The paper “ International Business Finance” is an opportune example of a finance & accounting coursework. Efficiency in investment depends on risk, return, and the costs incurred in managing the investment. Establishing subsidiaries in Eastern Europe, Asia, and Africa is a good strategy for IBF Supplies Plc. However, before the company implements this decision it has to consider both the financial and non-financial aspects in order for it to be successful. A company that wants to expand its business must have a strong financial base. Financial pressure affects the investments of firms (Carrascal and Ferrando, 2008).
The company should consider the following financial factors before establish its subsidiaries in the three continents. They include taxation policy, the level of cash flow, indebtedness, and capital. The company should consider the taxation policy in the host countries to establish the subsidiaries. In the current business world, governments compete to attract MNCs and this has made fiscal incentives a global concern. The low tax rate in the host counties should be the major factor to be considered by IBF Supplies Plc since it intends to start subsidiaries in multiple markets.
Starting the subsidiaries in countries with low tax shall give the company the chance to establish strategies to avoid tax. It is normally hard for a country to take the responsibility of taxing the holding company which has established subsidiaries in different markets. Some of the tax instruments used by governments to encourage multinationals to relate to corporate income tax like tax allowance and tax holidays (Morisset and Pirnia, 2000). Therefore, the company should understand different governments’ policies related to tax before it decides on the location of its subsidiaries in the three continents. Cash flow defines how a company receives and spends its revenues.
In order for a company to be successful, it has to experience an increase in cash flow. IBF Supplies Plc should consider managing its cash flows well, and avoid spending more revenues on operating expenses. There is a relationship between the profits a company gets and its capital demand.
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