Trade Finance and Services, Comptroller's

Running head: MANAGEMENT OF INTERNATIONAL TRADE FINANCE AND FOREIGN
DIRECT INVESTMENTS
Management of International Trade Finance and Foreign Direct Investments
Name of the Student
Name of the University
Author’s Note

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MANAGEMENT OF INTERNATIONAL TRADE FINANCE AND FOREIGN DIRECT
INVESTMENTS
Table of Contents
Process to manage international trade finance and foreign direct investments by global firms......2
Funding of Global Firms.............................................................................................................2
International Trade Finance.........................................................................................................4
Foreign Direct Investments..........................................................................................................5
Capital Budgeting in Multinational Level...................................................................................7
References........................................................................................................................................9

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MANAGEMENT OF INTERNATIONAL TRADE FINANCE AND FOREIGN DIRECT
INVESTMENTS
Process to manage international trade finance and foreign direct investments by global
firms
Business finance can be considered as the money and credit that the businesses employ
for the purpose of business and wide use of this practice can be seen in the multinational
business organizations. Proper management of international trade finance and foreign direct
investment is a crucial part of business finance for the multinational corporations and this
requires these corporations to take into account all the relevant aspects (Müllner, 2017). The
main aim of this essay is to shed light on how multinational companies or global firms manage
their international trade finance and foreign direct investments by putting special emphasis on
the aspects like funding of multinational firms, international trade finance, foreign direct
investment as well as political risk and multinational capital budgeting and cross-border
acquisition.
Funding of Global Firms
Funding of the global firms is considered as a crucial step in managing international trade
finance and foreign direct investments. There are different types of funding options are available
to the global firms and they can be used for raising the required funds. It is required for most of
the global firms to commence raising the required funds with the issue of international bonds as
this helps in gaining recognition in the international financial markets (Drover et al., 2017). This
strategy can be implemented through the issue of international bond in the target market or in the
Eurobond market. For example, a firm resident in United States issues a bond that is
denominated in U.S. dollars, but then he sells the same bond to Europe and Japan, not to the
investors of U.S; this is considered as Eurobond. Global firms are required to mix the debt and

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MANAGEMENT OF INTERNATIONAL TRADE FINANCE AND FOREIGN DIRECT
INVESTMENTS
equity in such a manner so that the overall cost of capital of their business is minimized. It is
considered that the multinational business organizations are in better place than the national
firms for supporting higher debt ratios because of the presence of their diversified cash flows
internationally. For this reason, multinational business organizations can use greater amount of
debt in their capital structure as a part of managing international trade.
There are three key aspects of the global equity market; they are issuance of equity,
listing of equity and private placement. The following table shows the movement of the Toronto
Stock Exchange’s S&P/TSX movement in the equity market for the last five years:
(Source: tradingeconomics.com, 2020)
Moreover, global firms can raise the required funds through certain alternative sources of equity
such as sale of a directed public share, sale of a European public issue to investors, private
placement under SEC Rule 144A, selling shares to private equity funds and selling shares in the