Principles of Managerial Finance, 15th Edition

19.5 Short-Term Financial Decisions

1. LG5

In international operations, the usual domestic sources of short-term financing, along with other sources, are available to MNCs. Included are accounts payable, accruals, bank and nonbank sources in each subsidiary’s local environment, and the Euromarket. Our emphasis here is on the “foreign” sources.

The local economic market is a source of both short- and long-term financing for a subsidiary of a multinational company. Moreover, the subsidiary’s borrowing and lending status, relative to a local firm in the same economy, can be superior because the subsidiary can rely on the potential backing and guarantee of its parent MNC. One drawback, however, is that most local markets and local currencies are ...