FINANCIAL MANAGEMENT

Financial Management in Multinational Organizations

Table of Contents

Introduction3

Literature Review3

Use of Debt3

Dividend Policy5

Managerial Ownership6

Corporate Governance10

Conclusion11

Financial Management in Multinational Organizations

Introduction

The study is related to the financial management of multinational organizations. The knowledge of international finance is important and crucial as it helps in two imperative ways. First, it helps in deciding how international events affect a multinational company and what steps can be taken to exploit the positive developments to insulate the company from the events that can harm the company in the international arena. Among the events that affect businesses, are the changes in exchange rates and interest rates, inflation rates and asset values. Because of the close linkages between markets, the events in different territories have effects that are felt immediately throughout the world. This situation has led to managers for the managerial ownership and corporate governance which are imperative to do a detailed review of the exciting and dynamic field of international finance in context of financial management of multinational organizations.

Literature Review

Use of Debt

For using the debt, it is important for the multinational organizations that they should work on the methods that corporate finance entails because corporate finance is the field of finance on financial decisions of economy. Its main purpose is to analyze and increase the market value, that is to say, improving profits future cash under the constraint of limiting the risks. The main issues of corporate finance are for using the debt by the multinational organizations is to;

Assess the adequacy of investment decisions

Optimize the structure of corporate balance sheets

To reward providers of capital

Improve the financing conditions

The practice of corporate finance is both internal management of company and business banking. The financial departments are in charge of the evaluation of investment projects and the contribution of capital to business life. The investment decisions makers advise multinational organizations on ways of financing their acquisitions, on the cover of their financial risk and then act as intermediaries between economic agents in lending that are savers and the investors and funding requirements of the economies (Aggarwal, 1996).

The theory of financial management is a field of study which is closer to the microeconomics since it studies the optimal decisions of economic agents assumed rational that can help multinational organizations in using the debt. Its main purpose is to define an optimal ratio between the expectation of financial return and its uncertainty, that is to say, its risk. The fundamental intuition linking risk and profitability, the multinational organizations will require a higher expectation of return on an investment whose success is uncertain (Andrews, 1994). The financial analysis distinguishes two concepts of profitability, a so-called economic, the second known as financial.

Economic efficiency of multinational organizations is the ratio of operating profit, affected the rate of corporation tax on its economic asset that is to say all the capital employed. She reports on how the wealth generated capital - employed; buildings, machinery, patents, need working capital. It measures the ability of the multinational organizations to offer a return at all of ...