Chapter 13.1 Flashcards
Introduction to International Financial Management (103 cards)
How has financial management changed in recent generations?
It has changed in many respects due to the globalization of the world economy.
Despite changes in the global business environment, what has remained the same in financial management?
The goals and principles of financial management remain essentially the same.
What is globalization?
The removal of barriers to free trade and the integration of national economies
How long has the globalization of business and financial markets been taking place?
Over the past 50 years.
How significant is international revenue for large corporations today?
Many generate more than half of their sales in countries other than where they are based.
What proportion of McDonald’s revenue comes from outside the United States?
Almost two-thirds.
What are examples of global consumer purchasing patterns?
Americans buy clothing and shoes from China, oil from Saudi Arabia, cars from Germany, pasta and shoes from Italy, wine from France, coffee from Brazil, TVs from Japan, and textiles from India.
What are examples of U.S. exports that foreigners commonly purchase?
Aircraft, medical technology, software, movies, music CDs, wheat, beef, and lumber.
What has been the effect of the emergence of large multinational companies on the global economy?
The economies of the world have become increasingly interdependent.
How do most multinational companies structure their operations globally?
They have integrated sales and production operations in a dozen or more countries.
Why do multinational firms locate production and purchase components in various countries?
To purchase components and locate production where costs are lower to generate higher margins
What example illustrates the globalized production of U.S.-branded personal computers?
PCs from Dell and HP may be assembled in Malaysia or China, with monitors and drives from Taiwan, chips from the U.S., keyboards from Korea, and software from India.
What has happened to the financial system alongside global product markets?
It has become highly integrated.
What has driven much of the financial integration among global markets?
Deregulation of foreign exchange markets, money and capital markets, and banking systems by major Asian and Western governments.
What is a multinational corporation?
A business firm that operates in more than one country
What major factor has driven globalization of the world economy?
Direct investment by multinational corporations.
What types of business activities do multinational corporations engage in?
Traditional lines of business such as manufacturing, mining, gas and oil, and agriculture, as well as consulting, accounting, law, telecommunications, and hospitality.
How might a multinational firm structure its global operations across countries?
It may purchase raw materials in one country, obtain financing from a capital market in another country, produce goods with labor and capital equipment from a third, and sell finished goods globally.
Who typically owns multinational corporations?
They are owned by a mixture of domestic and foreign stockholders.
What are transnational corporations?
A multinational firm that has widely dispersed ownership and that is managed from a global perspective
How are transnational corporations managed?
Regardless of the location of their headquarters, are managed from a global perspective rather than the perspective of a firm residing in a particular country
Why are transnational corporations politically controversial?
Viewed as stateless corporations with no allegiance or social responsibility to any nation or region of the world
What is an example of a transnational corporation?
Royal Dutch Shell
Where did Royal Dutch Shell rank among the largest multinational firms in 2016?
It was the fifth largest, with $272.2 billion in worldwide revenue.
