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Finance and accounting : International Finance - Essay Example

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Finance and accounting : International Finance

(GHC) is a United Kingdom based Multinational Company which sources variety of decorative hardwoods from countries around the world. These hardwoods are then processed into products that are used in the construction and furniture industries. It imports hardwoods in a raw, unfinished state which are then processed in its own sawmills and finishing plants. The Chairman of GHC decided to diversify GHC’s business and therefore established Real Furniture Company (RFC) as a subsidiary company to develop these markets. RFC imports a range of hardwood and cane furniture, which is manufactured in overseas location. Current Financial Practices of GHC Profitability position The financial position of Global Hardwood Corporation states that the turnover as a whole has been increasing on an ongoing basis. If we focus on the turnover by product wise then it can be noticed that construction division has shown a continuous decrease, furniture division has shown a continuous increase and the Real Furniture Company has also shown a continuous increase in terms of sales revenue. The earnings before interest and tax has shown a continuous increase since five years, profit before tax and profit after tax has also resulted in tremendous increase since the five year period ranging from 2003 to 2007. Analysis and Measurement of Political and Country Risk The risk which Global Hardwood Corporation may be facing is political and country risk. Political risk is the events that can negatively affect doing business (Jakobsen p.3). The country risk includes the possibility of losses due to country specific political, economic and social events (Levi, 2009, p.463). Nationalization may be the most excessive form of political risk which the company is facing. The other forms of political risk are currency and trade control, regulatory restrictions, changes in tax or labour laws and requirement for additional local production. It also includes macro and micro issues associated with political decisions, social and cultural issues and financial and economic risks. Political risk can be measured from a country risk analysis perspective. GHC may be facing country risk due to the following reasons: regional politics, currency stability, trade alliances, legal and regulatory system and home-host country relations (Shong, 2008, p.22). Political risk can be accessed through protecting new and existing global investment and operations and capitalizing on opportunities resulting from political change. Careful assessment is to be done by avoiding investment in those areas that are too risky and pulling money out of the areas when they become too risky. The managers should evaluate alternative investment options on a continual basis. Micro level political risk can be assessed by shifting the investment to different industries and firm can also file an insurance claim (Rajwani, 2013, p.1). Ratio analysis is used for measuring country risk. The ratio of gross domestic fixed investment to GDP measures the economic propensity to invest. The net capital imports over gross domestic fi ...Show more


Can you please amend the references? Because my lecturer place a great emphasis on references that he requires us to avoid using website as references. And I found that the WEBSITE references in the report are not ACADEMIC website even some of the links cannot open…
Author : millsflorence
Finance and accounting essay: International Finance essay example
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