Notes for global business

Jumpstarting Renewables Market

1. Feed-in-Tariffs
2. Tax Holidays on Manufacturing
3. Grants for manufacturing (50%+ in some countries)
4. Loan Guarantees
5. Accelerated Depreciation on Wind Turbines and Solar Panels
6. Renewable Portfolio Standards
a. Countries and states are setting goals to be using renewable energy
7. Renewable Energy Auctions
8. Production Tax Credits
9. Investment Tax Credits
10. Tax Equity
Porter: Case Study - Japanese Robotics
1. Japan is today one of the worlds leading exporter, producer, user of industrial robots
2. Most industrial robots are designed for a particular use
a. Numerically controlled robots execute operations numerically through a computer
program
b. Intelligent robots can modify their own operation through the use of AI
3. Cutting-edge Japanese manufacturers sophisticated and anticipatory buyers for the
growing Japanese robotics industry and a spur to continuous innovation.
4. Robots are hard to justify on a cost saving basis
a. Japanese firms used other criteria: improved product quality, flexible
manufacturing, the “option value” of the investment – the future opportunities that
the investment will create.

The EBRD in Global Markets

How do we think?
1. We take an internationalist approach believing in economic integration and
multilateralism to fight common challenges

Energy Transitions, Class from Ardeshir Contractor

1. Global Shift to Renewable Energy
a. Renewables are expanding in the amount of energy used
b. Nuclear is a renewable energy
c. Cheapest energy source is wind and solar, specifically than coal and gas
2. What factors drive this transition
a. The sources will not run out
i. Only need a little amount to power the world
 b. Energy intensity ?
i. The most intense is hydroelectricity
ii. The second is wind
iii. Then solar
c. There is a lot of ways to recycle the machines and materials used to make this
energy usable
i. Like solar panels
ii. Wind turbines
d. Markets have become very favorable to the green bonds (search definition)
i. They get a better return
e. The price of solar and renewable energy is cheaper than that of fossil fuels
f. There is an expectation that costs will go down for renewable energy (?) (idk if
thats what he is saying but i think so)
g. Scale of investments are bringing down the price of renewable energy and the
expectancy is there as well
h. Emissons
i. Half of these fossil fuel CO2 emissions have occurred since the late 1980’s
ii. Total emmisons of CO2 have been going down
i. Accelerating energy usage
i. Data centers used 416 TWh of energy in 2017
ii. 3% of worlds electrcitiy
iii. 40% more than entire UK
iv. Same carbon footprint as airline industry
3. Energy Transition nad the Corportation
a. Sutainable energy strategy
i. Physical energy consumption in direct operations
ii. Energy procurement mechanisms
1. Corporate renewable power purchase agreements
a. Committed to buying solar power or wind power and able
to say that their source of electricity is renewable
iii. Energy use in upstream and downstream supply chain
1. Supplier energy audits
a. How do you get others in your supply chain to make the
change
iv. Energy consumption during prodyve use and end-of-life
b. RE100 company
i. 100% renewable energy by a certain date
c. Takes 6 months for people to build a plant
i. Solar specifically i think
4. Electric Mobility
 a. 50% of new cars will be electric
b. Hydrogen energy is made completely from green smth
i. Honestly i rly dk what this is
c. Hydrogen predictions
i. Electrolyzer sales will quadruple, with china being largest market
1. Electrolyzer- equipment that takes power/electricity in and then
takes water and splits it into water and oxygen
ii. The us will see many hydrogen project annoucements, but action will lag
iii. New subsidies will spur a boom in the european hydrogen marker
iv. Hydrogen strategies will be adoptebed by 22 countries in 2022
d. Corporate finance, green bonds
i. Finance will play a pivotal role to fund the required transformation of the
world electricity
1. Transport is a section where renewable energy can be used
a. Land use
b. Buildings and industry
c. Energy
d. Ict
ii. Green bonds- ?
1. Green bonds became over 2 trillion
e. Green finance

Emerging Markets: India

India Overview
1. Federal republic of 28 states and 7 union territories
a. Parliamentary gsystem of government
2. Worlds largest democracy
a. Most populous nation with 1.486 billion people
3. Urban population 36% and 64% rural villages of 5,000 or less
a. Caste system sill has an influence
b. 18 official langauges
c. 30.6 million people do not have access to electricity but down from 400 million
without electricity in 2015
i. A lot was done with solar
d. 80% Hindu, 14% Muslim, 2% Christian, 4% Sikh and Buddhist
4. In 1947, India’s literacy rate 17% and life expectancy 32.5 (now 70)
5. Economic growth over past decade has improved quality of life and grown markets
a. Poverty has fallen dramatically since 2004
6. One of the fastest growing economies because they are focusing on developing their
economy
India: Introduction
1. GDP: agriculture: 17 %, industry 29%, services: 54%
a. Less than 20% of Indias workforce is in the formal sector
b. Major industries: textiles steel, foods, machinery, mining, autos, etc.
2. Major agricultural producer, 50% of Indias workforce
3. Worlds second largest small car market , world largest maker of motorcycles
4. 1 of only 3 countries that makes its own supercomputer s
5. 1 of 6 countries that launches its own satellites
6. 500 MNCs expected to launch R and D dcenters in INdia by 2025, and India accounts for
45% of global capability centers worldwide
7. Second largest group of software developers
8. 6,000 companies listed on the bombay stock exchange
9. Worlds largest producer of milk, second largest producer of food
10. Second largest pharmaceutical industry, behind china
11. Sends mors students to US colleges and unis than any other country except china
12. In 2000 India had 3MM cell phone users, now 1 billion+
Current Economic Overview
1. GDP of $11.87 trillion in 2022
2. #3 global economy in PPP terms
3. Economic growth has expanded since 1991 to 6.5% GDP growth estimated for 2023
4. Economy average growth rate of more than 7% since 1994, significantly reducing
poverty
5. US in 2023 replaced China as India’s #1 trading partner
6. 28% of the worlds “globally employable workforce”
a. More than 40% of worlds Fortune 500 outsource a portion of services to India
Business Background
1. Govt. controls on foreign trade and investment reduced since 1991, but high tariffs and
limits on foreign direct investment are still in place
2. Reforms since 1991 focused on financial and industrial sectors; has not included
agriculture
3. Indian Administrative Service (civil service) maintains significant control over federal
and state government functions
4. The government in 2005 liberalized investment in the civil aviation, telecom, and
construction sectors…privitization of government-owned idnsutries stalled in 2005
5. Business strongly influenced by government, legacy of swadeshi
6. Private sevtor business environment largely family-owned, patriarchal, influenced by
caste
7. Non resident indians are prob 25 million with 150,000 NRI millionares with combined
assets of $500 billion - becoming a force for globalization in India
Tata Group
1. Founded in 1860
2. 93 operating companies in 7 main business sectors: engineering, materials, consumer
products, chemicals, energy, sesrvices, and IT and communications
a. 32 publicly listed companies-
b. Operations in 85 countries, exports to 140 countries; generates 3% of India’s
GDP, 5% of India’s total exports
3. Tata Motors - builds 70% of all medium and large commercial vehicles and large
commercial vehicles in India
4. Tata steel was est in 1097 as India’s first oron and steel plant
5. Tata tea - worlds 2nd largest maker of packaged tea
6. Tata Consultancy - Asia’s largest software company
7. Tata Power - India’s largest private-sector power generation company
8. Focus on needs of the market instead of the product
Jugaad
1. Jugaad - Hindi word for “innovative solution”
a. Resourcefulness or doing more with less
2. Jugaad innovation- focused on market needs - not the product - and working back to a
product/sesrvice solution
a. invent/reinvent the product from scratch
b. Apply Jugaad at every link in teh value chain
c. Create a new market + attract new consumers
d. Low-price high-colume focus
e. “Good enough” quality and features
f. Applicability in emerging markets and beyond
g. Considers all aspects of the marketing mix
3. Example: GE: technology in a doctors bag
a. Leading ttech in electrocardiogram machines essential to detect heart disease
b. India has the largest number of heart disease patients
c. GE’s sales were low at the begining because they did not meet the needs of
India’s doctors
i. It was heavy and there was a lack of mobility, this was unhelpful because
Indian doctors spend a lot of time traveling to meet patients in rural areas
ii. The cost was unaffordable for most customers
d. As a solution, GE applied the Jugaad innovation to redesign the EKG machine
around the needs of the Indian market making it 7 pounds, battery operated with a
built-in printer, and much cheaper than before
 i. As a result: GE’s EKG machine was a best selling in India and in teh US
and other markets

Note: Reverse outsourcing (?), “The Reverse outsourcing happens when a foreign (say, Indian,
Chinese or Brazilian) outsourcing company hires American employees.”

Market Strategies for India

1. Build a presence in INdia to pursue low-cost innovation and rapid scale-up
2. Use india as a global platform for R+D innovation, services, production
3. Compete in multiple segments - nokia makes phones for every market
4. Create multiple channels of distribution
a. Only 20% of consumer goods in india are sold via modern retail chains
b. Invest heavily in brand building and consumer education
c. Offer customer financing (?)
d. Develop partnerships with India’s large conglomerates to pursue large projects,
and big-ticket sales
e. Utilize outsourcing to scale-up the marketing mix
f. Kaizen and continuous innovation particularly critical for India and China
Conclusion

Need solid business model with…

Emerging Markets: Brazil

Brazil Overview
1. Largest economy + population in Latin America
a. Represents 50% of South America in population, territory, and economy
b. Landmass larger than continental US
2. Worlds 8th largest economy
a. Agriculture: 6%, industry: 21%, services: 73%
3. Worlds #1 produced of iron ore, fruit, orange juice, #2 of tin, cocoa, #5 producer of
aluminium; top ranking producer of steel, manganese, and gold
a. 5th largest produced of autos
b. 6th largest aircraft manufacturer
4. Worlds #1 exporter of coffee, sugar, chicken, beef, orange juice, soybeans, ethanol,
tobacco
5. Brazil - “energy independent” with the potential for major exports
a. Hydropower supplies around 83% of Brazils electricity
b. Tupi offshore fields 8 billion barrels of oil + gas
c. Ethanol now accounts for as much as 23% …
Path to Industrialization
1. Industrialization came late to brazil
a. Getulio Vargas - ruled form 1930-45 - began import substitition policy in 1937,
began major state role in the economy - establishment of Petrobas
b. Volte Redonda Steel Mill financed
2. Major Industrialization program stated by Pres. Kibutschek in 1955
a. Usdutrial policies, loans for development in heavy industry
b. Import substitution policies
c. State-owned companies est. in nearly every sector
d. Government spending for infrastructure projects
e. Encouragement of foreign direct investment in autos
3. Protectionist policies in place
a. Tariffs in 1957 avereged 57.5% + non-tariff barriers that included quotas per
company, prohibition of imports of certain products, ban on oil exploration by
foreign companies until 1995
4. Brazil enjoyed relative prosperity and stability in 1960’s and 70’s
a. Growth averaged 10% until the 1979 oil crisis, among worlds highest
5. A capitalist country but by 1987, 60% of the economy controlled by the government
6. In 1980’s high state and federal budget deficits, hyper-inflation, alck of capital
investment and efficient industries led to the realization that reforms were needed
The Real Plan
1. Reforms beginning in 1993 with Real Plan greatly strengthened the economy, produced a
rebound in economic growth/investment
2. Inflation reached 2,500% in 1993; 50% per month in June 1994
3. Real Plan introduced on July 1, 1994
a. Designed by then Finance Minsiter Fernando Cardoso
b. A strong new currency tied 1 to 1 with US $
c. Tariff reduction, market opening, foreign competition lowered and stabilized
prices
d. High interest rates to curb inflation, attract foreign capital
e. Massive debt restructuring for state and municipal governments
f. Strict controls on state government spending (fiscal responsibility law)
g. Privatization of state enterprise
4. Inflation fell to 19% in 1995, now its 5-8%
5. Worlds largest ever privitization program, over $100 billion of government owned firlsm
sold to the private sector
Brazil: Trade and FDI (finish later)
1. Have been growing substantially in Brazil since early 1990’s
Emerging Markets: Africa
Africa - Overview
1. 54 countries with a total pop of 1.3 billion
2. Wide ethnic and cultural diversity of 1,000 languages spoken
3. Wide diversity in development, income levels, education, infrastructure, and resources
4. Economic growth and better government have improved indicators
a. Poverty has fallen 56% of pop
5. Urbanizing Africa: 80% of pop growth over next 20 years will occur in cities
6. Africa and Asia will each have 42% of the worlds working age pop
a. By 2034 Africa has a larger working age op, 1.1 billion, than CHina or Idia
b. 60% of Africans today are under 25 years old
c. Africans will make up 42% of the global youth pop by 2030
Emerging Africa
1. Sub-Saharan Africa’s GDP averaged 4.9% per year
2. FDA of SSA grew from $12BB to $38BB
3. Africa escaped the global decline in FDI as flows to the continent rose to US $46 billion
in 2018
4. 400 companies in Africa with revenues of $1 billion, and 700 with revenues of $500
million+
5. Africa has worlds youngest demographic: 40% below age 15, median age 20
6. Africa contains largest reserves of diamonds, gold, platinum, etc.
7. EMerging Africa - South AFrica, NIgeria, Ethiopia, Ghana, MOzambique, Tanzania,
UGanda, Zambia
a. fiversified , growing political stability, improving economic management
8. Excellent opportunities in retailing, consumer products, infrastructure, telecomm, mining
and resource related business, agriculture food chain, etc.
a. 54 million mobile phones subscribers in 2004, gre to 600+ million today
b. Greenfield projects by Volkswagen, BMW in SA, HOnda in NIgeria, Toyota in
Kenya
9. Africas trade with china consistently growing
10. “On a per unit basis AFirca is the 3rd most profitable marker in the world. THe market is
quite attractive for most MNC’s if they look at it with teh right lens”
Opportunities
1. A fast growing o=rapidly urbanizing young population will drive growing demand for
basic services: education, health care, consumer products and services
2. 70% of African households will have discretionary income by 2025, with 25% being
“global consumers” ($20,000+ annual income)
3. $1 trillion+ opportunity to expand industrialization to meet rising demand, and as a
platform for exports to global markets
4. Hige needs for investment in infrastructure on electricity, water, adn transport sectors
a. 67% of urban infrastructure need in teh future has yet to be built
b. Demand for electricity grows 4x through 2040
c. 600 million africans still lack electricity
d. Increasing use of renewables + mini-grids to meet demand given vast geography
5. Resource abundance in agriculture and natural resources
Market Opportunities in the Middle East: A focus on the Gulf Cooperation Council
Overview: Gulf Cooperation Council
1. GCC is Saudi Arabia, UAE, Kuwait, Oman, Bahrain, and Qatar
2. Strategic location at teh crossroads of Europe, Africa, and Asia
3. GCC established in 1981 to promote economic integration and collaboration
4. GCC implemented a Cusstoms Union on Jan 1, 2003 that stipulates free movement of
local goods among member states
5. Combined economy of the GCC was $2 trillion in 2022
6. COmbines pop of 56.3 million
7. High relative per capita income levels, young demographic, and expansion beyond the oil
& gas sector make the GCC a prime market in a wide variety of sectors
8. Services, infrastructure, high tech, tourism, renewables, consumer products, and
machinery of all types are among attractive sectors for international business.
Saudi Arabia
1. Largest economy in GCC
2. Saudi’s GDP grows 5.4% per year
3. Growing pop of 36.4 million
a. 70% 30 years old
4. Major market for high technology, construction equipment, oil & gas services and
equipment, mining equipment, foodstuffs, engineering services, water desalination (35%
of world market), renewable energy and storage, consumer products, etc
5. Saudi has 16%+ of the worlds proven oil reserves, #1 global exporter of oil
a. Oil sector accounts for 42% of GDP and 90% of export earnings
6. Saudi Armaco is the worlds most profitable company
a. Valued at $1.7 trillion
7. Trade with the US at $26 billion, trade with EU at $110 billion
8. In 2016, the government launched Vision 2030 that was a plan to diversify the economy,
goals include:
a. Creating private sector jobs for a growing population
b. Expanding health care, education, tourism, and entertainment
c. Promotion of FDI, and expansion of industry within Saudi Arabia
Saudi Arabia Vision 2030
1. Created to reduce Saudis dependence on oil and to promote the growth of the economy
on a more sustainable, diversified basis to create jobs
2. Targets aras Saudi can create comparative advantage: mining and tourism
3. Saud has 7% of the worlds phosphate reserves, and major deposits of gold, copper,
bauxite, and zinc but mining today just 4% of Saudi Arabias GDP
a. Bauxite already mined, refined, smelted into aluminum using Saudi’s low energy
costs
b. Using phosphate deposits + ammonia from existing petrochemical plants Saudi
Arabia positioned to become the world’s largest, and lowest cost producer, of
fertilizer.
c. Ma’aden already the worlds 10th largest mining company
4. Aism to promote tourism to receive 100 million visitors annually
a. A new $500 billion, zero-carbon city - neom - to be built as a major resort on teh
Red Sea with a pop of 1 million run by smart technology
5. Goal is to increase female participation in the labor force to 30%
EXIM Case Study: Qurayyah IPP
1. Qurayyan IPP - one of the largest IPPs in the world finalized financing in April 2012
a. 3927 MW gas-fired power plant-power sold to Saudi ELectric COmpany via
20-year PPA
b. SEC will source gas from Saudi Aramco via fuel supply contract
c. Qurayyah project located on east coast next to existing SEC facilities
2. Project SPC hajr Electricity Production Company (HAJR), owned 50% by ACWA power,
samsung CandT and MENA infrastructure fund + 50% by SEC
a. Structured on a 75%/25% debt?equity basis
United Arab Emirates (unfinished)
1. GDP avg annual growth rate of 5.82
2. UAE pop at 9.4 million with immigrantas making up 87.9% of total pop
3. Succesful efforts at economic diversification have reduced the portion of GDP from teh
oil and gas sector to 30%. UAE has worlds 6th largest reserves of oil, and 7th largest of
natural gas
4. Increased spending on job createion and infrastructure expansion and greeted private
sector investment in teh power sector
5. UAE’s free trade zone offer 100% foreign ownership + zero taxes to attract foreign
investors
Oman
1. Oman 2022 GDP of $162 billion, from %78.7 in 2000
2. Population at 4,6 million (2022)
a. 36% of OMans population under 25 years old
3. Omans economy heavily tied to oil and gas
4. Oman created a policy diversofocatopm, industrialization, and privitization with the
objective of reducing the oil sectors contribution of GDP
5. Omans diversification strategy focused on tourism, shipping and logistics, mining,
manufacturing, and aquaculture
6. Oman has allocated 10 billion USD to hte DUqm Economic Gree Zone and is seeking
another USD 10 billion in foreign investment by 2022
Bahrain + Qatar
1. Bahrain 2022 GDP is $76 billion; growing at average annual rate of 6.4%
2. Bahrains population at 1.47 million
3. Bahrains economy heavily tied to oil and gas. Aluminim production, Bahrains second
biggest export, along with finance, construction, and expanding petrochemical sector are
key industries
4. Qatar 2022 GDP of $262 billion; growing at average annual rate of 11%
5. Qatars pop at 2.7 million
6. Qatars proven natural gas reserves exceed 25 trillion cubic meters = 13% of the world
total and among countries, third largest in the world
7. Qatar’s government has long been proactive on diversifying the economy, and increased
investment in healthcare, education, and infrastructure in anticipation of Doha's hosting
of the 2022 World Cup.

Importance of culture
Importance of Culture
1. All business, esp int business is a people business
2. Most large MBC’s do business in over 70 countries
3. Smooth communication, facilitation of people to people relationships, across multiple
cultures critical to success
4. Culture drives values (building trait, saving face, etc.) tgat motivate people and provide
the context for their actions and decisions
5. Values drive assumptions which drive decisions
6. Cross-cultural competence is a skill that can be mastered with
a. An open mind
b. Attention to how others values and beliefs differ from others
Cultural Patterns Important in International Business
1. Individualist vs. Group-Oriented Cultures
2. Equality vs. Status-Oriented Cultures
3. Universalism vs. Paticularism
Individualist Cultures
1. Self-worth is determined by achievement
2. Self-esteem is central - what counts is how the person evaluates his or her own worth
3. A person likely motivated by guilt
4. There is a direct expression of ambition
5. In business, they focus on the task at hand
 6. “I work at…”
Group-oriented cultures
1. Self worth is determined by group ascription
2. “Face” is central - what counts is the standing of the person within the group
3. A person is likely motivated by shame - what other people think of the person in the
central
4. There is an indirect expression of ambition
5. In business, the focus is on developing and maintaining relationships
6. “I belong to…”
Equality-orientated Cultures
1. …
Status-Orientated Cultures
1. …
Universalism
1. Rules are more important
2. …
Paticuralism
1. Relationships are important
Concept of “face”
1. Very important in group-oriented
2. …
Maintaining Face
1. …

GE
Introduction
1. Bechtel Enterprises - one of the biggest epc companies in the world
a. Raise financing for projects
GE over the years
1. Keeps getting smaller and smaller
a. Didn't want to be a conglomerate anymore
b. Got rid of many different parts but stull have GE vernova and GE aerospace
i. Vernova - about sustainable energy
1. Vernova is supposed to spin off and be their own company, part of
the plan
ii. Aerospace - aircraft engines
GE Vernova
1. Innovating to support customers through energy transitions
a. Onshore wind
b. Offshore wind
 c. Nuclear
d. Gas power
e. Electrification and digital
2. Financed a lot of projects that had to do with that
GE Energy FInancial Services
1. Scale
a. Provide financial solutions to any stage of a project
b. Solutions span the capital spectru, and reach customers across the 180 countries
operated in
2. People
a. Leadership has 20+ years of experience
b. Supported by a team of specialists in risk, portfolio, tax, insurance, legal,
engineering, environmental, market strategy and regulatory affairs
3. Financing
a. Help developed and emerging markets finance their energy needs
b. Offer a wide range of investing and capital raising solutions tailored to customers
needs
Bechtel
1. 5 main business units
a. Nuclear, security, and encironmental
b. Energy
c. Mining and metals
d. Manufacturing and tech
i. Newest one
e. Infrastructure
What is EPC
1. Def: Engineering, Procurement, Construction
2. LSTK- Lump Sum Turnkey
3. FEED - front end engineering design
4. OEM - ORiginal equipment manufacturer
5. PPA - power purchase agreement
Bechtel Enterprises
1. Exist raise third part capital
2. Know how to plan out and make an idea happen, not just financing
a. Engage with government
b. Know how to get permits
What went right
1. Good partnerships with government and understanding of approval processes
2. Attractive financing provided by EXIM direct loan
3. Strong local presence
 4. Collab between exporter and buyer
What went wrong
1. NPI, an NPI but tested in field (?)
2. Delays, longer a deal takes the more chance you can lose lenders or a govt can lose its
political will
3. By time COD apporoaced other power plants had been built and the generation capacity
wasa no longer needed
a. They had enough power and the governmentn didnt want to pay for it if it wasnt
needed
4. Lack of harmonization between lenders on shared documents and timelines

Finance
Financial statements
1. Are the “scoreborad” for the business
2. For the managers of the business financial statements are critical for providing up to date,
accurate, and detailed info business performance and the financial position
3. For the investore or shareholders financial statements enable them to understand how the
business has been performing
4. …
5. For most business the main financial statements are
a. Balanace sheer
b. Income statement
c. Statement of cash flow
The balance sheet (just look at notes of business book)
1. Shows what the business owns=assets, and what it owes=liabilities
2. Assets minue liabilities = owners equity or net worth
3. Asses = liabilities + owners equity or net worth
4. Companies invest in assets - in particular non-current assets - to operate and expand the
business
5. Liabilities and owners equity show how the assets of the business are financed
Income Statement (P and L sheet)
1. Again you can just look in the business book if you don’t remember
Analyzing Financial Statements
1. First you should view changes in the accounts of the financial statements over different
time periods, such as comparing this year to last year, and understanding what caused
changes in certain accounts
2. Next, you look at the key financial ratios
a. Profitability ratio
b. Liquidityratio
c. Asset management ratio
 d. financial leverage ratio
3. The ratios are generated from info contained in teh companies balance sheets and income
statemetns
4. Ratios are valuable tools as they standardize balance sheets and income statements
5. Ratios can be used to:
a. Conduct trend analysis to evaluate a companies performance over time
b. Compare one company to another
c. Compare the company to industry average ratios
Profitability Ratios
1. Show the companies ability to generate returns on its sales, assets, and equity, as well as
showing the companies ability to control operating expenses relative to sales
2. The next step is to look at key financial ratios
a. Operating profit margin = EBIT/ Net sales
b. Net profit margin = net income / net sales
c. Return on assets (ROA) = net income / total assets
d. Return on equity (ROE) = net income / stockholders equity
Asset Management Ratios
1. Asset management ratios indicate how efficiently the company is using it assets to
generate revenue or sales
2. Key ratios to look at include
a. Total assest turnover = net sales / total assets
b. Fixed asset turnover = net sales / net fixed assets
c. Avg collection period = accounts receivable / (net sale/365)
d. Inventory turnover = cost of goods sold / inventory
Liquidity Ratios
1. Indicate the companies ability to meet short-term obligations as these become die
2. The less liqud the company is the geater the risk of n=bakruptcy
3. Given that debt obligations are paid with cash, the companies cash flows ultimately
determining company survival
4. Ket ratios :
a. Current ratio = current assets / current liabilities
b. Quick ratio = cash + marketable + accountrs receivable / current liabilities
c. Avg payment period = accounts payab;e / (caost of goods sold / 365)
Financial leverage ratios
1. Indicate the extent to which the companies assets are financed by borrowing or debt, and
the ability of the company to meet the principal and interest payments on its debt
2. More more levereged the company the greater the risk that the company will fall to meet
its principal and interest payments on ots debot should warnings fall
3. Key ratios include
a. Total debt to total assets = total debt / total assets
 b. Interest coverage tario = earnings before interest and teaxes/ interest experience
Statement of Cash Flows
1. ALREADY KNOW BUT MAYBE GO OVER LATER

Look up depreciation and tax relationships

International Trade Finance

1. The 5 C’s of credit
a. Character
b. Capacity
c. Collateral
d. Capital
e. Conditions
Cash in Advance vs. Open Account
1. Cash in Advance
a. Buyer/importer assumes all the risk
b. Buyer has no assurance goods will be shipped or services performed
2. Open Account
a. Goods shipped/services rendered, buyer sent an invoice to be paid at the maturity
of the credit
b. Seller is financing he sale for the buyer, relies upon buyers willingness and ability
to repay the credit
c. Seller.exporter assumes all the risk
Sales on Cosignment Basis
1. Exporter ships goods to the importer with payment due upon sale of goods
a. Exporter retains ownership (title) to the goods
2. Importer pays only when the goods are sold, so the exporter is financing hte inventory
a. No risk to the importer
3. Risks to the exporter
a. Limited control over the goods
b. Payment contingent upon the sale of the goods
Documentary Payments
1. Cash against documents
a. seller/exporter sends only the shipping documents to a bank in the buyers country
b. Upon payment by the buyer, documents released to the buyer who then claims the
product
2. Paymenr on a collection basis
a. …
 3. Documentary payments secure as a payment method bus has some risks
a. …
Common Trade Documents
1. Commercial invoice: a bill prepared by the seller, indicates the amount owed by the
buyer, description of the sale
a. Details will vary based byer/seller and the customs or foreign exchange
authorities in the importers country
2. Bill of lading: most common document used in export/import trade
a. Act as document of title, indicates ownership
b. Serves as shipment receipt
c. Evidence of contract between exporter and shipper
3. Certificate of origin: certifies the country in which the goods were produced
a. Issuance will depend on the country regulation
Incoterms 2020
(?)
Bankers’ Acceptance (“BA)
1. Negotiable draft drawan on and accepted by a bank
a. Unconditionally promises payment to designated party
b. Payment in sum certain at specified future date
2. The accepted draft is the SOLD to investors who purchase the draft on a 360 day
discounted basis
3. BA enables banks to finance customers import/export trade without using its own funds
a. Investors willing to purchase BA because of their belief in the banks ability to pay
at maturity
Letter of Credit
1. Def: commitment by a bank to a seller/exporter to pay
a. Certain amount
b. Within certain time
c. With specified documents
d. Presented in accordance with terms of the L/C
2. Key points
a. Under L/C banks deal only in documents, not goods/servicse
b. If the documents are in good order, the bank pays the L/C
c. If not, bank can refuse to make payment under the L/C
d. The L/c should mirror the underlying contract
3. Parties in teh L/C transaction
a. importer/buyer
b. Issuing (opening) bank
c. Advising and/or confirming baml
d. exporter/seller
Parties in L/C Transactions
1. importer/buyer
a. Requests their bank to issue (“open”) L/C in favor of exporter
b. Enters into a credit agreement with their bank and/or provides cash or other
collateral to the Issuing Bank
c. Specifies terms/conditions to be included in the L/C
2. Issuing bank
a. Opens the L/C based on commercial relationship with importer
b. Substitutes its credit for that of the buyer
c. Buyer creditworthiness, collateral critical to issuing L/C
d. Has legal obligation to pay the exporter under the L/C
e. Usually located in importer’s country, has correspondent relations with banks in
exporter’s country
3. Advising Bank
a. Acts as intermediary between Issuing Bank and Exporter
b. Authenticates, reviews the L/C before transmitting to Exporter
c. NO legal obligation to pay the exporter under the L/C unless notice is given that it
is also acting as Confirming Bank
4. Confirming bank
a. Adds its “irrevocable confirmation” to the L/C guarantees payment to the
Exporter upon presentation of documents
b. Note: Payment guaranteed only if documents presented to the Bank in conform to
terms/conditions of the “L/C”
c. Assumes the credit risk of the Issuing Bank
d. Incurs the same obligations/responsibilities as Issuing Bank
5. Exporter/Seller
a. The beneficiary of the L/C entitled to payment
b. Paid by the Confirming Bank upon presenting documents that conform to
terms/conditions of the L/C
6. UCP 600
a. Uniform Customs and Practice for Documentary Credits, version 600, governs the
actions/procedures of L/Cs.
b. Produced by the International Chamber of Commerce.
c. Exporter should always verify that their L/Cs state “issued under UCP 600
Types osf Letter of Credit
1. Irrevocable L/C
a. A definite commitment by an Issuing bank to pay the L/C
2. Confirmed l/c
a. Payment guaranteed to the exporter by the confirming bank
Managing Foreign Exchange Risk
Major Areas of Foreign Exchange Risk
1. Transaction Exposure
a. The risk that the exchange rate may change between the date of the contract
signing and the date of payment
2. Economic exposure
a. The risk to a firm that its long-term cash flows will be adversely affected by
changes in exchange rates
3. Translation Exposure
a. The risk arising from translating the foreign currency denominated financial
statements of subsidiaries into the currency of the parent company
Hedging Foreign Exchange Risk
1. Hedging
a. The process of seeking to offset transaction exposure with an asset or position
whose value moves in an equal but opposiste direction of the exposure
2. Natiral Hedging
a. A firm seeks to match foreign currency cash flows to offset exposure
3. Contractual Hedging
a. A firm seeks to offset exposure by buyinh financial contracts
i. Forwards contracts
ii. Currenct futures contracts
iii. Currenct opinions contracts
iv. Currency and interest rate SWAPS
Forward Contracts
1. A “customized” contract to buy or sell an amount of foreign currency at fixed rate of
exchange at pre-set future date
2. Avaliable primarily for short-term maturities less than 1 year
a. Contracts lock-in rates for 30, 90, or 180 days
3. Available for most major currencies for terms up to 5 years
a. Less attractive than SWAPS given wide bid/ask prices
4. In contrast to futures and options ocntracts, forward contracts intended for actual delivery
for the currency
5. Typical transaction size is $1 million an above; futures contract often well below 100k
6. Typically not available for lesser-known currencies; very expensive for “unstable”
currencies
Currenct Futures Contracts
1. A “standardized” contract to buy or sell a set amount of foreign currency at fixed rate of
exchange at the end of the settlement month (March/June/Sept/Dec).
2. Typically used to lock-in a future price.
3. Contracts on formal exchanges through a clearinghouse system.
 4. The longest maturity of a futures contract is 1 year.
5. An investor must deposit an initial margin with the Exchange.
6. Profits/losses from price changes settled daily (daily payments).
7. Both “long” and “short” positions are easy to liquidate.
8. Typically less than 2%of contracts result in actual delivery.
Currency options contracts
1. Call Option: A contract that gives the option buyer the right to buy a specific amount of
currency at a specific price at a specific time from the seller.
a. Seller must sell the currency if the option is exercised.
2. Put Option: A contract that gives the
option buyer the right to sell a specific
amount of currency at a specific price at a
specific time from the seller.
a. Seller must buy the currency if the
option is exercised.
3. Characteristics of Options:
a. The buyer of an option pays a
premium to the seller.
b. Options may be customized to the
needs of the buyer.
c. “American”options settle when
exercised; “European” options settle only at maturity.
d. Typically used for setting a ceiling or floor on currency prices.
e. Available primarily for short-term maturities

IFIs
Critical Resources for Financing Projects in Emerging Markets
1. Globalization of finance directing more private capital flows to emerging markets has
changed the roles for IFIs
2. IFIs continue to be major lenders for infrastructure projects in emerging markets
3. IFIs often act in a “trailblazer” role in creating new lending in emerging markets
4. IFIs serve as a key finance source and act as a “stabalizing” factor during periods of
market volatility
5. IFI products Partial Risk Gurantees and Political Risk Insurance, are critical for risk
mitigation in project finance
6. IFI participation often critical to successfully fund products
Note: Some of these may change and shift over time, but 3 and 4 is always true
The World Bank Group
1. International Bank for Reconstruction and Development (IBRD)
a. Loans to governments of middle-income developing countries
 b. Loans have 5-year grace period, 20-yeaer repayment terms
c. Interest rate is ½% over the World bank’s cost of funds
d. Gurantees for both sovereign borrowing/public projects (Partial Credit Gurantees)
and for private projects (partial risk guarantees)
2. International Development Association (IDA)
a. Loans to governments of poor countries; 1,255 per capita income in FY2023
b. Loans have 0% interest, 10-year grace periods, 40-year terms
3. International Finance Corporation (IFC)
a. loans /equity to private-sector firms on a project finance basis
World Bank Partial Risk Gurantee
1. Partial Risk Gurantees (PRGs)- Protect private lenders against risk of a government (or
government-owned entity) failing to perform its contractual obligations with respect to a
private project
a. Available for any country eligible to borrow from IBRD or IDA
2. PRG is generally intended to be used in coordination with othe WBG project financing
and risk mitigation instruments such as the IFC equity/loans, and MIGAs political risk
insurance
a. You can’t reposses infrastructure
3. PRG provides suppoer for a debt service default resulting from the non-performance of
specific contractual obligations by governments or their agencies under project
agreements, such as
a. Maintaining the agreed regulatory framework, including tariff structures
b. Delivering inputs such as fuel
c. Paying for outputs such as power
d. Compensating for project delays or interruptions; and,
e. Currency transfer and convertibility risks
Project Termination: HEightened Risk in Emerging Markets
1. A generic risk in large infrastructure projects is the large investment in a long-term asset
that immobile and political and subject to political an regulatory risk over decades
2. This risk is further increased when there is a single buyer - often a state-owned entity - of
the projects output in teh market
a. Esp the case in power projects selling powering under a power purchase
agreement (PPA), but also have large-scale infrastructure projects such as water
treatment and sipply project, toll road projects, etc.
3. If the PPA or project off-take agreement is terminated before the contractual expiration
then the investors and lenders to the project will have a “stranded” asset that is not
generating revenue.
4. To mitigate the project termination risk the project sponsors/investors and lenders will
often require the host country government or offtaker to purchase the project from the
 sponsors at a pre-agreed price in the event the PPA or offtake agreement is terminated for
reasons beyond control of the sponsors.
a. The right of the sponsors to sell the project to the host government or offtaker is
called the “Put Option.”
5. To mitigate the risk of non-performance by the project sponsor, the host country or
offtaker will have the right to purchase the project from the sponsors.
a. The right of the host government or offtaker to buy the project from the sponsors
is called the “Call Option.”
6. Sponsor events of default causing project termination can be the sponsors failure to
commercial operations, ongoing failure to generate agreed-upon output, or project
abandonment.
7. Offtaker events of default causing project termination can be failure to pay for project
output, breach of contract.
Note: Hard to mitigate in int business is currencies and getting people to pay back ?