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14 Cards in this Set
- Front
- Back
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Direct foreign investment
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buying equipment and buildings for a new company
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Advantages Of a direct foreign investment
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Lower taxes in the foreign nation
Annual depreciation allowances for the amount invested Access to foreign capital sources |
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Cost of capital for forign projects is higher because
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1. Exchange rate risk
2. Political risk |
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Foreign investments are funded by
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Parent company resources
Common stock sales in the foreign country Bond sales in foreign country Borrowing in the world financial markets |
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Benefits to the home country include
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Improved earnings and exports of products to foregn subsidiaries
Improved ability to botain scares resources Typical benefits of free trade |
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Fixed Vs. Floating Exchange rates
Adverse effects on the Home country |
Loss of jobs and tax revenue
instability Competitive advantage of multinationals |
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Fixed Vs. Floating Exchange rates
Benefits to the Host country |
New investment
IMprovements in output Stimluation of competition Increased tax rev |
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Fixed Vs. Floating Exchange rates
Adverse effects on the host country |
Remittance of royalties and profits that can cause net capital outflow
Transfer prices where taxes are lowest Anticompetitive strategies |
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Cross-border factoring
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method of consummating a transaction by a network of factors across borders.
the exporters factor contracts correspondent factors in other countries to assist in the collection of accounts receivable. |
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Letter of Credit
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Issuer undertakes with the account party to verify that the beneficiary has performed under the contract.
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Bankers acceptance
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time drafts drawn on deposits in a bank. Short term credit investments created by a nonfinancial firm and guaranteed by a bank as to payment.
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Forfaiting
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The sale by exporters of large, medium to long-term reciebales to buyers who are willing and able to bear the costs and risks of credit and collections.
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CounterTrade
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barter
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Treaties
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to avoid double taxation
coordinate or synchronize the effects of their taxing statutes. |
