Efnisyfirlit

• Front Matter
  • Contents
  • Preface
    • Approach
    • Pedagogy
    • Additional Resources
  • Selected Currencies and Symbols
  • Symbols and Acronyms
• PART 1 The Global Financial Management Environment
  • 1 Introduction to International Financial Management
    • LEARNING OBJECTIVES
    • 1.1 The Rise of the International Company
      • Mini-Case General Electric Globalizes Its Medical Systems Business
      • Evolution of the Multinational Corporation
        • FIGURE 1.1 Selected Transnational Corporations
        • FIGURE 1.2 Volkswagen’s Brands
        • FIGURE 1.3 Location of Volkswagen’s Main Production Facilities
        • FIGURE 1.4 Volkswagen Group Sales in 2012
        • FIGURE 1.5 The Stock of Worldwide Foreign Direct Investment: 1980–2012
        • Search for Raw Materials.
        • Market Seeking.
          • FIGURE 1.6 Flows of Foreign Direct Investment to Developing Countries: 1970–2012 (Billions of U.S. Dollars)
        • Cost Minimization.
          • FIGURE 1.7 Offshoring and Outsourcing—Some Definitions
          • Application Honda Builds an Asian Car Factory
        • Knowledge Seeking.
        • Keeping Domestic Customers.
        • Exploiting Financial Market Imperfections.
      • The Process of Overseas Expansion by Multinationals
        • FIGURE 1.8 Typical Foreign Expansion Sequence
        • Exporting.
        • Overseas Production.
        • Licensing.
        • Tradeoffs Between Alternative Modes of Overseas Expansion.
      • A Behavioral Definition of the Multinational Corporation
        • FIGURE 1.9 How Dell Reduces the Order-to-Delivery Cycle
        • Mini-Case Siemens: “Think More Like Visionaries”20
      • The Global Manager
    • 1.2 The Internationalization of Business and Finance
      • Political and Labor Union Concerns about Global Competition
        • Application The European Union Pays a Price to Stop Creative Destruction
          • FIGURE 1.10A Real GDP Growth United States Versus Core EU-15 1996=100
          • FIGURE 1.10B Unemployment Rate: United States Versus EU
          • FIGURE 1.10C Labor Productivity Growth United States Versus EU 1995=100
        • Application The Asian Tigers Fall Prey to World Financial Markets
          • FIGURE 1.11A Currency Devaluations
          • FIGURE 1.11B Stock Market Drop
      • Consequences of Global Competition
        • Application Japanese Competition Affects the U.S. Car Industry
        • Application The Myth of a Deindustrializing America
          • FIGURE 1.12 Winners and Losers: Percentage Change in Manufacturing Employment From 1995 to 2002
          • FIGURE 1.13 How Logitech’s $40 Mouse is Dissected
        • FIGURE 1.14 U.S. Unemployment Rates and New Job Creation
        • FIGURE 1.15A Real Compensation per Hour and Output per Hour for American Nonfarm Workers: 1959–2007
        • FIGURE 1.15B Real Compensation per Hour Various with Output per Hour for American Nonfarm Workers: 1959–2007
    • 1.3 International Financial Management: Theory and Practice
      • Criticisms of the International Corporation
      • Functions of Financial Management
      • Theme of This Text
      • Relationship to Domestic Financial Management
        • Arbitrage.
        • Market Efficiency.
        • Capital Asset Pricing.
      • The Importance of Total Risk
      • The Global Financial Marketplace
      • The Role of the Financial Executive in an Efficient Market
    • 1.4 Outline of the Text
      • The Global Financial Management Environment
      • Currency and Derivatives Markets
      • Managing Currency Risks
      • Financing International Operations
      • International Capital Budgeting
      • International Management of Working Capital
      • QUESTIONS
      • WEB RESOURCES
      • WEB EXERCISES
    • APPENDIX 1A The Origins and Consequences of International Trade
    • The Gains from Trade
    • Specialized Factors of Production
    • Monetary Prices and Exchange Rates
    • Tariffs
      • QUESTIONS
  • 2 Exchange Rate Determination
    • LEARNING OBJECTIVES
    • 2.1 Setting the Equilibrium Spot Exchange Rate
      • Demand for a Currency
      • Supply of a Currency
        • FIGURE 2.1 Equilibrium Exchange Rates
      • Factors that Affect the Equilibrium Exchange Rate
        • Relative Inflation Rates.
          • FIGURE 2.2 Impact of U.S. Inflation on the Equilibrium Exchange Rate
        • Relative Interest Rates.
        • Relative Economic Growth Rates.
        • Political and Economic Risk.
      • Calculating Exchange Rate Changes
        • Application The Ruble is Rubble
          • FIGURE 2.3A The Ruble is Rubble
          • FIGURE 2.3B The Ruble is Rubble Round Two
        • Application Calculating Yen Appreciation Against the U.S. Dollar
        • Application Calculating U.S. Dollar Appreciation Against the Thai Baht
        • Illustration Calculating Afghani Appreciation Against the Pakistani Rupee
    • 2.2 Expectations and the Asset Market Model of Exchange Rates
      • Mini-Case Asian Currencies Sink in 1997
      • The Nature of Money and Currency Values
        • Application Emerging Market Currency Turmoil Hits India
          • FIGURE 2.4 The Indian Rupee Against the U.S. Dollar
      • Central Bank Reputations and Currency Values
        • Price Stability and Central Bank Independence.
          • FIGURE 2.5 Central Bank Independence, Inflation, and Economic Growth*
          • Application Inflation Dies Down Under
            • FIGURE 2.6 Inflation Dies Down Under
          • Application The Bank of England Gains Independence
            • FIGURE 2.7 British Inflation Expectations Fall as the Bank of England Gains Its Independence
        • Currency Boards.
        • Dollarization.
          • Mini-Case Argentina’s Bold Currency Experiment and Its Demise
            • FIGURE 2.8 Argentina Ends Hyperinflation
          • FIGURE 2.9 Dollarization Stabilizes the Sucre
        • Expectations and Currency Values.
          • Application Sudan Devalues Its Pound
          • Mini-Case The U.S. Dollar Sells Off
    • 2.3 The Fundamentals of Central Bank Intervention
      • How Real Exchange Rates Affect Relative Competitiveness
        • FIGURE 2.10 Advantages and Disadvantages of a Strong Euro and a Weak Euro
        • FIGURE 2.11 The Value of the Euro Versus the U.S. Dollar: 1999–2013
      • Foreign Exchange Market Intervention
        • Mini-Case A Yen for Yuan
        • Mechanics of Intervention.
          • Application Switzerland Tries to Protect Its Economy by Capping the Value of Its Currency
            • FIGURE 2.12 Swiss Franc Versus the Euro
        • Sterilized Versus Unsterilized Intervention.
      • The Effects of Foreign Exchange Market Intervention
        • FIGURE 2.13 Bank of Japan Intervention Fails to Stem the Rise in the Yen
        • Application Japan Weakens its Currency
    • 2.4 The Equilibrium Approach to Exchange Rates
      • Disequilibrium Theory and Exchange Rate Overshooting
        • FIGURE 2.14 Exchange Rate Overshooting According to the Disequilibrium Theory of Exchange Rates
      • The Equilibrium Theory of Exchange Rates and Its Implications
    • 2.5 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 3 The International Monetary System
    • LEARNING OBJECTIVES
    • 3.1 Alternative Exchange Rate Systems
      • Application Instability Prevails in the International Monetary System
      • The Trilemma and Exchange Rate Regime Choice
        • FIGURE 3.1 The Trilemma and Exchange Rate Regime Choice
        • FIGURE 3.2 Typical Currency Control Measures
      • Free Float
        • FIGURE 3.3 Supply and Demand Curve Shifts
        • FIGURE 3.4A Fluctuating Exchange Rates
        • FIGURE 3.4B Actual Changes in the Dollar/Euro Exchange Rate: May 1–9, 2008
      • Managed Float
      • Target-Zone Arrangement
      • Fixed-Rate System
        • Mini-Case The BRICs Solve the Trilemma with Different Exchange Rate Regimes
          • FIGURE 3.5 BRIC Exchange Rates (Normalized to 2000)
    • 3.2 A Brief History of the International Monetary System
      • FIGURE 3.6 Wholesale Price Indices: Pre-World War I
      • FIGURE 3.7 Consumer Price Indices (CPI): Post-World War II
      • The Classical Gold Standard
        • FIGURE 3.8 The Price-Specie-Flow Mechanism
      • How the Classical Gold Standard Worked in Practice: 1821–1914
      • The Gold Exchange Standard and Its Aftermath: 1925–1944
        • Competitive Devaluations.
        • Bretton Woods Conference and the Postwar Monetary System.
        • Role of the IMF.
        • Role of the World Bank.
        • Role of the Bank for International Settlements.
          • Mini-Case Competitive Devaluations in 2003, Return in 2010
      • The Bretton Woods System: 1946–1971
        • Lessons and Red Flags from Bretton Woods.
      • The Post-Bretton Woods System: 1971 to the Present
        • FIGURE 3.9 Value of the U.S. Dollar in Terms of Euro, Yen, and Pounds: 1973–2014
        • FIGURE 3.10 Effects of Government Actions and Statements on the Value of the 1987 Dollar
        • Application Global Financial Crisis Boosts the U.S. Dollar
          • FIGURE 3.11 U.S. Dollar Rises on Global Financial Crisis
      • Assessment of the Floating-Rate System
        • Increasing Currency Volatility.
        • Requirements for Currency Stability.
    • 3.3 The European Monetary System and Monetary Union
      • The Exchange-Rate Mechanism
      • Lessons from the European Monetary System
      • The Currency Crisis of September 1992
        • The Catalyst.
          • FIGURE 3.12 Defending the ERM Required High Interest Rates in Europe
        • The High Cost of Intervention.
      • The Exchange Rate Mechanism is Abandoned in August 1993
        • The Catalyst.
        • Governments Surrender to the Market.
        • A Postmortem on the EMS.
          • FIGURE 3.13 The European Monetary System Forces Convergence Towards Germany’s Inflation Rate
      • European Monetary Union
        • Maastricht Convergence Criteria.
        • Launch of the Euro.
          • FIGURE 3.14 Conversion Rates for the Euro
        • EMU and the European Welfare State.
          • Application Sweden Rejects the Euro
        • Consequences of EMU.
        • Performance of the Euro.
          • FIGURE 3.15 Comparative Statistics for the EMU Countries
          • FIGURE 3.16 The Euro Rides a Rollercoaster
      • Optimum Currency Area
        • Application The French Say Non to a European Constitution and the Euro Responds
          • FIGURE 3.17 The Euro Tumbles in Response to the “No” Vote on the European Constitution in 2005
        • Mini-Case The Euro Reacts to New Information
        • Cracks in the Eurozone–the Periphery States Fracture.
          • FIGURE 3.18 Ten-Year Government Bond Yields
        • The Catalyst—Divergences in Prices.
          • FIGURE 3.19 Unit Labor Costs
          • FIGURE 3.20 Competitiveness Diverges as Real Exchange Rates are Out of Sync
          • FIGURE 3.21 Interest Rates Diverge
        • Euro Structural Flaws.
        • Disparate Growth Rates Heightened Tensions.
          • FIGURE 3.22 Government Debt/GDP and Deficit/GDP Ratios for the PIIGS (2011)
          • Mini-Case A Greek Tragedy
            • FIGURE 3.23 Yields on 10-Year Government Bonds for the PIGS
          • Mini-Case A Wounded Celtic Tiger Has Its Paws Out
      • Lessons from EMU and the Euro
      • Exchange Rate Regimes Today
    • 3.4 Emerging Market Currency Crises
      • Transmission Mechanisms
        • Trade Links.
        • Financial System.
        • Debt Policy.
      • Origins of Emerging Market Crises
        • Moral Hazard.
        • Fundamental Policy Conflict.
      • Policy Proposals for Dealing with Emerging Market Crises
        • Currency Controls.
        • Freely Floating Currency.
        • Permanently Fixed Exchange Rate.
        • Better Information.
    • 3.5 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 4 Currencies: Expectations, Parities, and Forecasting
    • LEARNING OBJECTIVES
    • 4.1 Arbitrage and the Law of One Price
      • FIGURE 4.1 Five Key Theoretical Relationships among Spot Rates, Forward Rates, Inflation Rates, and Interest Rates
      • Mini-Case Oil Levies and the Law of One Price
    • 4.2 Purchasing Power Parity
      • FIGURE 4.2 The Big Mac Hamburger Standard as of July 2013
      • Application Calculating the PPP Rate for the Swiss Franc
      • FIGURE 4.3 Purchasing Power Parity
      • The Lesson of Purchasing Power Parity
        • Application Calculating the Real Exchange Rate for the Japanese Yen
        • Application How Undervalued Is the Chinese Yuan?
      • Expected Inflation and Exchange Rate Changes
      • The Monetary Approach
      • Empirical Evidence
        • FIGURE 4.4 Retail Prices for Coca Cola Around the World
        • FIGURE 4.5 Purchasing Power Parity Empirical Data, 1993–2006
        • FIGURE 4.6 Purchasing Power Party and Actual Exchange Rates
    • 4.3 The Fisher Effect
      • Application Central Banks’ Low Interest Policies Lead to Negative Real Interest Rates
      • FIGURE 4.7 The Fisher Effect
      • Empirical Evidence
        • FIGURE 4.8 Fisher Effect: Nominal Interest Rate Versus Inflation Rate for 28 Developed and Developing Countries as of November 2013
        • FIGURE 4.9 The Distinction Between Capital Market Integration and Capital Market Segmentation
        • FIGURE 4.10 Real Interest Rate Versus Nominal Interest Rate for 28 Developed and Developing Countries as of May 2007
        • Adding Up Capital Markets Internationally.
    • 4.4 The International Fisher Effect
      • Illustration Using the IFE to Forecast US$ and SFr Rates
      • FIGURE 4.11 International Fisher Effect
      • Empirical Evidence
        • Application The Carry Trade
        • Application Iceland’s Economy Heats Up and then Freezes Over
    • 4.5 Interest Rate Parity Theory
      • FIGURE 4.12 An Example of Interest Rate Parity
      • Application Covered Interest Arbitrage between London and New York
        • FIGURE 4.13 An Example of Covered Interest Arbitrage
      • FIGURE 4.14 Interest Rate Parity Theory
      • Application Using Interest Rate Parity to Calculate the $/¥ Forward Rate
      • Empirical Evidence
        • FIGURE 4.15 Uncovered and Covered Interest Rate Differentials (U.S. $ Versus Other Currencies)
        • Application Computing the Covered Interest Differential When Transaction Costs Exist
    • 4.6 The Relationship Between the Forward Rate and the Future Spot Rate
      • FIGURE 4.16 Relationship Between the Forward Rate and the Future Spot Rate
      • Application Using UFR to Forecast the Future $/€ Spot Rate
      • Empirical Evidence
    • 4.7 Currency Forecasting
      • Requirements for Successful Currency Forecasting
        • FIGURE 4.17 Forecasting in a Fixed-Rate System
      • Market-Based Forecasts
        • Forward Rates.
        • Interest Rates.
      • Model-Based Forecasts
        • Fundamental Analysis.
          • Application Using PPP to Forecast the South African Rand’s Future Spot Rate
        • Technical Analysis.
      • Model Evaluation
        • Application The Distinction Between an Accurate Forecast and a Profitable Forecast
      • Forecasting Controlled Exchange Rates
    • 4.8 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • INTERNET EXERCISES
      • BIBLIOGRAPHY
  • 5 The International Monetary System and the Balance of Payments
    • LEARNING OBJECTIVES
    • 5.1 Balance-of-Payments Categories
      • FIGURE 5.1 Eurozone Balance of Payments for 2013 (€ Billions)1
      • FIGURE 5.2 Examples of Entries in the Eurozone Balance-of-Payments Accounts
      • Current Account
        • FIGURE 5.3 Current-Account Balances as a Percentage of GDP (2011)
      • Capital Account
      • Financial Account
      • Balance-of-Payments Measures
        • Application Apple’s iPhone is Not Really Made in China
          • FIGURE 5.4 Assembled But Not Really “Made in China”
      • The Missing Numbers
    • 5.2 The International Flow of Goods, Services, and Capital
      • Mini-Case The Bank of Korea Reassesses Its Reserve Policy
      • Domestic Saving and Investment and the Financial Account
      • The Link between the Current and Financial Accounts
        • FIGURE 5.5 The Trade Balance Falls as Spending Rises Relative to GDP
        • FIGURE 5.6 Linking National Economic Activity with Balance-of-Payments Accounts: Basic Identities
        • FIGURE 5.7 International Investment Position of the United States: 1976–2010
      • Government Budget Deficits and Current-Account Deficits
      • The Current Situation
        • FIGURE 5.8 Global Current-Account Balances: 2000 to 2012
        • Application Invasion of the Sovereign Wealth Funds
    • 5.3 Coping with the Current-Account Deficit
      • Currency Depreciation
        • FIGURE 5.9 The Dollar and the Deficit*
        • Lagged Effects.
          • Application Chinese Exports to the United States Rise along with the Yuan
            • FIGURE 5.10 Chinese Exports to the United States Continue to Rise
        • J-Curve Theory.
          • FIGURE 5.11 The U.S. Current-Account Balance Versus the U.S. Dollar: 1970–2010
          • FIGURE 5.12 The Theoretical J-Curve
        • Devaluation and Inflation.
        • U.S. Deficits and the Demand for U.S. Assets.
      • Protectionism
      • Ending Foreign Ownership of Domestic Assets
      • Boosting the Saving Rate
        • Mini-Case Yin and Yang of Capital Flow Management
      • Adjusting Global Economic Policies
      • Current-Account Deficits and Unemployment
      • The Bottom Line on Current-Account Deficits and Surpluses
    • 5.4 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
  • 6 Country Risk
    • LEARNING OBJECTIVES
    • 6.1 Measuring Political Risk
      • Application Overseas Risks Faced by Convergys
      • Political Stability
      • Economic Factors
      • Subjective Factors
        • Application Threats to the Nation-State
        • FIGURE 6.1 Ease of Doing Business Rankings 2013
        • Political Risk and Uncertain Property Rights.
          • Application Komineft Rhymes with Theft
        • Capital Flight.
          • Application Mr. Yampel Gets Trampled in Ukraine
          • Application Political Risk in Venezuela
            • FIGURE 6.2 Venezuela’s Per Capita GDP Falls Under Hugo Chavez
          • Application Is Russia Too Corrupt for Foreign Investors?
          • FIGURE 6.3 Capital Flight from India 1971–1997
          • FIGURE 6.4 Private Capital Returns to Latin America
        • Culture.
    • 6.2 Economic and Political Factors Underlying Country Risk
      • Fiscal Irresponsibility
        • Application Japan as Number One in Fiscal Irresponsibility
          • FIGURE 6.5A Gross Government Debt as a Percentage of GDP: 1992, 2001, and 2011
          • FIGURE 6.5B Japanese Economic Performance Over the Lost Decade: 1992–2001
          • FIGURE 6.5C Japan’s Lost Decade Turns Into a Lost Generation
      • Monetary Instability
        • Mini-Case Zimbabwe Descends into Chaos
      • Controlled Exchange Rate System
      • Wasteful Government Spending
      • Resource Base
      • Country Risk and Adjustment to External Shocks
      • Market-Oriented Versus Statist Policies
        • Why Capitalism Works.
          • FIGURE 6.6A Economic Freedom and GDP per Capita
          • FIGURE 6.6B Economic Freedom and Prosperity
        • Statist Policies Constrain Growth.
          • Application India Reforms and Reaps the Benefits
          • Application The China Express Derails
        • Why Statist Policies Persist.
          • Application Lack of Growth in Hungary
      • Key Indicators of Country Risk and Economic Health
        • Application The 1948 West German Erhard Reforms
        • Market-Oriented Policies Work.
        • Market-Oriented Reform in Latin America.
          • FIGURE 6.7 Mexico’s Economic Policies: Then and Now
          • Application The Potential Gains from Privatization
            • FIGURE 6.8 Indian Government Ownership Hurts Productivity
        • Obstacles to Economic Reform.
          • Application Strategies for Eastern European Economic Success
    • 6.3 Country Risk Analysis in International Lending
      • The Mathematics of Sovereign Debt Analysis
        • Application Spain’s Hard Budget Arithmetic
        • Application France Loses Its AAA Rating
      • Country Risk and the Terms of Trade
      • The Government’s Cost/Benefit Calculus
        • Application Swine Flu
          • FIGURE 6.9 PIIGS in Trouble
      • Lessons from the International Debt Crisis
        • Onset of the Crisis.
        • Reform Takes Hold.
        • Debt Relief.
        • The Crisis Ends.
        • Lessons from Successful Economic Reform.
    • 6.4 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
• PART 2 Currency and Derivatives Markets
  • 7 Currency Markets
    • LEARNING OBJECTIVES
    • 7.1 Organization of the Foreign Exchange Market
      • FIGURE 7.1 The Circadian Rhythms of the Foreign Exchange Market
      • The Participants
        • FIGURE 7.2 Leading Foreign Exchange Traders in 2012
        • FIGURE 7.3 Structure of Foreign Exchange Markets
        • The Clearing System.
        • Electronic Trading.
      • Size
        • FIGURE 7.4A Daily Foreign Exchange Trading Volume by Financial Center
        • FIGURE 7.4B Daily Global Foreign Exchange Trading Volume
    • 7.2 The Spot Market
      • Spot Quotations
        • FIGURE 7.5 Foreign Exchange Rates Wednesday, December 4, 2013
        • Transaction Costs.
          • Application Banks Battle Pension Funds over Foreign Exchange Pricing
        • Cross Rates.
          • FIGURE 7.6 Key Currency Cross Rates Wednesday, December 4, 2013
          • Application Calculating the Direct Quote for the Brazilian Real in Bangkok
        • Currency Arbitrage.
          • FIGURE 7.7 An Example of Triangular Currency Arbitrage
          • Mini-Case Arbitraging Currency Cross Rates
        • Settlement Date.
        • Exchange Risk.
      • The Mechanics of Spot Transactions
    • 7.3 The Forward Market
      • FIGURE 7.8 Hedging a Future Payment with a Forward Contract
      • Forward Quotations
        • Exchange Risk.
        • Cross Rates.
          • Application Arbitraging Between Currencies and Interest Rates
      • Forward Contract Maturities
    • 7.4 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 8 Currency Derivatives
    • LEARNING OBJECTIVES
    • 8.1 Futures Contracts
      • FIGURE 8.1 Contract Specifications for Foreign Currency Futures*
      • FIGURE 8.2 Currency Futures Contracts Available at Different Exchanges
      • Forward Contract versus Futures Contract
        • FIGURE 8.3 An Example of Daily Settlement with a Futures Contract
        • FIGURE 8.4 Basic Differences between Forward and Futures Contracts
        • Advantages and Disadvantages of Futures Contracts.
          • Application Computing Gains, Losses, and Performance Bond Calls on a Futures Contract
        • Arbitrage between the Futures and Forward Markets.
          • Application Forward-Futures Arbitrage
    • 8.2 Currency Options
      • Market Structure
        • FIGURE 8.5 Contract Specifications for CME Standardized Currency Option Contracts
      • Using Currency Options
        • FIGURE 8.6 Profit from Buying a Call Option for Various Spot Prices at Expiration
        • FIGURE 8.7 Profit from Selling a Call Option for Various Spot Prices at Expiration
        • FIGURE 8.8 Profit from Buying a Put Option for Various Spot Prices at Expiration
        • FIGURE 8.9 Profit from Selling a Put Option for Various Spot Prices at Expiration
        • Application Speculating with a Japanese Yen Call Option
        • Currency Spread.
          • FIGURE 8.10 Currency Spreads
        • Knockout Options.
      • Option Pricing and Valuation
        • FIGURE 8.11 The Value of a Call Option before Maturity
        • FIGURE 8.12 Currency Option Pricing and Valuation
      • Using Forward or Futures Contracts Versus Options Contracts
        • FIGURE 8.13 Declining Exchange Rate Scenario
        • FIGURE 8.14 Hedging Alternatives: Offsetting a $4,750 Loss Due to a Declining Euro
        • FIGURE 8.15 Rising Exchange Rate Scenario
        • FIGURE 8.16 Hedging Alternatives: Offsetting a $5,200 Gain Due to a Rising Euro
        • Application BioCytex Assesses Its Hedging Options
        • Mini-Case Carrier Lumber Evaluates Its Futures
      • Futures Options
        • Application Exercising a British Pounds Call Futures Option Contract
        • Application Exercising a Swiss Franc Put Futures Option Contract
    • 8.3 Reading Currency Futures and Options Prices
      • FIGURE 8.17 Currency Futures and Options Contracts
      • FIGURE 8.18 How to Read Futures and Futures Options Quotations
    • 8.4 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
    • APPENDIX 8A Option Pricing Using Black-Scholes
      • Application Pricing a Six-Month Swiss Franc European Call Option
    • Implied Volatilities
    • Shortcomings of the Black-Scholes Option Pricing Model
      • PROBLEMS
    • APPENDIX 8B Put-Call Option Interest Rate Parity
      • FIGURE 8B.1 Illustration of Put-Call Option Interest Rate Parity
      • Application Pricing a December Euro Call Option
      • PROBLEMS
  • 9 Interest Rate Derivatives
    • LEARNING OBJECTIVES
    • 9.1 Interest Rate and Currency Swaps
      • Interest Rate Swaps
        • The Classic Swap Transaction.
          • FIGURE 9.1 Classic Swap Structure
        • Cost Savings Associated with Swaps.
          • Application Payments on a Two-Year Fixed-for-Floating Interest Rate Swap
            • FIGURE 9.2 Swap Payments Over the Two-Year Life of Thales’ Swap
      • Currency Swaps
        • FIGURE 9.3 Diagram of a Fixed-For-Fixed Currency Swap
        • Interest Rate/Currency Swaps.
          • Application Dow Chemical Swaps Fixed-for-Fixed with Michelin
            • FIGURE 9.4 Example of a Fixed-For-Fixed Euro–U.S. Dollar Currency Swap
          • Application Dow Chemical Swaps Fixed-for-Floating with Michelin
            • FIGURE 9.5 Example of a Fixed-For-Floating Currency Swap
          • Application Kodak’s Zero-Coupon Australian Dollar Interest Rate/Currency Swap
            • FIGURE 9.6 Kodak’s A$200 Million Zero-Coupon Eurobond And Currency Swap
            • FIGURE 9.7 MLCS Cash Flows–Eastman Kodak Transaction
        • Dual Currency Bond Swaps.
          • FIGURE 9.8 Cash Flows Associated with Yen Debenture Currency Swap
      • Economic Advantages of Swaps
    • 9.2 Interest Rate Forwards and Futures
      • Forward Forwards
        • Application Telecom Argentina Fixes a Future Loan Rate
      • Forward Rate Agreement
        • Application Unilever Uses an FRA to Fix the Interest Rate on a Future Loan
      • Short-Term Interest Rate Futures
        • Application Using a Futures Contract to Hedge a Forward Borrowing Rate
    • 9.3 Structured Notes
      • Inverse Floaters
      • Callable Step-Up Note
      • Step-Down Coupon Note
    • 9.4 Credit Default Swaps
    • 9.5 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
• PART 3 Managing Currency Risks
  • 10 Translation and Transaction Exposure
    • LEARNING OBJECTIVES
    • 10.1 Alternative Measures of Foreign Exchange Exposure
      • FIGURE 10.1 Comparison of Translation, Transaction, and Operating Exposures
      • Translation Exposure
      • Transaction Exposure
      • Operating Exposure
    • 10.2 Alternative Currency Translation Methods
      • Current/Noncurrent Method
      • Monetary/Nonmonetary Method
      • Temporal Method
      • Current Rate Method
        • FIGURE 10.2 Financial Statement Impact of Translation Alternatives (€ Thousands)
    • 10.3 Transaction Exposure
      • Application Computing Transaction Exposure for Airbus
    • 10.4 Designing a Hedging Strategy
      • Objectives
        • Application Malaysia Gets Mauled by the Currency Markets
      • Costs and Benefits of Standard Hedging Techniques
        • FIGURE 10.3 Basic Hedging Techniques
        • Costs of Hedging.
          • FIGURE 10.4 Cost of the Basic Hedging Techniques
        • Benefits of Hedging.
          • Application Selective Hedging
        • Exposure Netting.
      • Centralization versus Decentralization
      • Managing Risk Management
        • Application The Luck of the Irish Eludes Allied Irish Banks
      • Accounting for Hedging under IFRS
      • Empirical Evidence on Hedging
    • 10.5 Managing Translation Exposure
      • FIGURE 10.5 Basic Strategy for Hedging Translation Exposure
      • Funds Adjustment
      • Evaluating Alternative Hedging Mechanisms
    • 10.6 Managing Transaction Exposure
      • Forward Market Hedge
        • FIGURE 10.6 Possible Outcomes of Forward Market Hedge as of December 31
        • The True Cost of Hedging.
      • Money Market Hedge
        • FIGURE 10.7 Possible Outcomes of Money Market Hedge as of December 31
        • Application Comparing Hedging Alternatives When There Are Transaction Costs
        • Application Saudi Aramco Hedges Its Exposure
      • Risk Shifting
      • Pricing Decisions
      • Exposure Netting
        • Application Using Exposure Netting to Manage Transaction Exposure
      • Currency Risk Sharing
        • FIGURE 10.8 Currency Risk Sharing: Rowad National Plastics Co. and BASF
        • Mini-Case Chrysler Shares Its Currency Risk with Mitsubishi
      • Currency Collars
        • FIGURE 10.9 Currency Range Forward: Rowad National Plastics Co. and BASF
        • FIGURE 10.10 Use of a Currency Cylinder to Hedge RNP’s Receivable
      • Cross-Hedging
        • Application Hedging a Danish Krone Exposure Using Euro Futures
      • Foreign Currency Options
        • Using Options to Hedge Bids.
        • Using Options to Hedge Other Currency Risks.
        • Options versus Forward Contracts.
          • Mini-Case Help Esprit Cover Up Its Mexican Peso Transaction Exposure
    • 10.7 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
    • APPENDIX 10A Currency Translation in Practice
      • FIGURE 10A.1 Translation of Sterling Ltd.’s Income Statement under IFRS (Millions)
      • FIGURE 10A.2 Translation of Sterling Ltd.’s Statement of Financial Position (Millions)
  • 11 Economic Exposure
    • LEARNING OBJECTIVES
    • 11.1 Foreign Exchange Risk and Economic Exposure
      • Application European Manufacturers Suffer When the Euro Soars
      • FIGURE 11.1 The Time Pattern of Economic Exposure
      • Real Exchange Rate Changes and Exchange Risk
        • Application Japanese Yen Appreciation or Depreciation?
      • Importance of the Real Exchange Rate
      • Inflation and Exchange Risk
        • Application Calculating the Effects of Exchange Rate Changes and Inflation on Siemens Philippines
          • FIGURE 11.2 The Effects of Nominal Exchange Rate Changes and Inflation on Siemens Philippines
      • Competitive Effects of Real Exchange Rate Changes
        • Application Yen Appreciation Harms Japanese TV Producers
        • FIGURE 11.3 The Effects of Real Exchange Rate Changes on the Brazilian Shoe Manufacturer
    • 11.2 The Economic Consequences of Exchange Rate Changes
      • Transaction Exposure
      • Operating Exposure
        • Mini-Case Euro Appreciation Hurts Southern European Exports
        • FIGURE 11.4 Characteristic Economic Effects of Exchange Rate Changes on International Corporations
        • Mini-Case How Rising Gold Prices Hurt Harmony
    • 11.3 Identifying Economic Exposure
      • Pla Seau Beach Resort
        • FIGURE 11.5 Performance of Rupee, Ringgit, and Baht Against U.S. Dollar, 2011 to 2014
      • Petróleos Mexicanos
      • Toyota Motor Company
        • FIGURE 11.6 Key Questions to Ask that Help Identify Exchange Risk
    • 11.4 Calculating Economic Exposure
      • FIGURE 11.7 Summary of Projected Operations for Spectrum Manufacturing AB: Base Case
      • Spectrum’s Accounting Exposure
        • FIGURE 11.8 Impact of Krona Devaluation on Spectrum AB’s Financial Statement
      • Spectrum’s Economic Exposure
        • Scenario 1: All Variables Remain the Same.
        • Scenario 2: Krona Sales Prices and All Costs Rise; Volume Remains the Same.
          • FIGURE 11.9 Summary of Projected Operations for Spectrum Manufacturing AB: Scenario 2
        • Scenario 3: Partial Increases in Prices, Costs, and Volume.
          • FIGURE 11.10 Summary of Projected Operations for Spectrum Manufacturing AB: Scenario 3
        • Case Analysis.
          • FIGURE 11.11 Summary of Economic Exposure Impact of Krona Devaluation on Spectrum Manufacturing AB
    • 11.5 An Operational Measure of Exchange Risk
      • Limitations
        • Empirical Results.
    • 11.6 Managing Operating Exposure
      • Marketing Management of Exchange Risk
        • Market Selection.
        • Pricing Strategy.
        • Product Strategy.
          • Application Hitachi Chemical Moves Overseas
      • Production Management of Exchange Risk
        • Input Mix.
          • Application Japanese Car Manufacturers Outsource to Cope with a Rising Yen
        • Shifting Production Among Plants.
        • Plant Location.
        • Raising Productivity.
      • Planning for Exchange Rate Changes
        • Application Japanese Car Manufacturers Follow Different Paths to Profitability
      • Financial Management of Exchange Risk
        • Mini-Case Porsche Revs Up Its Results
        • FIGURE 11.12 Statement of Projected Cash Flow
        • FIGURE 11.13 Effect of Financial Structure on Net Cash Flow
        • Application South Korean Companies and Banks Mismatch Their Currencies
        • Application Avon Is Calling in Asia
    • 11.7 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
• PART 4 Financing International Operations
  • 12 International and Domestic Capital Markets
    • LEARNING OBJECTIVES
    • 12.1 Corporate Sources and Uses of Funds
      • Financial Markets versus Financial Intermediaries
      • Financial Systems and Corporate Governance
      • Globalization of Financial Markets
        • Financial Regulation and Deregulation.
          • Application Capital Markets Compete for Business
          • Application The Basel Rules and Financial Shocks
        • Financial Innovation.
          • Application The Swedish Export Credit Corporation Innovates
          • FIGURE 12.1 Securitization Versus Intermediation
    • 12.2 Domestic Capital Markets as International Financial Centers
      • FIGURE 12.2 The Role and Consequences of Well-Functioning Financial Markets
      • Application Japanese Regulators Press Shinsei Bank to Make Bad Loans
      • Mini-Case Beijing Tries to Overhaul Banks Through IPOs
      • International Financial Markets
      • Foreign Access to Domestic Markets
        • The Foreign Bond Market.
        • The Foreign Bank Market.
        • The Foreign Equity Market.
          • FIGURE 12.3 The International Equity offering by Deutsche Telekom
          • Application Waste Management Lists Its Stock in Australia
      • Globalization of Financial Markets Has Its Downside
    • 12.3 Development Banks
      • The World Bank Group
        • IBRD.
        • IFC.
        • IDA.
      • Regional and National Development Banks
      • Regional Development Banks
        • National Development Banks.
      • Private Sector Alternatives
        • FIGURE 12.4 Investment in Infrastructure Projects with Private Participation in Developing Countries (Billions of U.S. Dollars)
    • 12.4 Project Finance
      • FIGURE 12.5 Project Finance Expertise and Risk Sharing
    • 12.5 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 13 International Financial Markets
    • LEARNING OBJECTIVES
    • 13.1 The Eurocurrency Market
      • Modern Origins
      • Eurodollar Creation
      • Eurocurrency Loans
        • Terms.
          • Application Calculating the Effective Annual Cost of a Eurocurrency Loan
          • Mini-Case Siemens Negotiates a Eurocurrency Loan
        • Multicurrency Clauses.
      • Relationship Between Domestic and Eurocurrency Money Markets
        • Interest Differentials.
        • Eurocurrency Spreads.
          • FIGURE 13.1 Interest Rate Relationships Between Domestic And Eurocurrency Credit Markets
      • Euromarket Trends
    • 13.2 Eurobonds
      • FIGURE 13.2 Example of Offering Memorandum
      • To be confirmed Swaps
      • Links Between the Domestic and Eurobond Markets
        • Placement.
        • Currency Denomination.
        • Interest Rates on Fixed-Rate Eurobonds.
          • FIGURE 13.3 Comparison of All-In Costs of a Eurobond Issue and a U.S. Dollar Domestic Bond Issue
        • Interest Rates on Floating-Rate Eurobonds.
        • Eurobond Retirement.
        • Ratings.
      • Rationale for Existence of Eurobond Market
      • Eurobonds versus Eurocurrency Loans
    • 13.3 Note Issuance Facilities and Euronotes
      • Note Issuance Facilities versus Eurobonds
      • Euro-Medium-Term Notes
        • Reasons for Success.
        • Costs of a Euro-MTN Program.
        • Characteristics.
        • Risks.
    • 13.4 Euro-Commercial Paper
    • 13.5 The Asiacurrency Market
      • Application Steady Safe Isn’t
    • 13.6 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 14 The International Cost of Capital
    • LEARNING OBJECTIVES
    • 14.1 The Cost of Equity Capital
    • 14.2 The Weighted Average Cost of Capital for Foreign Projects
      • Application Estimating the Weighted Average Cost of Capital
      • Application Estimating a Foreign Project’s Weighted Average Cost of Capital
    • 14.3 Discount Rates for Foreign Investments
      • Evidence From the Stock Market
      • Key Issues in Estimating Foreign Project Discount Rates
      • Proxy Companies
        • Local Companies.
        • Proxy Industry.
        • Adjusted U.S. Industry Beta.
      • The Relevant Base Portfolio
        • The Impact of Globalization on the Cost of Capital.
          • Application How Globalization Affected Nestlé’s Cost of Capital
        • Empirical Evidence.
        • A Recommendation.
      • The Relevant Market Risk Premium
      • Recommendations
    • 14.4 The Cost of Debt Capital
      • Annual Exchange Rate Change
      • Using Sovereign Risk Spreads
        • FIGURE 14.1 Average Sovereign Bond Spreads of New Issues by Developing Countries (20 Countries with Highest and Lowest Bond Spreads)
    • 14.5 Establishing a Worldwide Capital Structure
      • Foreign Subsidiary Capital Structure
        • FIGURE 14.2 Subsidiary Capital Structure: Debt-to-Equity Ratios
        • FIGURE 14.3 Consolidated Parent Balance Sheet: Debt-to-Equity Ratios
        • FIGURE 14.4 Subsidiary Capital Structure Depends on What Its Funds are Called
        • Political Risk Management.
        • Currency Risk Management.
        • Leverage and Foreign Tax Credits.
        • Leasing and Taxes.
        • Cost-Minimizing Approach to Global Capital Structure.
      • Joint Ventures
    • 14.6 Valuing Low-Cost Financing Opportunities
      • FIGURE 14.5 Calculating the Value of Nordic Exploration’s Low-cost Loan Arrangement (US$Millions)
      • Taxes
        • Zero-Coupon Bonds.
        • Debt versus Equity Financing.
      • Government Credit and Capital Controls
      • Government Subsidies and Incentives
        • Application Internationalizing the Cost of Capital of Novo Industri
          • FIGURE 14.6 Novo’s B Share Prices Compared with Stock Market Indices, 1977–1982
    • 14.7 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
• PART 5 International Capital Budgeting
  • 15 International Portfolio Investment
    • LEARNING OBJECTIVES
    • 15.1 The Risks and Benefits of International Equity Investing
      • International Diversification
        • FIGURE 15.1 Annualized Monthly Returns and Standard Deviation of Returns, 1988–2012
        • Correlations and the Gains from Diversification.
          • FIGURE 15.2 How Foreign Markets Were Correlated with the World Index and the U.S. Market, 1970–2012
          • FIGURE 15.3 The Potential Gains from International Diversification
          • FIGURE 15.4 The U.S. Market Lags Behind the EAFE Index, 1970–2012
          • FIGURE 15.5 International Diversification Pushes Out the Efficient Frontier
        • Recent Correlations.
          • FIGURE 15.6 Correlation of Monthly Returns with the U.S. Market and Developed Country Markets
          • FIGURE 15.7 Correlation of U.S. and EAFE Returns (rolling 5-year periods using monthly data from January 1970 to June 2012)
          • FIGURE 15.8 No Place to Hide
          • FIGURE 15.9 Risk and Return for Various Mixes of U.S. and EAFE Indices, 1970–2012
      • Investing in Emerging Markets
        • FIGURE 15.10 Risk and Return for Emerging Markets, 1988–2012
        • FIGURE 15.11 Correlation of Monthly Returns with the U.S. Market and Emerging Markets
        • FIGURE 15.12 Correlation of U.S. and Emerging Market Returns (rolling 5-year periods using monthly data from January 1989 through June 2012)
        • FIGURE 15.13 Risk and Return for Various Mixes of MSCI-World and Emerging Market Indices, 1989–2012
        • Application When Latin American Stocks Were Hotter Than Salsa
          • FIGURE 15.14 Latin American Stock Markets Take Off on a Bumpy Ride
      • Barriers to International Diversification
        • Mini-Case Deutsche Bank Lists as a Global Share
    • 15.2 International Bond Investing
    • 15.3 Optimal International Asset Allocation
      • FIGURE 15.15 Efficient Frontiers, 1989 to 2009
    • 15.4 Measuring the Total Return from Foreign Portfolio Investing
      • Bonds
      • Stocks
    • 15.5 Measuring Exchange Risk on Foreign Securities
      • Hedging Currency Risk
    • 15.6 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 16 Strategies for Foreign Direct Investment
    • LEARNING OBJECTIVES
    • 16.1 Theory of the Multinational Corporation
      • Product and Factor Market Imperfections
      • Financial Market Imperfections
    • 16.2 The Strategy of Multinational Enterprise
      • Innovation-Based Multinationals
      • The Mature Multinationals
        • FIGURE 16.1 Planned Capital Investments for Soda Production and Bottling in Emerging Markets Announced by PepsiCo and Coca-Cola in 1992 and 1993 (US$ Millions)
        • Application Fiat’s Strategic Dilemma
      • The Senescent Multinationals
      • Foreign Direct Investment and Survival
        • Application Japan’s Electronics Industry Loses Its Spark
        • Cost Reduction.
        • Economies of Scale.
        • Multiple Sourcing.
        • Knowledge Seeking.
        • Keeping Domestic Customers.
          • Application Bridgestone Buys Firestone
    • 16.3 Designing a Global Expansion Strategy
      • Awareness of Profitable Investments
      • Selecting a Mode of Entry
      • Auditing the Effectiveness of Entry Modes
      • Using Appropriate Evaluation Criteria
      • Estimating the Longevity of a Competitive Advantage
    • 16.4 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • INTERNET EXERCISES
      • BIBLIOGRAPHY
  • 17 International Capital Budgeting
    • LEARNING OBJECTIVES
    • 17.1 Basics of Capital Budgeting
      • Net Present Value
      • Incremental Cash Flows
        • Cannibalization.
        • Sales Creation.
        • Opportunity Cost.
        • Transfer Pricing.
        • Fees and Royalties.
        • Getting the Base Case Right.
        • Accounting for Intangible Benefits.
          • Application Intangible Benefits from Investing in Japan
      • Alternative Capital-Budgeting Frameworks
        • An Adjusted Present Value Approach.
          • Application Estimating a Foreign Project’s Cost of Capital
    • 17.2 Issues in Foreign Investment Analysis
      • Parent versus Project Cash Flows
        • A Three-Stage Approach.
        • Estimating Incremental Project Cash Flows.
        • Tax Factors.
      • Political and Economic Risk Analysis
        • Adjusting the Discount Rate or Payback Period.
        • Adjusting Expected Values.
      • Exchange Rate Changes and Inflation
        • Application Factoring in Currency Depreciation and Inflation
    • 17.3 Foreign Project Appraisal: The Case of International Machine Tools
      • Estimation of Project Cash Flows
        • Initial Investment Outlay.
          • FIGURE 17.1 Initial Investment Outlay in IMT-U.K. ($2 = £1)
        • Financing IMT-U.K.
          • FIGURE 17.2 Initial Balance sheet of IMT-U.K. ($2 = £1)
        • Interest Subsidies.
        • Sales and Revenue Forecasts.
          • FIGURE 17.3 Present Value of IMT-U.K.: Project Viewpoint
        • Production Cost Estimates.
        • Projected Net Income.
        • Additions to Working Capital.
        • Terminal Value.
        • Estimated Project Present Value.
      • Estimation of Parent Cash Flows
        • Loan Payments.
        • Remittances to IMT-TW.
          • FIGURE 17.4 Dividends and Fees Royalties Received by IMT-TW (US$ Millions)
        • Earnings on Exports to IMT-U.K.
          • FIGURE 17.5 Net Cash Flows from Exports to IMT-U.K
        • Estimated Present Value of Project to IMT-TW.
          • FIGURE 17.6 Present Value of IMT-U.K.: Parent Viewpoint (US$ Millions)
        • Lost Sales.
          • FIGURE 17.7 Value of Lost Export Sales
    • 17.4 Political Risk Analysis
      • Expropriation
        • Application BanaBay Calculates the Consequences of Expropriation
          • FIGURE 17.8 BanaBay’s Choices (€ Millions)
      • Blocked Funds
        • Application Brascan Calculates the Consequences of Currency Controls
          • FIGURE 17.9 Cash Flows to Brascan (C$ Millions)
    • 17.5 Growth Options and Project Evaluation
      • FIGURE 17.10 The Gold-mine Operating Decision
      • FIGURE 17.11 Valuing a Growth Option to Undertake a Follow-Up Project
    • 17.6 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
    • APPENDIX 17A Managing Political Risk
    • Pre-investment Planning
      • Avoidance
      • Insurance
      • Negotiating the Environment
      • Structuring the Investment
    • Operating Policies
      • Changing the Benefit/Cost Ratio
        • Application Beijing Jeep
      • Developing Local Stakeholders
      • Adaptation
• PART 6 International Management of Working Capital
  • 18 International Trade Management
    • LEARNING OBJECTIVES
    • 18.1 Payment Terms in International Trade
      • Cash in Advance
      • Documentary Credit
        • FIGURE 18.1 Documentary Credit
        • FIGURE 18.2 Relationships Among the Three Parties to a Documentary Credit
        • FIGURE 18.3 Example of Documentary Credit Financing of Imports into Nigeria
        • Online Alternatives.
      • Draft
        • FIGURE 18.4 Time Draft
        • FIGURE 18.5 Banker’s Acceptance
      • Consignment
      • Open Account
        • FIGURE 18.6 International Methods of Payment: Advantages and Disadvantages (Ranked by Risk)
      • Banks and Trade Financing
      • Collecting Overdue Accounts
    • 18.2 Documents in International Trade
      • Bill of Lading
      • Commercial Invoice
      • Insurance Certificate
      • Consular Invoice
    • 18.3 Financing Techniques in International Trade
      • Bankers’ Acceptances
        • Creating an Acceptance.
          • FIGURE 18.7 Example of Banker’s Acceptance Financing of Imports: Created, Discounted, Sold, and Paid at Maturity
        • Terms of Acceptance Financing.
        • Evaluating the Cost of Acceptance Financing
      • Discounting
      • Factoring
        • Evaluating the Cost of Factoring.
      • Forfaiting
    • 18.4 Government Sources of Export Financing and Credit Insurance
      • FIGURE 18.8 Export-Import Agencies
      • Export Financing
        • FIGURE 18.9 COFACE Country Risk Ratings
        • Trends.
      • Export-Credit Insurance
      • Taking Advantage of Government-Subsidized Export Financing
        • Export Financing Strategy.
        • Import Financing Strategy.
          • FIGURE 18.10 Alternative Sources of Procurement: Hypothetical Copper Mine (US$ Million)
    • 18.5 Countertrade
      • Application Marc Rich & Co. Recreates the Former Soviet Union’s Supply System
    • 18.6 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 19 Managing Working Capital
    • LEARNING OBJECTIVES
    • 19.1 International Cash Management
      • Organization
      • Collection and Disbursement of Funds
        • FIGURE 19.1 How Multinationals Expedite Their Collection of Receivables
        • Application How Firms Coped with the Euro Crisis
        • Application International Cash Management at National Semiconductor
        • FIGURE 19.2 Reviewing Disbursements: Auditing Payment Instruments
      • Payments Netting in International Cash Management
        • Bilateral and Multilateral Netting
          • FIGURE 19.3A Payment Flows before Multilateral Netting
        • Information Requirements.
          • FIGURE 19.3B Intercompany Payments Matrix (U.S. € Millions)
          • FIGURE 19.3C Payment Flows After Multilateral Netting
        • Foreign Exchange Controls.
        • Analysis.
          • Application Cost/Benefit Analysis of an International Cash Management System
      • Management of the Short-Term Investment Portfolio
        • FIGURE 19.4 Key Money Market Instruments
        • Portfolio Guidelines
      • Optimal Worldwide Cash Levels
        • Evaluation and Control.
      • Cash Planning and Budgeting
        • Application An Italian Cash Management System
        • Multinational Cash Mobilization.
          • FIGURE 19.5 Daily Cash Reports of European Central Cash Pool (US$ Thousands)
          • FIGURE 19.6 Aggregate Cash Position of European Central Cash Pool (US$ Thousands)
          • FIGURE 19.7 Five-Day Cash Forecast of European Central Cash Pool (US$ Thousands)
      • Bank Relations
    • 19.2 Accounts Receivable Management
      • Credit Extension
        • Application Evaluating Credit Extension Overseas
    • 19.3 Inventory Management
      • Production Location and Inventory Control
      • Advance Inventory Purchases
      • Inventory Stockpiling
    • 19.4 Short-Term Financing
      • Key Factors in Short-Term Financing Strategy
      • Short-Term Financing Objectives
      • Short-Term Financing Options
        • Intercompany Financing.
        • Local Currency Financing.
        • Bank Loans.
          • Forms of Bank Credit
          • Interest Rates on Bank Loans
        • Commercial Paper.
      • Calculating the Costs of Alternative Financing Options
        • Case 1: No Taxes.
          • Analysis
        • Case 2: Taxes.
          • Analysis
    • 19.5 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
  • 20 Financial Management for the Global Enterprise
    • LEARNING OBJECTIVES
    • 20.1 The Value of the Multinational Financial System
      • FIGURE 20.1 The Multinational Corporate Financial System
      • Mode of Transfer
      • Timing Flexibility
      • Value
        • FIGURE 20.2 Market Imperfections that Enhance the Value of Internal Financial Transactions
    • 20.2 Intercompany Fund-Flow Mechanisms: Costs and Benefits
      • Tax Factors
      • Transfer Pricing
        • Tax Effects.
          • FIGURE 20.3 Tax Effect of High Versus Low Transfer Price (US$ Thousands)
        • Tariffs
          • FIGURE 20.4 Tax-Plus-Tariff Effect of High Versus Low Transfer Price (US$ Thousands)
        • Exchange Controls.
        • Joint Ventures.
        • Disguising Profitability.
        • Evaluation and Control.
      • Reinvoicing Centers
      • Fees and Royalties
        • Application Glaxo Gets an Ulcer from the IRS
      • Leading and Lagging
        • FIGURE 20.5 Fund-Transfer Effects of Leading and Lagging
        • Shifting Liquidity.
        • Advantages.
        • Government Restrictions.
      • Intercompany Loans
        • Back-to-Back Loans.
          • FIGURE 20.6 Structure of a Back-to-Back Loan
        • Parallel Loans.
          • FIGURE 20.7 Structure of a Parallel Loan
      • Dividends
        • Tax Effects.
          • FIGURE 20.8 Tax Effects of Dividend Remittances from Abroad
        • Financing Requirements.
        • Exchange Controls.
        • Joint Ventures.
      • Equity versus Debt
        • FIGURE 20.9 Euro Cash Flows Under Debt and Equity Financing
        • FIGURE 20.10 Euro Cash Flows Under Debt and Equity Financing
    • 20.3 Designing a Global Remittance Policy
      • Prerequisites
      • Information Requirements
      • Behavioral Consequences
    • 20.4 SUMMARY AND CONCLUSIONS
      • QUESTIONS
      • PROBLEMS
      • WEB RESOURCES
      • WEB EXERCISES
      • BIBLIOGRAPHY
• Back Matter
  • Glossary
  • Index

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