Financial Management and Accounting
What are the major tasks in managing working capital and cash flow for international operations?
Working capital and cash flow in organizations refer to financial resources allocated for the daily activities of the firm. Different organizations manage working capital and cash flow differently with respect to their scale of operations (Tamer, Cavusgil & Riesenberger, 2019). Organizations involved in international operations implement a framework for managing working capital and cash flow guided by the following elements;
- Ensuring that working capital management is a collective responsibility amongst all stakeholders in the firm; reduces instances of reckless expenditure and unnecessary financial losses,
- Guaranteeing that all expenses are fulfilled in time to ensure an undisturbed workflow of production activities in the firm (Andreas, 2017).
- Monitoring the stock closely to establish patterns entailing the use of raw materials and frequent shortages of supplies in the firm.
What are the major steps in capital budgeting?
- Close identification and evaluation of potential opportunities that are feasible to the firm.
- An estimation of implementation and operating expenses (Rossi, 2015).
- Identify and capitalize on the benefits of efficient cash flow and working capital management (Tamer, Cavusgil & Riesenberger, 2019).
- Establish a relevant and consistent SWOT analysis required for strategy formulation and implementation in the firm (Rossi, 2015).
- Ensure the implementation process is executed in time and within the provided budget.
For what types of ventures do international managers typically engage in capital budgeting?
- Foreign Direct Investments (FDIs). These are business ventures with a market presence in more than one country across the entire globe. FDIs are headquartered in the parent country where a business idea originated (Andersson & Servais, 2018). Capital budgeting is necessary to establish profitable-only ventures with reference to revenue generation levels.
- Multinational Corporations. These are profitable ventures that operate in more than one country and require diplomatic procedures – involving the parent and host countries – to thrive in an identified public or market (Tamer, Cavusgil & Riesenberger, 2019).
- Non-Governmental Organizations (NGOs). These are ventures which mostly provide humanitarian aid to disadvantaged people such as the physically challenged (Andersson & Servais, 2018). NGOs require capital budgeting to ensure that aid is evenly and equitably distributed to affected regions or victims.
Andersson, S., & Servais, P. (2018). Different types of International New Ventures Based on Different Commercialization Processes in a Business-to-Business Context-the Case of Born Globals. In The 22nd McGill International Entrepreneurship Conference.
Andreas, A. (2017). Analysis of Operating Cash Flow to Detect Real Activity Manipulation and Its Effect on Market Performance. International Journal of Economics and Financial Issues, 7(1).
Rossi, M. (2015). The use of capital budgeting techniques: an outlook from Italy. International Journal of Management Practice, 8(1), 43-56.
Tamer, S., Cavusgil, K., & Riesenberger, G. (2019). International Business: the new realities. PEARSON.