Benefits and Costs of Foreign Direct Investment (FDI) to Host Country

Foreign Direct Investment plays an important part in global entrepreneurs and businesses. The FDI can easily provide a firm with new business environments and markets, cheaper production facilities, usage chances of newest technologies, cheaper financing and skills. There is an significant difference between FDI and  foreign portfolio investment  (FPI). Foreign portfolio investment means investing of individuals, companies, or policy makers of a nation in foreign fiscal tools (for example government bonds, foreign stocks) making an important wealth piece in a foreign entrepreneurship is not involved.

There are two strategic kinds of FDI:

  1. Horizontal foreign direct investment  : If FDI is made in way which in same sector as a company have activity in at home.
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Implications of Asset Securitization

Asset securitization can be defined as the partial or complete segregation of a specific set of cash flows from a corporation’s other assets and the issuance of securities based on these cash flows, i.e exchanging one asset for another. The types of financial assets involved in asset securitization transactions are often receivables. The practice of securitization originated with the sale of securities backed by residential mortgages, but the framework of asset securitization has rapidly expanded from its initial root of mortgages and receivables to other more variable cash flows in home equity loan markets, commercial loan markets, credit card receivables, auto loans, small-business loans, corporate loans, state lottery winnings, and litigation settlement payments and other types of loans.… Read the rest

Capital Supply and International Financial Markets

Capital flows have  traditionally focused on the ‘demand side’ of emerging market financing by  examining current account balances, which are equal to the net external  financing needs of countries, and then seeking to identify ways in which these  financing needs could be met and on what terms. However, this approach  ignores trends in capital flows into and out of the major advanced economies,  which are the source of most cross-border capital and the main reason why  gross flows have risen so dramatically relative to net flows. These flows are  typically in a securitized form and, as such, are susceptible to trading in active  secondary markets.… Read the rest

Centralized Cash Management Operations of Multinational Corporations

International money managers attempt to attain on a worldwide basis the traditional  domestic objectives of cash management: (1) bringing the company’s cash resources  within control as quickly and efficiently as possible and (2) achieving the optimum  conservation and utilization of these funds.

Accomplishing the first goal requires establishing accurate, timely forecasting and  reporting systems, improving cash collections and disbursements, and decreasing the  cost of moving funds among affiliates. The second objective is achieved by  minimizing the required level of cash balances, making money available when and  where it is needed, and increasing the risk-adjusted return on those funds that can be  invested.… Read the rest

Multinational Corporations and Accounts Receivable Management

Multinational Corporations (MNC’s)  grant trade credit to customers, both domestically and internationally, because they  expect the investment in receivables to be profitable, either by expanding sales volume or by retaining sales that otherwise would be lost to competitors. Some companies also earn a profit  on the financing charges they levy on credit sales.

The need to scrutinize credit terms is particularly important in countries experiencing rapid  rates of inflation. The incentive for customers to defer payment, liquidating their debts with  less valuable money in the future, is great. Furthermore, credit standards abroad are often more  relaxed than in the home market, especially in countries lacking alternative sources of credit  for small customers.… Read the rest

Definition of Forfaiting

Forfaiting is a specialized form of trade finance that allows the exporter to offer  extended credit to the importer. Under forfaiting  , the importer gives the  exporter a bundle of bills of exchange or promissory notes covering the principal  amount as well as the interest. Each tranche of the notes fall due at different points of  time in the future, e.g. every six months, extending up to several years. The notes are  backed by an aval or guarantee provided by a reputed bank in the importer’s country.  The exporter can then discount these notes without recourse with banks who  specialize in the forfaiting business to generate an immediate cash flow.… Read the rest