Financial Resourcs Management Essay Example | Topics and Well Written Essays - 2500 words

Financial Resourcs Management - Essay ExampleIt is therefore important to evaluate some of the risks and complications that arise as a result of operating in several(prenominal) countries when making capital financing decisions.Foreign exchange rates as a result of operations spanning several countries are a major risk for MNCs even when they are considering their capital structure and financing issues. A country with exchange rate controls means that the MNC testament have difficulties with international capital low and the solution can only be the use of debt. The use of equity financing in such a country willing affect the phoners ability to invest in other countries since there are limitations to the flow of capital from the country to other (Horcher, 2013).One of the major complications of financing MNCs related to the government or political environment is the valueation policies of the foreign country. Taxation has been viewed by various researchers as wizard of the majo r factors that influence the capital structure of an MNC. The debt to asset ratio of an MNC is positively related to the tax rate applicable in the host country and negatively related to that of the home country. This means that in case the corporate tax rate in a foreign country is high, a company will prefer to use debt financing in place of equity financing as a source of capital as it will reduce its tax liability and thus increased earnings (Huizinga, Laeven & Nicodame 2008).Legal issues may also bring about complications for MNCs such as the issue of repatriation of profits. If a country pay its operations using equity financing and the legal requirements in a country are that there are limitations to the repatriation of profits, this may affect the ability of the company to pay dividends to shareholders outside the country. Another issue is that using equity financing in a country that regulates operations in terms of employment of topical anaesthetic people means that the MNC might