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International Corporate Finance International Executive Master of Business Administration TÀI CHÍNH DOANH NGHIỆP QuỐC TẾ International Executive Master of Business Administration Multinational Corporations – An overview - Chapter Usually start with a single import or export to another country Recognize more opportunities Evolve with significant assets placed in other countries DOW Chemical Nike IBM Some of the firms have over 50% of its assets in other countries chương 1: công ty đa quốc gia – tổng quan Thường khởi nghiệp với sản phẩm xuất nhập sang quốc gia khác Phát nhiều hội Trưởng thành với sở /tài sản đáng kể đặt quốc gia khác DOW Chemical Nike IBM Tỷ trọng tài sản nước số hãng chiếm tới 50% International Financial Management is still important if You Have NO International Business • You have to recognize that your competitors exist in other countries as well as domestically • That your customers look beyond your borders for better deals If you are international, how should you control subsidiaries? • The Best Approach • Allow subsidiary management to make key decisions – since they are closest to the problem • Audit decision by parent company so they comply with corporate goals International Executive Master of Business Administration Quản Trị Tài Chính Quốc Tế đóng vai trò quan trọng doanh nghiệp anh/chị KHÔNG CÓ sở đặt nước • Anh/chị phải nhận đối thủ tồn nước • Đồng thời phải nhận khách hàng anh/chị có tầm nhìn “xuyên biên giới” nhằm tìm kiếm thương vụ có lợi Nếu doanh nghiệp anh/chị doanh nghiệp quốc tế, làm để kiểm soát công ty con? • Phương pháp tối ưu: • Cho phép nhà quản lý công ty đưa định chủ chốt họ người theo sát vấn đề • Công ty mẹ định kiểm toán để công ty tuân thủ mục tiêu doanh nghiệp International Executive Master of Business Administration Centralized Multinational Financial Management for an MNC with two subsidiaries, A and B Cash Management at A Financial Managers of Parent Inventory and Accounts Receivable Management at A Financing at A Capital Expenditures at A Cash Management at B Inventory and Accounts Receivable Management at B Financing at B Capital Expenditures at B International Executive Master of Business Administration Quản trị tài đa quốc gia cách tập trung hóa Đối với công ty đa quốc gia (MNC) có hai công ty con: A B Quản lý tiền mặt A Các nhà quản lý tài thuộc công ty mẹ Quản lý khoản phải thu hàng tồn kho A Quản lý tiền mặt B Quản lý khoản phải thu hàng tồn kho B Các hoạt động tài trợ vốn A Các hoạt động tài trợ vốn B Các chi phí vốn A Các chi phí vốn B International Executive Master of Business Administration Decentralized Multinational Financial Management for an MNC with two subsidiaries, A and B Cash Management at A Financial Managers of A Inventory and Accounts Receivable Management at A Financing at A Capital Expenditures at A Financial Managers of B Cash Management at B Inventory and Accounts Receivable Management at B Financing at B Capital Expenditures at B International Executive Master of Business Administration Quản trị tài đa quốc gia cách phân tán Đối với MNC có hai công ty con: A B Các nhà quản lý tài thuộc công ty A Quản lý tiền mặt A Quản lý khoản phải thu hàng tồn kho A Các hoạt động tài trợ vốn A Các chi phí vốn A Các nhà quản lý tài thuộc công ty B Quản lý tiền mặt Tại B Quản lý khoản phải thu hàng tồn kho B Các hoạt động tài trợ vốn B Các chi phí vốn B International Executive Master of Business Administration Short Term Financing Chapter 20 264 Sources of Foreign Financing Internal short term financing Example: A Canadian subsidiary of a MNC has experienced strong earnings and invested its earnings in local money market The Mexican subsidiary of the same MNC had relatively low earnings The parent MNC instructs the Canadian subsidiary to loan some funds to the Mexican subsidiary External short term financing Short term notes – maturities 1,3,6 months – eruonotes – commercial banks underwrite the notes Commercial paper – MNC issue commercial paper with the backing of an underwriting syndicate Bank loans - usually based on a credit arrangement Currency Decisions • Short borrowing is usually in the currency required for short term applications • If the interest rate on a foreign currency is low – a MNC may borrow and convert International Executive Master of Business Administration Decision Making Criteria • Interest Arbitrage • Borrow a foreign currency and convert the currency to home currency • Simultaneously purchase the foreign currency Forward Contract to lock in the exchange rate of the currency needed to pay off the loan Interest Rate Parity is a no-Arbitrage condition representing an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries The fact that this condition does not always hold allows for potential opportunities to earn riskless profits from Covered Interest Arbitrage International Executive Master of Business Administration Decision Making Criteria The Forward Rate as a Forecast • If the forward rate is an unbiased predictor of the future spot rate, then the effective financing rate of a foreign loan will on average be equal to the domestic financing rate Exchange Rate Forecasts • Firms may use exchange rate forecasts to forecast the effective financing rate of a foreign currency, or they may compute the break-even exchange rate that will equate the domestic and foreign financing rates • Sometimes, it may be useful to develop probability distributions, instead of relying on single point estimates International Executive Master of Business Administration International cash management Chapter 21 268 MNC Working Capital Management Cash for accounts short term assets Subsidiary Expenses Subsidiary revenue Subsidiary dividend payments Subsidiary liquidly management Inventory management Accounts receivable management Cash management Need for centralized cash management Since each subsidiary has cash management needs and each in difference currencies – a centralized system is commonly used by MNC to monitor and mange intersubsidiary cash flows Minimize currency conversion costs Manage blocked funds Manage inter-subsidiary cash transfers Cash Flow Analysis: Subsidiary Perspective The management of working capital has a direct influence on the amount and timing of cash flow : Subsidiary Expenses • International purchases of raw materials or supplies are more likely to be difficult to manage because of exchange rate fluctuations, quotas, etc • If the sales volume is highly volatile, larger cash balances may need to be maintained in order to cover unexpected inventory demands Subsidiary Revenue • International sales are more likely to be volatile because of exchange rate fluctuations, business cycles, etc • Looser credit standards may increase sales (accounts receivable), though often at the expense of slower cash inflows International Executive Master of Business Administration Cash Flow Analysis: Subsidiary Perspective Subsidiary Dividend Payments • Forecasting cash flows will be easier if the dividend payments and fees (royalties and overhead charges) to be sent to the parent are known in advance and denominated in the subsidiary’s currency Subsidiary Liquidity Management • After accounting for all cash outflows and inflows, the subsidiary must either invest its excess cash or borrow to cover its cash deficiencies • If the subsidiary has access to lines of credit and overdraft facilities, it may maintain adequate liquidity without substantial cash balances International Executive Master of Business Administration Sources of Short-Term Financing • Euro notes are unsecured debt securities with typical maturities of 1, or months They are underwritten by commercial banks • MNCs may also issue Euro-commercial papers to obtain short-term financing • MNCs utilize direct Euro bank loans to maintain a relationship with the banks too International Executive Master of Business Administration Internal Financing by MNCs • Before an MNC’s parent or subsidiary searches for outside funding, it should determine if any internal funds are available • Parents of MNCs may also raise funds by increasing their markups on the supplies that they send to their subsidiaries International Executive Master of Business Administration Cash Flow of the Overall MNC Interest &/or Principal Purchase Loans or Investment Sale Fees & Earnings Subsidiary Excess Cash Short-Term Securities Long-Term Investment Return on Long-Term Investment Projects Funds for Supplies Parent Loans Subsidiary Excess Cash Sources of Debt Repayment Fees & Earnings Loans or Investment Interest &/or Principal New Issues Cash Dividends International Executive Master of Business Administration Stockholders Centralized Cash Management • The centralized cash management division of an MNC cannot always accurately forecast the events that may affect parent- subsidiary or intersubsidiary cash flows • It should, however, be ready to react to any event by considering • any potential adverse impact on cash flows, and • how to avoid such adverse impacts International Executive Master of Business Administration Techniques to Optimize Cash Flows Accelerating Cash Inflows • The more quickly the cash inflows are received, the more quickly they can be invested or used for other purposes • Common methods include the establishment of lockboxes around the world (to reduce mail float) and preauthorized payments (direct charging of a customer’s bank account) Minimizing Currency Conversion Costs • Netting reduces administrative and transaction costs through the accounting of all transactions that occur over a period to determine one net payment • A bilateral netting system involves transactions between two units, while a multilateral netting system usually involves more complex interchanges International Executive Master of Business Administration Intersubsidiary Payments Matrix Payments Matrix Canada 40 France 50 Japan 30 Netting Switzerland Schedule 50 Canada U.S 30 –– France Japan 10 Switzerland Thousands of US$ Owed to Subsidiary in: Canada France Japan Switzerland U.S –– 40 90 20 60 –– 30 60 100 30 –– 20 Net Thousands of US$ Owed: 10 50 10 –– Canada France Japan Switzerland U.S –– 0 10 10 60 20 20 20 10 –– 0 –– 10 10 0 –– International Executive Master of Business Administration Techniques to Optimize Cash Flows Managing Blocked Funds • A government may require that funds remain within the country in order to create jobs and reduce unemployment • The MNC should then reinvest the excess funds in the host country, adjust the transfer pricing policy (such that higher fees have to be paid to the parent), borrow locally rather than from the parent, etc Managing Intersubsidiary Cash Transfers • A subsidiary with excess funds can provide financing by paying for its supplies earlier than is necessary This technique is called leading • Alternatively, a subsidiary in need of funds can be allowed to lag its payments This technique is called lagging International Executive Master of Business Administration Complications in Optimizing Cash Flows Company-Related Characteristics • When a subsidiary delays its payments to the other subsidiaries, the other subsidiaries may be forced to borrow until the payments arrive Government Restrictions • Some governments may prohibit the use of a netting system, or periodically prevent cash from leaving the country Characteristics of Banking Systems • The abilities of banks to facilitate cash transfers for MNCs may vary among countries • The banking systems in different countries usually differ too International Executive Master of Business Administration ... “imperfect.” International Executive Master of Business Administration Các học thuyết kinh doanh quốc tế Tại doanh nghiệp lại có động lực mở rộng công việc kinh doanh họ trường quốc tế? Học thuyết... advantages?? International Executive Master of Business Administration Tại doanh nghiệp lại theo đuổi hoạt động kinh doanh quốc tế? Các quốc gia có lợi cạnh tranh • Nguồn nhân công • Nhân tài khéo... parent company so they comply with corporate goals International Executive Master of Business Administration Quản Trị Tài Chính Quốc Tế đóng vai trò quan trọng doanh nghiệp anh/chị KHÔNG CÓ sở đặt