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Chapter 21

Financial Management Outside of the U.S.

Book Version 3
By Boundless
Boundless Finance
Finance
by Boundless
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Section 1
Types of International Business
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Definition and Challenges of a Global Corporation

Global corporations operate in two or more countries and face many challenges in their quest to capture value in the global market.

Countertrade

Countertrade is a system of exchange in which goods and services are used as payment rather than money.

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Multinational Firms

With the advent of improved communication and technology, corporations have been able to expand into multiple countries.

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Direct Investment

FDI is practiced by companies in order to benefit from cheaper labor costs, tax exemptions, and other privileges in that foreign country.

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Offshoring

Offshoring entails a company moving a business process from one country to another.

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Outsourcing

Outsourcing business functions to developing foreign countries has become a popular way for companies to reduce cost.

Licensing

When considering strategic entry into an international market, licensing is a low-risk and relatively fast foreign market entry tactic.

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Importing

Imports are the inflow of goods and services into a country's market for consumption.

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Joint Ventures

In a joint venture business model, two or more parties agree to invest time, equity, and effort for the development of a new shared project.

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Contract Manufacturing

In contract manufacturing, a hiring firm makes an agreement with the contract manufacturer to produce and ship the hiring firm's goods.

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Franchising

Franchising enables organizations a low cost and localized strategy to expanding to international markets, while offering local entrepreneurs the opportunity to run an established business.

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Exporting

Exporting is the practice of shipping goods from the domestic country to a foreign country.

Section 2
The International Business Environment
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Overview of the International Business Environment

International business offers substantial potential risks and returns from an organizational perspective.

Section 3
Factors Impacting Exchange Rates
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Overview of Exchange Rates

An exchange rate between two currencies is the rate at which one currency will be exchanged for another.

Section 4
Types of Rates and Transactions
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Spot Rates, Forward Rates, and Cross Rates

Spot & forward rates are settlement prices of spot & forward contracts; cross rates are the exchange rate between two unofficial currencies.

Section 5
Managing Exchange Risk
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Types of Exchange Exposure: Short-Run, Long-Run, and Translation

Foreign currency exposures are categorized as transaction/ short-run exposure, economic/ long-run exposure, and translation exposure.

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Types of Exchange Hedges: Forward, Money Market, and Future

Forwards, money market instruments, and futures are common instruments used to manage exchange risk.

Section 6
International Investment and Finance
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Funding the International Business

Funding global processes or organizations is a complex financial process with a variety of options, each with varying rates of risk and return.

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Mergers and Acquisitions
  • Reasons for Business Combinations
  • Types of Transactions
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Current Chapter
Chapter 21
Financial Management Outside of the U.S.
  • Types of International Business
  • The International Business Environment
  • Factors Impacting Exchange Rates
  • Types of Rates and Transactions
  • Managing Exchange Risk
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