FINANCING INTERNATIONAL TRANSACTIONS

This book emphasizes financial problems that arise when managing multinational operations. However, the financial manager of a multinational company (MNC) must be familiar with certain mechanics of financing foreign trade and foreign investment because most MNCs are frequently engaged in foreign trade and investment activities.The first three sections cover the sources of financing foreign trade, while the last three sections discuss the sources of financing foreign investment. Section 10.1 discusses three basic documents involved in foreign trade: draft, bill of lading, and letter of credit. Section 10.2 analyzes the various payment terms of foreign trade. Section 10.3 describes the major sources of financing foreign trade. The three major sources of funds for foreign investment are internal sources of funds, external sources of funds, and sources of funds from development banks as described in Sections 10.4, 10.5 and 10.6, respectively. MNCs may use internally generated funds such as profits and depreciation charges. If internal sources of funds are insufficient, they may obtain their capital from sources within their home country and/or in foreign countries. In addition to these internal and external sources of funds, development banks provide MNCs with a variety of financing sources.