Controller's Guide to Multinational Financial ManagementCode: 14A-FM-MNC
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This course is designed for managers working for multinational companies (MNCs) as well as accountants, CFOs, controllers, treasurers, and international investors. In a modern economy, neither businesses nor individual investors can afford to be ignorant of the basic concepts of international finance. Changes in exchange rates and differences in national inflation and interest rates can affect the competitive position of businesses regardless of whether they are engaged in international operations. It is a valuable overview of financial management of MNCs and how it works. Discussed in detail are practical techniques and tools needed for currency risk management, financing, working capital management, international banking, imports and exports, and international investing and portfolio diversification, as well as for business on a global scale. Foreign currency risks are explained as they are conditioned by inflation, regional political factors, and government intervention in foreign markets.Presentation Method: Self-Study Category: Finance CPE credit: 15 Hours Program Level: Intermediate Prerequisites: General understanding of finance. Advance Preparation: None Exam expiration date: Participants must submit exams for grading within one year from the date of purchase. Objectives:
After completing this course, you will achieve the following chapter objectives::
1. List some special features of a multinational corporation (MNC).
2. Distinguish the factors that complicate financial decision making in an international environment.
3. Describe the impact of changes in exchange rates on a company’s competitive position.
4. Evaluate the impact of exchange rate changes on financial rates of return.
5. Explain the nature of international political and credit risks as they relate to financial decision making.
6. List the advantages for investors and business managers of understanding the fundamental principles and techniques of international finance.
1. Define an exchange rate.
2. Outline the different conventions for exchange rate quotation.
3. Convert any amount of one currency into the corresponding amount of any other currency.
4. Discuss the foreign exchange market and how it operates.
5. Outline the impacts of changes in foreign exchange rates on the multinational company's products and services and foreign investments
6. Explain the concept of a cross exchange rate and be able to use it to evaluate alternative methods of converting one currency into another.
1. Explain the nature of bid/ask spreads and be able to anticipate differences in them.
2. Discuss the nature and implications of locational arbitrage and how it relates to bid/ask spreads.
3. Differentiate between spot and forward exchange rates.
4. List the advantages of being able to contract at forward exchange rates.
5. Distinguish the difference between forward and futures contracts.
6. Weigh the advantages and disadvantages of exchange rate futures contracts.
1. Describe the nature of an option contract.
2. Distinguish between the varieties of option contracts.
3. Outline the operations of currency option markets.
4. Discuss the general economic uses of both put and call options on currencies.
5. Contrast the costs and risks associated with the use of currency options.
6. Explain the economics underlying the determination of option premiums.
1. Diagram changes in international trade to fluctuations in currency values.
2. Explain the influence of international credit markets on foreign exchange prices.
3. Describe the impact of international lending and investment on trade patterns and currency markets.
4. Outline the use of balance of payments concepts as they are used to forecast exchange rates.
5. State the goals of General Agreement on Tariffs and Trade (GATT) and WTO.
1. Identify the existence of advantageous black market and offshore exchange rates.
2. Explain the methods and limitations of government intervention in the foreign exchange market.
3. Discuss reserve currencies and special international currency reserves such as special drawing rights and European currency units.
4. Analyze the effect of monetary and fiscal policies on currency values.
5. Describe the nature and function of systems of international exchange rate regulations such as the Bretton Woods System and European Monetary System.
6. Briefly outline the Financial Crisis 2007-2010.
1. List the determinants of the forward exchange rate.
2. Discuss the risks associated with foreign exchange speculation.
3. Distinguish the differences between the forward rate and future spot rates.
4. Design simple speculative foreign exchange trading strategies.
5. Illustrate simple interest rate arbitrage strategies.
6. Describe what interest rate parity (IRP) implies.
7. Explain the influence of interest rates on forward and spot exchange rates.
1. Outline the arguments underlying the Law of One Price.
2. Explain arbitrage opportunities in tradable goods.
3. Discuss the impact of relative differences in inflation rates among different countries on future competitiveness.
4. Explain the concept of purchasing power parity.
5. Analyze the long term influence of national price levels on the values of currencies.
6. Describe the interactions of inflation rates and exchange rates on a company's competitiveness.
1. Describe the relationship between interest rates and future exchange rate changes.
2. Differentiate among the Fisher Effect, International Fisher Effect, and Global Fisher Effect.
3. Design risky interest rate arbitrage strategies and evaluate potential gains and losses.
4. Estimate the differences between real and nominal rates of return.
5. Outline the relationship between real interest rates in different countries and recognize factors that may cause them to differ.
6. Diagram the International Parity Conditions.
1. Discuss the need for managers to forecast the foreign exchange rates.
2. Explain the relationship between exchange rates, interest rate, and inflation rate.
3. Compare the different types of forecasting techniques used to predict the foreign exchange rates.
4. Distinguish between the fundamental and technical methods of forecasting exchange rates.
5. Evaluate the performance of forecasting models using past exchange rate series.
1. Describe the nature and consequences of transaction exposure.
2. Measure the magnitude of transaction exposure.
3. Design strategies for eliminating some transaction exposure.
4. Evaluate and select the most appropriate hedging techniques.
5. List the types of transaction exposures that cannot be eliminated and be able to design strategies for reducing them.
1. Discuss the nature and causes of translation exposure.
2. Describe the rationale behind different methods for translating financial statements.
3. Define the functional currency.
4. Summarize the basic accounting rules specified by ASC 830-10-15, Foreign Currency Matters: Overall (FAS-52, Foreign Currency Translation), as it is currently required for U.S. businesses.
1. Outline operating (economic) exposure as it relates to multinational, import-export, and purely domestic operations.
2. Evaluate the relevance of transaction and translation exposure as they relate to the value of the business.
3. Measure the degree of a company's operating exposure to changes in various exchange rates.
4. Summarize the economic factors that cause the value of the business to increase or decrease in response to exchange rate changes.
5. Devise strategies for controlling the degree of operating exposure to exchange rate changes.
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