Chapter 13: Direct Foreign Investment

These flashcards cover key vocabulary and concepts related to Direct Foreign Investment as discussed in the lecture notes.

Direct Foreign Investment (DFI)

Investment made by a company or individual in one country in business interests in another country, in the form of establishing business operations or acquiring business assets.

Motives for DFI

Reasons driving companies to invest abroad, including seeking new markets, reducing costs, and exploiting monopolistic advantages.

Revenue-Related Motives

Motives for DFI that focus on increasing revenue by attracting new demand, entering profitable markets, and exploiting monopolistic advantages.

Cost-Relative Motives

Motives centered on cost advantages, such as benefiting from economies of scale and utilizing cheaper factors of production.

Host Government Incentives

Benefits provided by a government to attract foreign direct investment, such as tax breaks, subsidies, or reduced regulations.

Barriers to DFI

Challenges or restrictions imposed by host countries that may hinder foreign investment, including protective barriers, red tape, and political instability.

International Diversification

Spreading investments across various countries to reduce risk and stabilize cash flows.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing owner wealth.

Country Risk Analysis

Assessment of the potential risks associated with investing in a particular country, including political, economic, and social factors.

Exchange Rate Movements

Changes in the value of one currency relative to another, which can affect the potential profitability of investments abroad.