2. INT FINANCE
• Foreign exchange risks
• Currency flows and country specific restrictions
• Different tax laws and the differences in methods
of calculating the taxable income
• Debt equity ratio (it is finance officer’s task to
ensure that the company gets the capital at the
lowest possible cost.)
• Dividend remission policy
3. Bond Market
• Several counties have a bond market for
international finance that runs parallel to the
domestic bond market, since for international
business International Finance Market is a good
source of funds. Companies can issue bonds in a
foreign country to a group of investors. Several
developing countries borrow money from
international finance market by selling bonds.
However they have to pay a higher rate of
interest because of the misperception in such
investments from the rich countries.
4. Int stock exchange
• International stock exchanges like the American stock
exchange or the Nasdaq-“National Association of
Securities Dealers Automatic Quotation System.
Nasdaq Stock Markets one of the largest for trading
stocks. However for developing countries trading on
Nasdaq may be subject to their government’s approval.
• Dow Jones Analysis group of daily and weekly indices
of selected stocks and bond business are used as
parameters for doing business in particular stocks. The
firms of Standard and Poor indexes and ratios or
averages are designed to measure the performance of
finance market.
5. Foreign bonds
• Foreign bonds are sold outside the country of the
borrowing company and they are in the currency of the
country of issue, while the Eurobonds are sold in countries
other than the one in whose currency the bond has been
made. Global bond is registered in different national
markets as per the registration requirements of each
market.
• International bonds are useful way of obtaining finances
because they help companies to diversify its finance
portfolio from local banks and bond market and maturities
not usually available in domestic markets.
•
6. Financial centres
• Financial Centers
• These are cities or offshore countries that provide large
international currency funds. They offer a low cost source
of finance for MNCs.. They offer foreign currency like Euro
for deposits and loans at times these are intermediary or
pass through markets for international loans. These could
be for bringing economic and political stability and operate
as efficient experienced and reliable finance. They have
good communication and support services; these could be
operational or booking centers. Key offshore finance
centers are in Bahrain, the Caribbean, Hong Kong, London,
New York Singapore and Switzerland besides others.
7. Internal Financing
• Companies planning business expansion need
to generate some of their own finances
besides debt and equity. MNCs have diverse
operations in different currencies and that
makes the assessment of internal finance
availability complex. Parent company can
provide the seed capital as its share of equity.
Following chart shows how the internal
finance system operates-
8. FIN RISKS
• Financial risks normally result from either inflation or currency
fluctuations. It is better to understand the type of risk the company
as to deal with, in the international finance. The nature of the
risk, the conditions in which the risk becomes pronounced and how
the company can preempt the avoidance of the risk factor. When
the currency of a country becomes weak, or is devalued, inflation
comes into play. Import restrictions, control on acquisition of
funds, difficulties in getting credit terms and high interest rates all
cause inflation. These can cause high levels of bills receivables and
longer credit periods disrupting there cash flow. At times the
country’s government tries inflation control through artificially
established price. Price, as is known remains under the influence of
competitive pricing, brand equity, production costs and at times
government regulations.
9. HOME COUNTRY
• Payment to home country can be made as license
fees, payment for importing capital goods or materials and
as dividends for equity investments.
• Country’s inflation rates must be understood in advance to
prevent cash flow problems
• Repatriation of profits to home country must be properly
documented and recognized for maintaining transparency
towards the host country’s government and for obeying
their laws.
• Sudden exchange fluctuations must be considered as these
can change the cash flow as well as the company’s
competitive position.
•
10. ACCOUNTING SYSTEMS
• It is important for the companies in international
business to understand the accounting systems for the
MNCs as they operate in different countries. Decision
process of MNCs stars with having timely and accurate
information on the company’s accounts and the
taxation as prevalent in the host country. It is necessary
to know about different currencies and accounting
systems. Financial reporting differs in countries both in
content and in presentation. is to follow the accounting
system according to the host country’s established
practices; also known as Generally Accepted
Accounting Principles or GAAP.
11. GAAP
Each country’s GAAP is different and yet the
MNCs have to prepare their accounts in the
manner required by the host country and also
as per the home country’s needs as they have
to submit the accounts to the head quarters in
the home country a well.
