Chpt 17 ans

Chpt 17 ans - After reading this chapter students should be...

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Unformatted text preview: After reading this chapter, students should be able to: • Define the term “multinational corporation” and identify 6 primary reasons why firms go international. • List six major factors that distinguish financial management in firms operating entirely within a single country from those that operate in several different countries. • Distinguish between direct and indirect quotations, and calculate exchange rates between any two or three countries. • Briefly explain the following terms: floating rate system, trade deficit, pegged exchange rate, and convertible currency. • 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 concepts of interest rate and purchasing power parity. • Explain the implications of relative inflation rates, or rates of inflation in foreign countries compared with that in the home country on multinational financial decisions. • Distinguish between foreign portfolio investments and direct investments, and briefly explain the following terms: Eurodollar, Eurocurrencies, LIBOR, foreign bonds, and Eurobonds. • Identify some key differences in capital budgeting as applied to foreign versus domestic operations including the following terms: repatriation of earnings, exchange rate risk, and political risk. • Explain whether international differences in financial leverage exist. • List some factors that make working capital management especially complicated in a multinational corporation. Learning Objectives: 16 - 1 Chapter 16 Multinational Financial Management LEARNING OBJECTIVES 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. Assuming you are going to cover the entire chapter, the details of what we cover, and the way we cover it, can be seen by scanning Blueprints , Chapter 16. For other suggestions about the lecture, please see the “Lecture Suggestions” in Chapter 2, where we describe how we conduct our classes. DAYS ON CHAPTER: 2 OF 58 DAYS (50-minute periods) Lecture Suggestions: 16 - 2 LECTURE SUGGESTIONS 16-1 A dollar will buy more euros. 16-2 There will be an excess supply of dollars in the foreign exchange markets, and thus, this will tend to drive down the value of the dollar. Foreign investments in the United States will increase. 16-3 Taking into account differential labor costs abroad, transportation, tax advantages, and so forth, U.S. corporations can maximize long-run profits. There are also nonprofit behavioral and strategic considerations, such as maximizing market share and enhancing the prestige of corporate officers....
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Chpt 17 ans - After reading this chapter students should be...

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