international_finance_examination_1_book_terms%5b1%5d

international_finance_examination_1_book_terms%5b1%5d -...

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Examination 1: International Finance Please study all of the handouts that were distributed in class and the film. The terms below come from the book in Chapters 1-5. The test will include information from the handouts, the film and the book. Chapter 1: Globalization and the Multinational Enterprise The Multinational Enterprise (MNE) is defined as one that has operating subsidiaries, branches or affiliates Creating Firm Value in Global Markets requires 3 critical elements: 1.) open markets, 2.) strategic management and 3.) access to capital. The Theories of Comparative and Absolute Advantage (see notes) Adam Smith and David Ricardo Why do firms become Multinational ? 1. Market Seekers, 2. Raw material seekers, 3. Production , efficiency seekers , 4. Knowledge seekers and 5 political safety seekers See: Handout about Porsche which the appendix case Chapter 2: Financial Goals and Corporate Governance Agency Problem: When a firm is managed by hired professionals, not owners, this raises the possibility that ownership and management may not be perfectly aligned in their business and financial objectives. Most of the world is characterized by controlling shareholders: Government, Institutions, Family and Consortiums Shareholder Wealth Maximization : assumes the stock market is efficient which means shares are always priced correctly. Perfect Information is available for all market participants. No the meaning of impatient and patient capitalism: profit time horizon. There is a single goal of wealth maximization. Stakeholder Capitalism Model: ( A non-Anglo American Model) There is no assumption that markets are efficient and there are powerful third party stakeholders such as labor unions, government and banks or other types of financial institutions. This results in multiple goals. The MNE must determine the proper balance between 3 common operational financial objectives: 1.) Maximization of consolidated after-tax income 2.) Minimization of the firm’s effective global tax burden 3.) Correct positioning of the firm’s income, cash flows and available funds as to country and currency One of the most widely accepted statements of good corporate governance practices are those
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This note was uploaded on 11/15/2011 for the course FIN 4420 taught by Professor Billiebrotman during the Fall '11 term at Kennesaw.

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