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Multinational Companies - Essay Example

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Multinational Companies

Because currency exchange rates fluctuate on a daily (minute-to-minute) basis, clean and easy apples-to-apples comparisons of U.S. dollars to Euros or Yen may not be possible, especially with systems that deal with data on an intraday basis. Tracking the profitability of products in varying markets will fall short of expectations unless data stores and currency tables that contain detailed exchange rates and valuation dates are properly integrated into the general warehouse or operational data store. Many currencies will be tracked against other currencies - the simplest being home currency versus the single currency of the trade/deal/transaction - using parallel fields for each denomination in the appropriate warehouse tables. Thus, if a transaction took place in Japan (in Yen), multiple fields that represent the event would have both U.S. dollars and Yen denominations that communicate up-to-date or restated exchange rates. The business firm must also be aware that the location of the transaction does not always unequivocally define the currency of the transaction. Many financial events such as currency swaps and spots will fall into this category, making it more laborious to correctly portray the financial picture of the business.
Unexpected changes in the values of foreign...
Suffice it to say that organizations may wish to seek the assistance of available expertise in the banking or brokerage communities to design and implement a foreign exchange hedging strategy.
As a related point, international operations entail the accumulation of short-term and long-term assets and liabilities that must be managed. Differences in economic conditions from country to country may oblige management to treat foreign assets and liabilities differently from domestic assets and liabilities. An obvious example is provided by countries where there is some significant risk of governments imposing restrictions on the transfer of foreign-held funds out of their countries. In such circumstances, foreign companies will find it inadvisable to hold accounts receivables and other short-term assets for as long as they might ordinarily hold such assets in their home market. This problem is compounded by the difference in accounting procedures that is applicable in the country although the fundamental principles are not that varied. International firms will also different economic and legal ramifications. For example, the other country may have different taxes and wages required as compared to the mother country. In effect, they may need some modifications in their cash inflows and outflows providing additional categories or deleting some items.
Other such examples can be cited, but the main point, again, is that international business management extends to virtually all aspects of the financial management activity in more or less subtle ways

2.0 Forecasting Country Risks
The field of forecasting is concerned with approaches to ...Show more

Summary

Multinational companies are defined as business firms that operate in two or more countries with international sales and a multinational mix of managers and owners. This definition alone carries with it implications and ramifications that differentiates with the financial arrangements of a domestically based firm…
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Multinational Companies Essay essay example
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