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The Accounting Equation Free Essays

Bookkeeping is established on the fundamental condition that expresses a company’s Assets equivalent their complete Liabilities in ad...

Tuesday, February 18, 2020

The nature of FDIs Essay Example | Topics and Well Written Essays - 2000 words

The nature of FDIs - Essay Example The second commonality mentioned is usually taken to be the more important defining feature of the two. FDI denotes a degree of direct ownership whereas indirect investments are those gaining exposure to enterprises without investing directly such as listed securities, investment funds and derivatives. (Blomstrom and Globerman, 2001) Previously, FDIs referred only to physical investments made by a local company to a foreign setting. Building factories, providing machineries and equipment were considered as FDIs while portfolio investments were considered as an indirect investment. However, the rapid globalization of markets served as an impetus to broaden the definition of FDI to include the lasting ownership of shares of companies and enterprises. As such, joint ventures, alliances where a company provides technological support and licensing of intellectual property and direct acquisition of a firm are now considered to be FDIs. (Sullivan and Sheffrin, 2003) The current requirement is that an international business relationship must be formed between the local entity and the foreign affiliate. Foreign Direct Investors can either be a private or a public entity and may involve an incorporated or unincorporated organization or a lone individual. In any case, the foreign entity should provide the local entity a certain level of control in its management. According to the International Monetary Fund (IMF), control can come in the form of a 10% ownership as a minimum. In cases where this are not present, the investment made is known as portfolio investment. The ownership implies that the investor is afforded control in the management and decision-making of the enterprise. However, the data from the Organisation for Economic Cooperation and Economic Development indicate that there are countries where the 10% ownership is treated in a flexible manner to accommodate local legal and business environment circumstances. There are cases where the o wnership is less than 10% but the investor is afforded an effective voice and there are cases where exercise of influence control is not given even if the investor exceeds 10% ownership. FDI Classification According to UNCTAD (2007), FDIs are classified according to certain defined factors. A classification based on the direction of FDI generates two broad types: outward-bound and inward-bound. Outward-bound FDIs are those investments provided by local entities to foreign partners while inward-bound FDIs have local entities as the beneficiary of investments from abroad. FDIs can also be classified according to the nature it is conducted. Vertical Foreign Direct Investments exist when a local entity owns some shares in a foreign enterprise and is using the business arrangement to either generate supplies or be the one supplying. Horizontal Foreign Direct Investment occurs when a local entity, usually a multinational company, establishes a similar business operation in foreign settings. FDIs can also be classified according to its motives. If the FDI was made to explore new opportunities in new markets or strengthen the existing market structure, we have a 'market-seeking FDI'. When the FDI was made because the foreign setting provides resources that are not locally available at the same degree,

Monday, February 3, 2020

Analyze Financial Statement Essay Example | Topics and Well Written Essays - 500 words

Analyze Financial Statement - Essay Example We will be interested in a high ratio since we will be assured of a high return on our investments. A higher ratio is recommended since this indicates the solvency of the organization. Since it has the highest current ratio in 2015 hence shows that the company is having ability to meet its obligation if they fall due. This shows that if loan are to be advance to the company it will be able to pay its interest as per the loan in the short-run. Higher ratio is preferred as this will indicate liquidity of the entity. Hence it will be wise to consider this company as qualified for loans since it has the highest quick ratio in the year 2015 but this will only be a wise decision after assessing the Going concern principle of the entity. This shows the ability of the entity to meet its obligation in the long-run. Since the lower ratio is recommended hence this shows that the company will experience the challenges in paying back the loan hence will recommend the loan maturity should be lowered. Finally apart from the quantitative analysis of the financial statement of the company, it can also be advisable to consider carrying out the following qualitative analysis before advancing loans and also after advancing loans Assess whether they have established long-term customer relationships, with the company or its suppliers hence this can proof its viability whether to advance loans or not and if yes how much and at what interest. The company should provide collateral and compensating balance requirements. This will help in loan recovery in case of default. The company advancing the loan can exercise credit rationing by giving a loan but limiting the loan amount to be less than the borrower would