When expanding and investing in projects overseas as my company (BELL TECH, USA) has planned to, it is very important to understand such things as return on equity (ROE) and internal rate of return (IRR).
I need you to help me (you can use the websites listed below and other internet resources) gather information on ROE and IRR explaining each of these terms and the advantages and disadvantages of using them when selecting projects to invest in overseas.
- Return on Equity vs. Return on Capital: http://invest-faq.com/articles/analy-roe-vs-roc.html
- Return on Equity Definition: http://www.fool.com/investing/beginning/return-on-equity-an-introduction.aspx
- Keep Your Eye on the ROE:- http://www.investopedia.com/articles/fundamental/03/100103.asp#axzz1a4spgl4T
- IRR Example:- http://www.computerworld.com/s/article/78524/ROI_Guide_Internal_Rate_of_Return?taxonomyId=074
Select two companies from the same industry.
Use the annual report information available on the company's websites and compute the ROE for each company.
Return on equity means the amount of net income returned as a percentage of shareholders equity. The return on equity is important because it measures the corporation's profitability by revealing how much profit the company makes with the cash that the shareholders have put in. Usually this expressed as a percent and is calculated as the Return on Equity = Net Income divided by Shareholder's Equity. Why return on equity is important is because it helps measure the firm's efficiency at generating profits from every unit of shareholder's equity.
The return on equity is an important measure because the higher the return on equity, the firm is more likely to be one that is capable of generating cash internally. The higher the company's return on equity, compared to its industry, the better. The gain to the investor is that earnings reinvested in the company at a high return on equity rate which can give the company a high growth rate. The gain can also come as a dividend on the common shares or as a combination of dividends and reinvestment in the company.
The internal rate of return is the discount rate used in capital budgeting that makes the net present value of all cash flows from a specific project ...
This answer provides you an excellent discussion on Global Financial Management
Global Financial Management (Fin630) Individual Project
Points Possible: 250
Points Earned: 0
Deliverable Length: 5-7 Pages
The most popular way for international expansion is for a local firm to acquire foreign companies. One of the most benefits for international expansion is global distribution capability that helps expanding the market share.
There are different implications of running a company that is within or outside of the European Union. If you were the head of a firm based in the United States, please answer the following questions, providing the rationale behind your answers:
Would you seek to acquire a company within the European Union or outside of it? Why?
Describe the advantages and disadvantages of the choice you made.
Describe the advantages and disadvantages inherent in the option you did not choose.
Explain why an MNC may invest funds in a financial market outside its own country.
Explain why some financial institutions prefer to provide credit in financial markets outside their own country.
This assignment will be assessed using additional criteria provided here.
Interpret the operation of the international financial system, its current state, and challenges for the future.
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