财务管理基础课件：International Financial Management

InternationalFinancialManagement

ChapterOutlineMultinationalcorporationsEffectofexchangeratesonprofitabilityandcash-flowHedgingandreductionofforeignexchangeriskEvaluatingpoliticalriskinforeigninvestmentdecisionsFinancinginternationaloperationsGrowingInterdependencyNecessitatesthedevelopmentofsoundinternationalbusinessrelations,whichwillenhancetheprospectsforfutureinternationalcooperationIntegratescapitalmarketsWorldeventssuchascurrencycrisis,governmentdefaults,terrorismcancausestockandbondmarketstosufferemotionaldeclineswellbeyondtheexpectedeconomicimpactofamajoreventCurrencymarketsImpactontradebetweennationsaffectingsalesandearningsofinternationalcompaniesTheadventoftheEuroSeverimpactonearningsofU.S.companiesdoingsignificantbusinessinEuropeInternationalSalesofselectedU.S.

CompaniesTheMultinationalCorporationAfirmcarryingoutitsbusinessactivities(often30%ormore)outsideitsnationalbordersCantakeseveralforms:ExporterLicensingagreementJointventureFullyownedforeignsubsidiaryFormsofMultinationalCorporationExporter:LeastriskymethodReapingthebenefitsofforeigndemandNolong-terminvestmentcommitmentLicensingagreement:Licensegrantedtoalocalmanufacturerinforeignlandtousefirm’stechnologyEffectivelyexportingtechnologyCollectslicensingfeeorroyaltyJointventure:EstablishedwithalocalfirminforeignlandMostpreferredbybusinessfirmsandforeigngovernmentsLeastamountofpoliticalriskFormsofMultinationalCorporation(cont’d)FullyownedforeignsubsidiaryHigherrisksandcomplexitiesofoperationOftenmoreprofitablethandomesticfirmsLowerscombinedportfolioriskoftheparentcorporationDecisivefactorinshapingthepatternoftrade,investment,andtheflowoftechnologyExertsignificantimpactonhostcountry’seconomicgrowth,employment,trade,andbalanceofpaymentsExchangeRatesTherelationshipbetweenthevaluesoftwocurrenciesForexample,thequotationof$2.00perpoundisthesameas£.50perdollar(1/$2.00)ExchangeRatestotheDollarThefollowingfigureshowstheamountofeachcurrencythatonecanexchangeforoneU.S.dollarFactorsInfluencing

ExchangeRatesInflation:AparitybetweenthepurchasingpoweroftwocurrenciesestablishestherateofexchangebetweenthetwocurrenciesExample:ittakes$1.00tobuyoneappleinNewYorkand1.25eurostobuyappleinGermany.ThentherateofexchangebetweentheUSDandtheEurois€1.25/$1.00or$.80/euroPurchasingpowerparitytheorystatesthat:CurrencyexchangeratesvaryinverselywiththeirrespectivepurchasingpowersExchangeratesbetweentwocountriesadjusttoinflationdifferentialbetweenthetwocountriesFactorsInfluencing

ExchangeRates(cont’d)Interestrates:Short-termcapitalmovementsfromlow-yieldtohigh-yieldmarketsInterestrateparitytheory:TheinterplaybetweeninterestratedifferentialsandexchangeratesInterestratesandexchangeratesadjustuntiltheforeignexchangemarketandthemoneymarketreachequilibriumBalanceofpayments:AsystemofgovernmentaccountsthatcatalogflowofeconomictransactionsbetweentheresidentsofonecountryandthatofothersTradesurplusordeficitdeterminesstrengthofcurrencyFactorsInfluencing

ExchangeRates(cont’d)Governmentpolicies:DirectorindirectinterventionintheforeignexchangemarketFormaintenanceoftheundervaluedcurrencyCurrencyvaluessetbygovernmentdecreeRestrictiononinflowandoutflowoffundsMonetaryandfiscalpolicies ResultininflationandchangeinvalueofcurrencyExpansionarymonetarypoliciesExcessivegovernmentspendingOtherFactorsInfluencing

ExchangeRates(cont’d)Otherfactors:ExtendedstockmarketrallyHighercapitalinflowandincreaseincurrencyvalueSignificantdropindemandforanation’sprincipalexportsgloballyLowerinvestmentpotentialanddecreaseinvalueofcurrencyPoliticalturmoilinacountryCapitalshifttomorestablecountriesanddecreaseinvalueofcurrencyWidespreadlaborstrikesSpotRatesandForwardRatesSpotrateExchangerateatwhichthecurrencyistradedforimmediatedeliveryForwardratesTradingofcurrenciesforfuturedeliveryReflectstheexpectationsregardingthefuturevalueofacurrencyDiscountorpremium:Expressedasanannualizedpercentagedeviationfromthespotrate

CrossRatesNotallcurrenciesareactivelytradedValueforsuchcurrenciesdeterminedthroughacrossrateExample:Threecurrencies$,€and¥$and€areactivelytraded$is0.8384€and€is141.390¥Thus$=0.8384×141.390¥=118.541¥KeyCurrencyCrossRatesManagingForeignExchangeRiskForeignexchangeriskPossibilityofadropinrevenueoranincreaseincostinaninternationaltransactionduetochangesinforeignexchangeratesShiftfromfixedexchangerateregimetofreely-floatingrateregimeExchangeriskofamultinationalcompany:AccountingortranslationexposureTransactionexposureTranslationExposureConsolidatedfiguresoftheparentincludevalueofforeignassetsandliabilitiesconvertedandexpressedinhomecurrencyChangingexchangeratesresultinlossesandgainsontranslationTreatmentofsuchgainsandlossesdependontheaccountingrulesestablishedbythegovernmentofparentcompanyTranslationExposure(cont’d)SFAS52says:Allforeigncurrency-denominatedassetsandliabilitiestobeconvertedattherateofexchangeondateofbalancesheetpreparationUnrealizedgainorlosstobeheldinequityreserveaccountandrealizedgainorlossincorporatedintheconsolidatedincomestatementoftheparentcompanyTransactionExposureForeignexchangegainsorlossesresultingfrominternationaltransactions(fromthetimeofagreementtotimeofpayment)VolatilityofreportedearningspershareincreasesStrategiestominimizetransactionexposure:ForwardexchangemarkethedgeMoneymarkethedgeCurrencyfuturesmarkethedgeOtherFormsofProtection

AgainstForeignExchangeRiskMNCshavedevelopedforeignassetmanagementprograms,involvingstrategies:SwitchingcashandotherassetsintostrongcurrenciesPilingupdebtandotherliabilitiesindepreciatingcurrenciesQuickcollectionofbillsinweakcurrenciesbyofferingsizablediscounts,whileextendingliberalcreditinstrongcurrenciesForeignInvestmentDecisionsFactorsencouragingforeignaffiliates:AvoidimpositionoftradebarriersLowerproductioncostsoverseasSuperiorAmericantechnologyenabledeasyaccesstoresourcesindevelopingcountriesTaxadvantageMotivatedbystrategicconsiderationsinanoligopolisticindustryDiversificationofrisksinternationallyRiskReductionfrom

InternationalDiversificationPoliticalRiskinForeignInvestmentGovernmentinterferencebyimpositionofunfriendlyforeignexchangerestrictionsLimitationofforeignownershiptoasmallpercentageBlockingrepatriationofasubsidiary’sprofittotheparentfirmExpropriationofforeignsubsidiary’sassetsbythehostgovernmentGuardingAgainstPoliticalRiskEstablishajointventurewithalocalentrepreneurEstablishajointventurewithfirmsfromothercountriesInsuranceagainstperceivedpolitical-risklevelcanbeobtainedOverseasPrivateInvestmentCorporation(OPIC)andotherprivateinsurancecompaniessellinsurancepoliciesCoverageisexpensiveintroubledcountriesFinancingInternationalBusinessOperationsCreditsalesareinfluencedby:RelationshipofthepartiesinvolvedPoliticalstabilityofcountriesinvolvedLetterofcreditissuedbyimporter’sbankreducesriskofnonpaymentCreditrisktoexporterisabsorbedbytheimporter’sbankImporter’sbankinagoodpositiontoevaluatethecreditworthinessoftheimportingfirmFinancingInternationalBusinessOperations(cont’d)Alternativestoavoidriskoflossofbusiness:ObtainingexportcreditinsuranceTheForeignCreditInsuranceAssociation(FCIA)providesthiskindofinsuranceAprivateassociationof60U.S.insurancefirmsFundingofTransactionsEximbank(Export-ImportBank)DirectloanprogramDiscountprogramLoansfromparentcompanyorsisteraffiliateParallelloansFrontingloansEurodoll