CH20sguide - 20 ofForeignOperations ChapterObjectives 1 To...

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Chapter Objectives 1. To examine global control systems for foreign operations. 2. To discuss performance evaluation for foreign operations. 3. To consider the significance of national tax systems on international operations. 4. To evaluate how where to invest, how to finance, and where to remit funds are all affected by multinational taxation. 5. To examine international transfer pricing. 6. To appraise the role of taxes, tariffs, competition, inflation rates, exchange rates, and restrictions on fund transfers. Chapter Outline I. Global Control System and Performance Evaluation A. To maximize stockholder wealth the financial manager performs three major functions: i. Financial planning and control. ii. Investment decisions. iii. Financing decisions. B. Financial decisions are dependent on timely accounting information, mainly from the balance sheet and income statement. The Cost of Capital for Foreign Projects     1 20 Corporate Performance  of Foreign Operations
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i. The balance sheet measures the assets, liabilities, and owners’ equity of a business at a particular time. ii. The income statement matches expenses to revenues in order to determine the net income or net loss for a period of time. iii. The control system is also used to relate actual performance to some predetermined goal. C. The actual and potential flows of assets across national boundaries complicate the accounting functions of an MNC. i. There are environmental differences such as different rates of inflation and changes in exchange rates. ii. The performance of foreign affiliates must be measured and these affiliates must also have clearly defined goals. D. For an MNC to operate as a system, the parent and its subsidiaries must have continuing flows of data. This information system usually consists of the following: i. Impersonal communications such as budgets, plans, programs, electronic messages, and regular reports. ii. Personal communications such as meetings, visits, and telephone conversations. E. Communications essential to evaluating the performance of an enterprise usually follow established organizational channels. i. Effective communication systems require an efficient reporting system. ii. The more efficient the system, the more quickly managers can take action. F. Financial results of profits have traditionally provided a standard to evaluate the performance of business operations, but, as MNCs expand their operations across national boundaries, the environment in which they operate affects the standard. i. Inflation and foreign exchange fluctuations affect all financial measures of performance. G. Every control system establishes a standard of performance and compares actual performance with the standard. i.
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CH20sguide - 20 ofForeignOperations ChapterObjectives 1 To...

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