About This Chapter
International Corporate Finance - Chapter Summary and Learning Objectives
The international financial system enables businesses to operate on a global scale. This chapter looks at various parts of the system and explores transactions, risks, and the risk management strategies companies use to navigate the international marketplace. The lessons were created by experienced instructors who are available to answer your questions as you progress. Topics in the chapter include:
- Doing business in multiple currencies
- Relative values of different currencies
- Dealing with different interest rates in different countries
- Allocating capital across international borders
- Exploring risks from exchange rates and political situations
|Foreign Currency Exchange: Supply and Demand for Currency||Learn about exchange rates and types of transactions.|
|What is Purchasing Power? - Definition & Parity Theory||Define purchasing power and relate it to parity theory.|
|Interest Rate Parity, Forward Rates & International Fisher Effect||Explain issues related to types of interest rates and how they influence international business decisions.|
|International Capital Budgeting: Approaches & Exchange Rate Risk||Study methods of allocating capital resources across borders and dealing with exchange rate risk.|
|Exchange Rate Risk & Forms of Exposure||Explore different types of exchange rate risks and strategies to manage them.|
|International Corporate Finance & Political Risk||Discuss how politics puts international business at risk.|
1. Foreign Currency Exchange: Supply and Demand for Currency
In this lesson, you'll learn why money from different countries has different values of exchange. We'll cover the supply and demand for currencies and how changes in supply and demand can affect the exchange rates between currencies.
2. What is Purchasing Power? - Definition & Parity Theory
In this lesson, we'll be looking at purchasing power, which is used for computing the value of currency. After the lesson, you can test your knowledge with a short quiz.
3. Interest Rate Parity, Forward Rates & International Fisher Effect
How do interest rates affect companies that do business in multiple countries? In this lesson, we'll look at exchange and interest rates, including interest rate parity, the international Fisher effect, and interest arbitrage.
4. International Capital Budgeting: Approaches & Exchange Rate Risk
International businesses face risks that domestic companies don't. In particular, the exchange rate can pose a risk for multinational corporations. In this lesson, we'll examine the home currency approach and how it can help mitigate this risk.
5. Exchange Rate Risk & Forms of Exposure
International businesses face certain risks, including the risk of exchange rates being unfavorable. In this lesson, we'll explore forms of exchange rate exposure, including short-run, long-run, and translation exposure.
6. International Corporate Finance & Political Risk
Multinational corporations face risks to their financial bottom line thanks to politics and political risk in different countries. In this lesson, we'll look at common sources of political risks for companies and how they can impact companies.
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Other chapters within the Finance 101: Principles of Finance course
- Introduction to Corporate Finance
- Financial Statements, Taxes & Cash Flow
- Financial Statement Basics
- Long-Term Financial Planning & Growth
- Introduction to Valuation Methods
- Discounted Cash Flow Valuation
- Interest Rates & Bond Valuation
- Stock Valuation
- Net Present Value & Investment Basics
- Capital Investment Decisions
- Accounting Risk & Return
- Return, Risk, & the Security Market Line
- Options & Corporate Finance
- Cost of Capital
- Financial Leverage & Capital Structure
- Dividends & Dividend Policy
- Short-Term Financing & Planning
- Cash & Liquidity Management
- Credit & Inventory Management
- Studying for Finance 101