and on multinational financial decisions.

◆ Distinguish between foreign portfolio investments and direct investments, and briefly explain the following terms: Eurocredits, Eurodollar, Eurobonds, and foreign bonds.

◆ Explain why new issues of stock are sold in international markets.

◆ Identify some key differences in capital budgeting as applied to foreign versus domestic operations including the following terms: repatriation of earnings, exchange rate…...

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