Multinational Corporations and International Finance
Multinational Corporations (MNCs)
A Multinational Corporation (MNC) has facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they coordinate global management.
Very large multinationals have budgets that exceed those of many small countries. The 100 largest international companies comprise over 6 million employees outside their country of origin and generate
Read MoreTypes & Costs of Financial Capital: A Guide for Entrepreneurs
Chapter 7: Types and Costs of Financial Capital
Exam:
- Estimate the cost of publicly traded equity capital (exchange-listed common stocks)
- Explain how capital costs combine into the weighted average cost of capital (WACC)
- Understand venture investors’ target returns and their relation to capital costs.
Implicit vs. Explicit Financial Costs:
- Formal accounting includes explicit records of debt (interest & principal) & dividend capital costs.
- No provision is made to record the less tangible expense
Economics 101: Key Concepts and Market Analysis
Opportunity Cost
Opportunity Cost: The next best alternative foregone when a decision is made. It is the real cost of any decision and represents the other good or service that could have been produced with the same resources. The slope of the Production Possibility Curve (PPC) represents the opportunity cost.
Scarcity
Scarcity: Describes the condition of limited resources relative to unlimited wants.
Assumptions of the PPC
Assumptions of the PPC:
- Production of only two goods
- Fixed resources
- Given level
Economics Basics: Supply, Demand, and Consumer Behavior
Economics Basics
Core Concepts
Reservation Price: The price at which a person would be indifferent between doing x and not doing x.
Opportunity Cost: The value of all that must be sacrificed to do x.
4 Pitfalls to Avoid
- Ignoring Implicit Costs
- Failing to ignore sunk costs
- Failure to understand the average-marginal distinction
Marginal Cost: The cost of doing an additional unit of activity.
Marginal Benefit: The benefit of an additional unit of activity.
Cost-Benefit Rule: Keep increasing the activity as long
Read MoreBalance of Payments & Trade Blocs: Economics Guide
Balance of Payments (BOP)
BOP records economic transactions between residents of one country and all other countries.
Current Account
Relates to income and payment flows.
- Trade in goods (X-M): X (credit) represents exports, M (debit) represents imports.
- Trade in services (X-M)
- Income from investment
- Current transfers: No exchange of goods and services.
Current Account Surplus (abcd > 0)
Inflow of money from export revenue, trade in services, investment income, and incoming transfers is larger than the
Read MoreUnderstanding Final Accounts: A Comprehensive Guide
What Do Final Accounts Contain?
The Trading Account
This account shows how the gross profit of a business is calculated. It uses the following formula:
Gross Profit = Sales Revenue – Cost of Goods Sold
Note that:
- Gross profit does not take into account overheads.
- Only the cost of goods sold is calculated; inventory is not included.
- In a manufacturing business, direct labor and manufacturing costs are also deducted to obtain gross profit.
The Profit and Loss Account
The profit and loss account shows how net
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