After claims have been met in priority order and an accounting made of the
proceedings, there may than be instituted an application to discharge the
bankrupt business.
❖ MULTINATIONAL CORPORATIONS
International business encompasses all business activities that involve exchanges across
national boundaries. Specialization and international trade can result in the efficient
production of want satisfying goods and services on a worldwide basis through
Absolute and Comparative Advantage. Yet the nations of the world continue to erect
barriers to free trade.
International finance involves considerate of working capital, financing the business,
control of foreign exchange and political risks, and foreign direct investments.
o Financial goals of multinational corporation (MNCs)
A survey made on financial managers of MNCs lists the financial goals of MNCs in the
following order of importance:
- Maximize growth in corporate earnings, whether total earnings, earning by
interest and taxes (EBIT), or earnings per share (EPS).
- Maximize return on equity
- Guarantee that funds are always available when needed.
Companies involved in multinational business may structure their activities in the
following three ways wholly owned subsidiaries, import/export activities, and joint
ventures. In evaluating the impact that foreign operation have on the entity’s financial
health, the financial manager of an MNCs should consider the extent of inter country
transaction, foreign restrictions and laws, tax structure of the foreign country, and the
economic and political stability of the country.
Due to the foreign exchange market, the buyer may pay in one currency while the seller
can receive payment in another currency. The conversion rate between currencies
depends on the demand/supply relationship.
