Assignment 3: International Finance
What financial considerations should you ensure you evaluate for proceeding with your concept?
As a multinational trading company, it needs to always consider the habit of conducting business activities in the target market country, and it needs to abide by local fiscal policies and related laws and regulations.
In addition, at the same time, the following points need to be considered in terms of financial:
- Keep a Line of Credit, in the early stage of business establishment, you may need to obtain funds other than the initial investment to maintain business development. Credit cards and commercial credit lines are the two most common forms of revolving credit, each with advantages and disadvantages. When cash is tight, having an available line of credit is essential to fill the gap. Therefore, it is necessary to maintain good credit and not excessively consume one’s own reputation.
- Minimize overhead
Whether a company can be profitable is very important, and everything spent in the company will eat up profits. Prioritize procurement to minimize costs. In addition, consider labor costs, utilities, property-related expenses, and other operating costs. Find ways to reduce expenses so that you can maximize profits
- Maintain cash reserves
Your initial savings will quickly dry up. You can rely on credit lines and loans, but it is usually better to have liquid assets.
Is it more advantageous for you to work in US dollars or should you use the host country’s currency?
As a Chinese herbal medicine multinational company, I initially thought that USD is the best settlement method. Because of its convenience, every country uses USD for settlement. However, due to the difficulty of exchanging foreign exchange between the United States and China and the continued depreciation of the U.S. dollar, I think it is currently in other words, it is better to use renminbi for settlement, because the current value of renminbi is relatively stable, and there is no risk of currency exchange in China, which is a conservative choice. In the future, when the international political situation is stable, if necessary, it will be settled in US dollars, which is directly linked to the price of gold, so most settlements are safe, reliable, fast and standardized.