Modern System of International Financial Management in Multinational Companies by Oksana Bulkot PhD (Economics), Lecturer, Kyiv Natl. University, Ukraine
Introduction Multinational Companies (MNCs) are unique economic entities because of their turnover, sales, global production activity and financial system. The defining feature of the MNCs functioning is their ability to get free access to any resources in globalized economy.
PURPOSE • To summarize contemporary theoritical and practical approaches to MNCs intl. financial mngt. as well as to disclose the special features of its functioning in contemporary global economy
RESULTS MNCs finance is correct to define as a system of monetary relations, Resulting in the economic activities of MNCs and is necessary for the accumulation, allocation and efficient use of capital and income funds. MNCs finance is special because of the fact that the financial system of MNC itself affects the state of national economies and entire global finance.
Six Basic Elements That Form The System of Financial Mngt of MNC • Short-Term or Working Capital Mngt. • Long-Term Financial Mngt. or Strategic Financial Mngt. • Associated w/ the structure & characteristics of the methods of financing the activities of MNC & particularly w/ funds obtaining. • Related to element no. 3 and covers the problem of financing the subsidiaries of MNCs. • System Planning and Forecasting • Strong correlated with theoritical/mathematical substantiation of MNCs final decision.
1. Short-term or Working Capital Mngt Two Basic Objectives OPTIMIZING CASH FLOW INVESTING EXCESS CASH MOVEMENTS Investing the excess cash - 1. Accelarating cash inflows & demonstrate the interrelation between delaying cash outflows cash mngt & intl financial markets. 2. Managing blocked funds. 3. Leading ang lagging strategy. IMPORTANT ASPECTS 4. Capital Budgeting. 5. Using netting/clearing to reduce 1. To define the investment strategy. overall transaction cost 2. To define the country & the market 6. Instrument of international transfer for investment. pricing for the purposeof minimizing 3. To divesify its securities portfolio the tax on cash flow. acriss the countries w/ diff. currency 7. Accounts receivable mngt. denominations.
2. Long-term Financial Mngt. or Strategic Financial Mngt. It encompasses long-term directions & priorities of intl. financial activity of MNCs: 1. Development & implementation of MNCs financial policy & strategy. 2. Development & realization of real investments and investment portfolio. 3. Perspective budgeting. 4. Mechanism of long-term financial resources generating. 5. Maximization of market value of MNC. 6. Formation of optimal capital structure. 7. International tax mngt. 8. Global allocation assests. 9. Factor analysis of global financial environment. 10. International risk-management.
• The main purpose of strategic financial mngt. is to increase the financial capacity of MNC that means its ability to use effectively its own financial resources and to attract debt capital. • The key priorities in strategic financial mngt for MNC remain globalization of its activities through foreign direct investment & intl production.
MNCs Global Financial Strategy has to focus on: 1. Providing effective producing competitive products. 2. Host country resource mobilization. 3. Maximum reduction of production cost. 4. Formation & distribution of income 5. Effective use of capital.
3. Associating W/ the Structure & Characteristics of Methods of Financing the Activities of MNC Long-term funds of financial resources are: 1. Financing from creditors. 2. Financing from investors. 3. Eurocurrency financing. 4. Foreign financing. 5. Official financing.
Benifits from MNC international financing are caused by several factors: 1. MNCs tend to have a high credit rating, and thus, access to cheaper resources. 2 . M N C s a re r a p i d l y g ro w i n g c o m p a n i e s t h a t u s e m a r k e t s opportunities around the worldthe provide sales growth. 3. Widely diversified MNCs activities provide their financial stability and extend the opportunities for obtaining capital. 4. MNCs are tightly integrated into the global financial system.
4. Related to 3rd element & covers the problem of financing the subsidiaries of MNCs. • Three main groups of financial funds available in sudsidiaries financing. 1. Funds generated internally by the foreign subsidiaries 2. Funds from within MNC 3. Funds external to MNC
5. System Planning and Forecasting Several methods of financial palanning are used for effective allocation of worldwide generalized profits... Effective planning of 1. Flexible budget financing activities and global strategy of MNCs development 2. Percent of sales largely depends on the purpose and orientation of top mngt. its organizational capacity & 3. Breakeven analysis intuition. 4. Cost mngt. 5. Situation plan analysis
6. Theoritical/Mathematical Substantiation of MNCs financial decisions "To use financial management models that are based on the criteria of their impact on the assets and liabilities of the MNC as well as on its market values" Mathematical approaches to management of MNCs finance & the cost of its capital are: 1. Instrument for assets evaluation in balance sheet 2. Instrument for assets liabilities in balance sheet
“ Enjoy The Month of Ramadhan. ” –Group 7
Recommend
More recommend
