Multinational Corporation Case Study

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The Financial function of a multinational Corporation begins with its leader the Chief Financial Officer. The three key functions for the CFO are to make investment decisions, financing decisions and manage short term cash needs (Berk, J pg. 9). Making investment decisions is crucial to the firm’s overall success. The CFO needs to weigh up numerous costs and benefits relating to each investment or project and make the decision as the whether that investment will be worthwhile. In the multinational setting, this process becomes even more complicated for the CFO, as they have to analyze their potential investments in relation to numerous factors. The factors range can range from political instability to the recent economic slowdown in Russia.…show more content…
This decision process involves how to pay for the investments the firm with to make. This can be achieved through debt and equity funding to raise additional money to pay for the investments. Raising debt involves the borrowing of money through functions such as bonds. Whereas, raising equity involves the issuing and selling shares of stock from new and existing shareholders (Berk pg. 10). Both strategies have the pros and cons and obtaining the right mix of debt and equity is crucial for CFO to decide. The third important decision of the CFO is to manage the short-term cash needs of the firm. The means that the CFO needs to ensure that the firm will have enough cash in its reserves to meet its day-to-day financial obligations. This crucial function is also known as managing working capital (Berk pg. 10). In a multinational setting, this can meant that when a firm chooses to expand into a new market, the CFO needs to ensure that there is enough working capital to ensure the firm can handle this expansion. Especially if there are any issues in accessing the…show more content…
However, as corporations become more globalized, the CFO is presented new opportunities and challenges. Rather than simply making the aforementioned investment, financial and and working capital decisions, they also now have to deal with the changes in “capital structure and profit repatriation policies” (Desai, Harvard Business Review) of their firm’s numerous subsidiaries and multinational divisions. Capital budgeting decisions and valuation must reflect not only divisional differences but also the complications introduced by currency, tax, and country risks. Therefore, incentive systems need to measure and reward managers operating in various economic and financial settings the correctly correlate with
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