International Financial Management
Financing International Business Operations
Funding of Transaction
The International Finance Corporation
An affiliate of the World Bank established with the sole purpose of providing partial seed capital for private ventures around the world
Internationally Equity Markets
The entire amount of equity capital comes from the parent company for a wholly owned foreign subsidiary
Eurobond Market
Bonds payable or denominated in the borrower’s currency sold outside the country of the borrower
Eurodollar Loans
Loans made by foreign banks denominated in U.S. dollars
Loans from partners or afiliate
Fronting Loan
Paraller Loan
Eximbank
USA govertment agency facilities the financing of US exports through its various program
Managing Foreign Exchange Risk
As a consequence of transactional gains and losses, the volatility of reported earnings per share increases
Strategies to minimize transaction exposure
Currency Futures Market Hedge
Money Market Hedge
Forward Exchange Market Hedge
Foreign Exchange Rates
Cross Rates
Exchange rate between two currencies when neither are the official currencies of the country in which the exchange rate quote is given
The relationship between the values of two currencies
Factors Influencing Exchange Rates
Government Policies
Balance of Payments
Interest Rates
Inflation
The Multinational Corporation: Nature and Corporation
Fully Owned Foreign Subsidiary
Despite the difficult challenges, foreign affiliates often is more profitable than domestic business
Joint Venture
A joint venture with a local entrepreneur exposes the firm to the least amount of political risk
Licensing Agreement
The exporting firm may grant a license to an independent local producer to use the firm’s technology in return for a license fee or a royalty
Exporter
The least risky method, recaping the benefits of foreign demand without committing any long term investment to that foreign country
