As Assessment of Financial Management in International Business

2698 Words Sep 23rd, 2010 11 Pages
Abstract.
Paper discussed how operating of financial management in different nations impacts investment decisions with multinational enterprise. Paper describes financial options available to the foreign subsidiary of the multiple enterprises and shows how money management in international business can be used to minimize cash balances, and taxation and introduce us to basic methods of money management.

This project is focusing on financial management in the international business, discussing three sets financial decisions such as:
• Investing decisions, decisions about what activities to finance.
• Financing decisions, decisions about how to finance those activities.
• Money management decisions, decisions about how to manage firm
…show more content…
For example Japan relates on debt ratio them more U.S. firms. One of the explanations for different financial structures is a different tax regime. For example, if interest income were taxes at higher rate, a preference for debt financing over equity financing would be expected. However, according to the empirical research, country differences in financial structure do not seem related to any systematic to country difference in tax structure. Another explanation is that these country differences may reflect cultural norms, cultural influences not yet been explained.
Principle behind global money management is that that firms must use the firm’s cash recourses in the most efficient way and work on minimization cash balances and reducing transactional costs.
Firms must hold certain cash balances that will cover payments of accounts payables and expected demand on cash. The rest of the cash assets are usually reinvested on in money markets accounts and firms earn interest on them. However, firms must have flexible accounts so it can withdraw all cash freely. Such accounts usually have low interest rates and if it doesn’t, firm can suffers from financial penalties. That is the dilemma many firms are facing and that is why firms are minimizing cash balances, so it can earn interest in high rated market account.
Another way to reduce costs of doing business internationally is to reduce transaction costs. Transaction cost is the cost of exchange, it is
Open Document