FIN640 international financial mgt ch01

FIN640 international financial mgt ch01 - Part 1 (Chapters...

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Unformatted text preview: Part 1 (Chapters 1 through 5) provides an overview of the multinational corporation (MNC) and the environment in which it operates. Chapter 1 explains the goals of the MNC, along with the motives and risks of international business. Chapter 2 describes the international flow of funds between countries. Chapter 3 describes the international financial markets and how these markets facilitate ongoing operations. Chapter 4 explains how exchange rates are determined, while Chapter 5 provides background on the currency futures and options markets. Managers of MNCs must understand the international environment described in these chapters in order to make proper decisions. Part 1: The International Financial Environment Product Markets Foreign Exchange Markets Subsidiaries International Financial Markets Exporting and Importing Investing and Financing Dividend Remittance and Financing Multinational Corporation (MNC) 01-B4324-MP1.indd 1 01-B4324-MP1.indd 1 8/21/07 2:13:40 AM 8/21/07 2:13:40 AM 2 S S N L 2 1: Multinational Financial Management: An Overview Multinational corporations (MNCs) are defi ned as fi rms that engage in some form of international business. Their managers conduct international fi nancial manage- ment, which involves international investing and fi nanc- ing decisions that are intended to maximize the value of the MNC. The goal of their managers is to maximize the value of the fi rm, which is similar to the goal of managers employed by domestic companies. Initially, fi rms may merely attempt to export products to a particular country or import supplies from a foreign manufacturer. Over time, however, many of them recog- nize additional foreign opportunities and eventually es- tablish subsidiaries in foreign countries. Dow Chemical, IBM, Nike, and many other fi rms have more than half of their assets in foreign countries. Some businesses, such as ExxonMobil, Fortune Brands, and Colgate- Palmolive, commonly generate more than half of their sales in foreign countries. A prime example is the Coca-Cola Co., which distributes its products in more than 160 countries and uses 40 different currencies. Over 60 percent of its total annual operating income is typically generated outside the United States. Even smaller U.S. fi rms commonly generate more than 20 percent of their sales in foreign markets, in- cluding AMSCO International (Pennsylvania), Ferro (Ohio), Interlake (Illinois), Medtronic (Minnesota), Sybron (Wisconsin), and Synoptics (California). These U.S. fi rms that conduct international business tend to focus on the niches that have made them successful in the United States. Seventy-fi ve percent of U.S. fi rms that export have fewer than 100 employees....
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FIN640 international financial mgt ch01 - Part 1 (Chapters...

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