ffm11i19 - MultinationalFinancialManagement...

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Chapter 19 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  Chapter 19:  Multinational Financial Management Learning Objectives 237
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the following terms:  repatriation of earnings, exchange rate risk, political risk, country risk, and business  climate. Explain whether international differences in capital structure exist. List some factors that make working capital management especially complicated in a multinational  corporation. 238 Learning Objectives Chapter 19:  Multinational Financial Management
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Lecture Suggestions This chapter presents an overview of multinational financial management, including exchange rates, interest  rate and purchasing power parity, international capital markets, multinational capital budgeting, international  capital structures, and multinational working capital management.
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This note was uploaded on 02/08/2012 for the course FINANCE MA 502 taught by Professor Chaudhry during the Spring '11 term at Instituto Balseiro.

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ffm11i19 - MultinationalFinancialManagement...

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