FINANCE COURSE ASSIGNMENT - Essay Example

Initiating utilizable financial information is even more complicated in comparison to companies performing at the national level. The MNE s face contrasting practices of accounting between various states and they end up with difficulties in making comparisons. More so, the comparison issue is made hard since they make profits in currencies that are different. Therefore, MNE company groups need to report the accounting operations in consolidated accounts for their global gains and losses. Most recently, the financial aspects have been made more complex by the increasing requirement to do a segmental reporting.

(Muchlinski, 1999) First, before the issue of external sources of finance for public MNEs is looked at it is important to note that the internal sources of capital are mostly preferred in the US. The reason for this is that internal financing is considered less costly compared to the external sources. Furthermore, companies may not wish to disclose their information regarding operations to external parties. Lastly, the scenario of asymmetric information places hurdles to a firm’s ability to seek financing externally.

(Rugman, 2004) External sources of capital are essential just like internal sources of capital. These may include sources such as Eurodollars, or bank loans. Generally, the sources of funding for MNEs differ due to maturity, geographical sourcing, currency used in the denomination as well as institutional sourcing. External capital sources may either be national or else international. National sources of capital may cater for both short-term and long-term financing. Short-term financing may refer to bridge loans, overdrafts or medium term loans that are discountable.

Long-term financing may relate to bonds, long-term loans and equity. International sources may range from international bonds, international equity or even Eurobonds. This study is going to narrow down and discuss