Financial Management Essay

1006 WordsJan 13, 20155 Pages
Multinational VS Domestic Financial Management Domestic companies have production facilities and markets in one country, and multinational company have production facilities and markets in more than two country. In general the principles and concept of financial management are applicable for domestic and multinational corporations are the same. But the financial management of multinational companies differ from that of domestic corporation from different respects. They are as follows; Different currency denomination; In domestic financial management cash flows are denominated in a single currency. In other words, financial transactions are denominated in the currency of the concerned country. For example, the companies operating only in Nepal denominate their financial transaction in Nepalese currency. But in case of Multinational financial management financial transactions are denominated in more than one currency. So, the exchange rates and currency values affect the cash flow of multinational corporation. Hence analysis of exchange rates, and the affects of fluctuating currency values are included in all financial analyses in multinational financial management. Exposure to Foreign Exchange: The most significant difference is of foreign currency exposure. Currency exposure impacts almost all the areas of an international business starting from your purchase from suppliers, selling to customers, investing in plant and machinery, fund raising etc. Wherever you need money, currency exposure will come into play and as we know it well that there is no business transaction without money. Macro Business Environment: An international business is exposed to altogether a different economic and political environment. All trade policies are different in different countries. Financial manager has to critically analyze the policies to make out the feasibility

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